Cheap and cheerful

After a couple of years in which the global financials sector has outperformed global equities, the managers of Polar Capital Global Financials Trust (PCFT) state that they remain as positive about the outlook for the sector as they were in May of last year, when we last wrote on the trust.

The managers observe that this is a sector that many investors neglect or underweight. However, even after the recent period of positive returns, financials trade on the lowest valuations relative to other sectors and are still experiencing improving returns on equity. Many investors have consciously or passively (by holding index-tracking ETFs, for example) allocated more to technology and appear to be expressing concerns about valuations in that area. The managers suggest that investor sentiment may turn more favourably towards financials as a way to diversify.

Growing income and capital from financials stocks

PCFT seeks to deliver income and capital growth by finding the best investment opportunities across the world of financials (which includes banks, life and non-life insurance companies, asset managers, stock exchanges, speciality lenders, and fintech companies, as well as property and other related sub-sectors). A new enhanced dividend policy aims to pay out a quarterly dividend equivalent to approximately 4% of NAV each year.

Source: Bloomberg, Marten & Co

Fund profile

PCFT looks to grow investors’ income and their capital

More information on the trust is available on its website www.pcgft.com

Polar Capital Global Financials Trust (PCFT) has stated objectives of growing both investors’ income and their capital. Its global mandate may provide an alternative for UK-based investors seeking to increase and diversify their financials exposure.

PCFT launched on 1 July 2013 with a fixed life. In April 2020, in conjunction with a vote on prolonging the life of the trust, shareholders were offered a cash exit. Shareholders approved an extension of the trust’s life beyond May 2020. In June 2025, PCFT offered a 100% tender offer, and holders of 56.17% of the shares remained with the trust. These tender offers are held every five years, with the next planned for 2030.

The portfolio is primarily invested in listed or quoted securities. The trust’s performance benchmark is the MSCI All-Countries World Financials Net Total Return Index in sterling (MSCI ACWI Financials).

PCFT’s AIFM is Polar Capital LLP, which had AUM of £28.4bn at 7 November 2025 and employs 13 investment teams, spread across offices in Europe, the US and Asia. PCFT’s lead managers are Nick Brind, George Barrow, and Tom Dorner.

Managers’ view – strong returns yet low valuations

ROE on a rising trend for financials

Since the global financial crisis (GFC), the sector has gradually rebuilt its returns on equity (ROE), as Figure 1 shows. The impact of COVID is apparent, but much of that reduction related to provisions that did not translate into losses. One factor that may have limited returns was low interest rates. When these began to rise from 2022 onwards, banks’ net interest margins expanded.

Figure 1: MSCI ACWI Financials ROE

Source: Bloomberg

The strict capital discipline imposed on the sector following the financial crisis appears to have weighed on its ROE. However, there is now some resistance to further tightening of regulation and, at the same time, buybacks are increasing, which may support ROE growth.

Figure 2: MSCI ACWI sector price/earnings ratios

Source: Bloomberg

PCFT’s managers state that they are about as bullish on the sector’s prospects as they have been for a long while. However, even though profits are rising, this does not appear to be reflected in the ratings of financial stocks, as shown in Figure 2. One possible implication is that, having experienced losses during the GFC, investors may remain sceptical about the sector.

Tariffs, which are applied to products rather than services, do not have a direct impact on financials’ profitability but still appeared to affect share prices in the sector, as Figure 3 shows.

Financials appeared to recover relatively quickly following “Liberation Day”, but in recent months have not kept pace with a market that appears to be influenced by US mega-cap AI companies.

Financials should benefit from AI

The managers point out that this appears unusual when considering that financials may be among the sectors that could benefit most from AI, which is already reported to be helping reduce costs and improve profitability in many companies. Figure 5 shows the findings of research by Accenture Research into the effects of AI on various industries.

Figure 5: Estimated AI impact by industry

Source: Accenture Research

Q3 figures were generally positive, although there were some areas, such as property and casualty insurance, where results were less strong. The insurance subsector has generated high profits, which appears to be attracting more capital to the sector. The managers state that they see greater upside in life assurance companies and have adjusted PCFT’s portfolio accordingly, adding to AIA, Prudential, and Globe Life.

Earlier this year, PCFT appears to have profited from a switch from US banks towards European banks. The managers observe that a push for greater deregulation is taking hold in both the US and Europe, which they believe could help profitability and – in the case of banks – permit an uptick in lending, which they state has been constrained for some time. Despite delivering share price gains, Europe’s banks are trading on a forward P/E of 9.5x and a price to book ratio of 1.3x at the end of November 2025.

Deregulation is becoming a reality

In the UK, the Bank of England announced that banks had passed its stress tests and minimum tier 1 capital requirement was being cut from 14% to 13%. In addition, the latest budget did not include new taxes on banks, which some market participants had anticipated.

In the US, a recent report published by consultants Alvarez and Marsal suggested that deregulation in that market could free up $2.6trn of capacity for lending and capital markets activity.

M&A activity has been increasing and the managers state that, for the most part, this appears sensible; there have not been many cross-border or large-cap deals. The managers cite recent transactions in the US banking sector where banks have been acquired for 1.7x book (Fifth Third Bank paid $11bn for Comerica Bank, and Huntington Bank paid $7bn to buy Cadence Bank).

Interest rates are falling, but not, according to the managers, to the point where they will be eating into interest rate margins once again. Bad debts remain relatively low, with recent well-publicised issues within private credit not appearing in banks’ loan books in a material way. This may reflect the constraints on lending that have been in place since the GFC.

Figure 6: Delinquency rate on all loans, US commercial banks

Source: Federal Reserve Bank of St Louis

Notwithstanding recent weakness in pricing, the managers have initiated a small position in Coinbase, which provides exposure to the crypto and stablecoin market. The managers state that this was done in response to the recent decline in Coinbase’s share price.

There appears to be a trend towards increased equity investing in markets such as the US. There are indications of similar activity in other markets, including the UK. Platform business flatexDEGIRO, which was discussed in the previous note (see page 11 of that note), has now doubled in price since PCFT made its investment.

Investment process

PCFT’s managers select stocks, and geographic and sector allocations are determined by their stock selection decisions. The US has traditionally represented a significant opportunity set for investors, which the managers attribute to the maturity of the industry in that country and fragmentation in the banking market. Over the last year, the portfolio has shifted towards Europe and emerging markets, where the managers state that valuations remain compelling.

Emphasis on proprietary research

The managers are involved in researching opportunities. Proprietary research is a core part of the investment process. The managers state that, whilst some of it is useful, external research appears to be too often short-term in focus. They prefer to take a medium- to long-term view. Access to companies’ management is included as part of the process.

The approach aims to identify stocks that may have the potential to generate risk-adjusted returns. Analysis of balance sheet strength is included in this process.

Focus on limiting the downside

Short-term profitability and rapid top-line growth may mask underlying issues with asset quality. Most financials stocks are highly geared, and the managers state that there is a need to focus on limiting downside risk.

The remit is global and includes emerging markets. The universe consists of about 500 stocks (typically, the smallest stock that the managers would consider for PCFT’s portfolio would have a market cap of around $500m). There are no limits on the exposure of the investment portfolio to either smaller or mid-cap companies, but the majority of the portfolio is invested in companies with a market capitalisation greater than US$5bn.

The managers state that this is a manageable number of stocks for the team to cover. The managers note that firms such as Goldman Sachs and JPMorgan have complex business models, but most banks have relatively simple business models. In many areas, pricing is commoditised and the sector can be generic, but the managers believe that research is necessary to differentiate between companies.

The managers use a scoring system to assess a range of variables related to risk, growth, and value. These include balance sheet strength; funding structure; composition of the loan book; historical quality of the loan book; and trends in margins. This model is described as providing a framework for further analysis rather than producing a buy list.

The team meets about 400 companies a year

The team meets approximately 400 companies each year, with much of this activity focused on verifying research findings, including discussions with customers and competitors.

For banks and similar companies, any assessment of value is based on a variation of CAPM, using returns on equity and price to book. The managers state that P/E ratios and measures of growth do not appear to work as effectively.

The sector includes more than balance sheet businesses and is evolving. The managers use a more earnings-driven, traditional approach to valuing other companies.

Restrictions

The investment manager has discretion to invest up to 10% of the portfolio in debt securities.

PCFT may have a small exposure to unlisted and unquoted companies, but in aggregate, this is not expected to exceed 10% of total assets at the time of investment.

PCFT will not invest more than 10% of total assets, at the time of investment, in other listed closed-ended investment companies and no single investment will normally account for more than 10% of the portfolio at the time of investment.

PCFT may employ levels of borrowing from time to time with the aim of enhancing returns, currently subject to an overall maximum of 20%.

ESG

ESG factors are integrated into the investment process, and the managers believe that they are a critical driver of long-term returns. According to the managers, governance and risk management has always been an important component of the investment process as it sets the tone, along with culture, for how a business is managed and may perform in a stressed environment. The managers’ proprietary ESG process incorporates both quantitative and qualitative factors, making use of both internal research and data from third-party ESG providers. An ESG overlay is prepared for each company. This focuses on specific governance (risk management, engagement, litigation, strategy) and environmental factors (exposure to fossil fuels, communication, and engagement).

The lowest-rated companies are excluded from the universe of prospective investments, and any company that scores poorly on governance is also automatically excluded.

The analysis is used to identify matters that may be raised with the companies by the managers. Ongoing monitoring and engagement of companies appears to be central to the team’s approach.

PCFT has an A MSCI ESG rating

As at 30 November 2024, PCFT had an MSCI ESG rating of A, with a weighted average ESG quality score of 6.86 versus 6.96 for PCFT’s benchmark. The trust’s holdings have a low carbon intensity, which may reflect the nature of the financials sector. The trust has a record of voting at meetings of the companies it invests in, and at over a third of them, the fund’s vote was not cast in favour of resolutions put forward at these meetings.

Portfolio – asset allocation

At the end of November 2025, there were 68 positions in PCFT’s portfolio, down from 77 at the end of April 2025 (when last published). Relative to the benchmark MSCI ACWI Financials Index, PCFT’s active share at 30 November 2025 was 72.9%, which was higher than the figure at end April.

There has been a shift in PCFT’s geographic asset allocation since the last publication (using data as at the end of April 2025). Exposure to North America has decreased from 51.6% to 46.4%. The allocation appears to have been redeployed mostly to Europe, where the allocation has increased from 12.3% to 19.4%, and to a lesser extent Asia, where the allocation has increased from 10.6% to 12.7%.

On a sector basis, there appears to have been a shift to increase exposure to banks and reduce exposure to financial services.

Top 10 holdings

Figure 9: Top 10 holdings as at 30 November 2025

Source: Polar Capital Global Financials Trust. Note 1) Percentage of gross assets.

Since the last publication (using data as at end April 2025), Berkshire Hathaway, UniCredit, Barclays, SwissRe, Intercontinental Exchange, and Progressive are no longer in the top 10. The new entries are Royal Bank of Canada, BPER Banca, AIA Group, Citigroup, Globe Life, and Erste Group Bank.

Royal Bank of Canada

Figure 10: Royal Bank of Canada (CAD)

Source: Bloomberg

Royal Bank of Canada (rbc.com) is the largest Canadian bank by certain measures, with a significant capital base and an expanding presence in wealth management in the US and UK. It recently published results for the 12 months ending 31 October 2025. Net income and earnings per share (EPS) increased by 25% year-on-year.

RBC acquired HSBC Canada in 2025 and is aiming to extract cost and revenue synergies from the deal. The company highlights its C$5bn annual spend on technology and its plan to use that to reduce costs, increase revenue, and improve its AI capabilities. RBC is targeting an ROE of 16% by 2027 and annualised EPS growth of 7%. RBC also intends to maintain a dividend payout ratio of about 40%–50%.

BPER Banca

Figure 11: BPER Banca (EUR)

Source: Bloomberg

BPER Banca (bper.it) began as Banca Popolare dell’Emilia Romagna and has expanded both organically and through acquisitions, including the recent acquisition of Banca Popolare di Sondrio, to reach a €21bn market cap as an Italian bank. PCFT made a new investment in the bank in July 2025.

Its Q3 figures were above expectations and showed ROE at 19.8% and a common equity tier 1 (CET1) capital ratio of 15.1%. Following the acquisition, YTD net profits to the end of Q3 were €1.5bn, representing an increase of almost 20% compared to the same period last year (on a like-for-like basis, they would have been €1.3bn). After this year’s share price increase, the shares trade on less than 10x earnings.

AIA Group

Figure 12: AIA (HKD)

Source: Bloomberg

AIA Group (aia.com) was a new addition to the portfolio in June 2025. It is a life insurance business in Asia, with total assets of US$328bn at the end of June 2025. It operates in 18 markets across Asia and Australasia. Tata AIA Life, its joint venture in India, is the leading retail life insurer in that market.

Its Q3 figures showed 25% growth in new business (with double-digit growth in 11 of the 18 markets it serves) and higher margins. The company is recruiting more agents in China to support the expansion of that part of its business.

AIA is targeting CAGR of 9%–11% in its operating profit after tax, per share, between 2023 and 2026 and believes it is on track to achieve this.

Erste Group Bank

Figure 13: Erste Group bank (EUR)

Source: Bloomberg

Erste Group Bank (erstegroup.com) was discussed in the December 2024 note (see page 11 of that note). It is one of the largest financial services providers in Eastern Europe in terms of clients and total assets.

EPS and return on tangible equity have increased quarter-on-quarter over 2025. Net interest margins have remained at around 2.4% and the cost/income ratio has decreased. The bank has reported growth in both customer loans and deposits. Assets under management within its long-term savings business have also increased, supported by the George Invest digital savings platform, which had 11.2m users by the end of Q3 2025. The bank’s CET1 ratio was 17.5% at the end of Q3 2025.

Citigroup

Figure 14: Citigroup (USD)

Source: Bloomberg

Citigroup (citigroup.com) is one of the world’s largest banks, with a market cap approaching $220bn. The company is focusing on improving profitability by simplifying its business, which has included exiting some markets (including a recent reduction in its stake in Banamex) and simplifying its management structure.

Q3 figures showed a 9% year-on-year increase in revenue, a 38% increase in adjusted income, and a 48% increase in its EPS. At the end of Q3 2025, its CET1 ratio was 13.2%, about 1.1% higher than its regulatory requirement. The company has been returning surplus capital to investors through buybacks and dividends, with the former appearing to have contributed to the EPS increase.

Globe Life

Figure 15: Globe Life (USD)

Source: Bloomberg

Globe Life (globelifeinsurance.com) is a US life and health insurance company, distributing its products under the American Income, Liberty National, Family Heritage, and United American brands, as well as through a direct-to-consumer business. Based on end Q3 2025 numbers, life insurance accounted for about 69% of its total premium income and health insurance 31%. The life business accounts for a greater proportion of its insurance underwriting margin, with a split of 82%:18%.

Globe’s Q3 figures showed a 28% increase in net operating income and, with the inclusion of share buy backs, a 38% increase in its net operating income per share. The book value per share had grown to $93.63 from $83.92 year-on-year.

Performance

Figure 16 shows the trust’s NAV and share price total returns alongside those of the MSCI All Countries World Financial Index for the five years to the end of December 2025. The factors that have contributed to PCFT’s historic performance have been covered in previous notes, a list of which is provided on page 19.

After the impact of the tariff announcements in April, the NAV and share price have increased in recent months, approximately in line with the benchmark.

Source: Bloomberg, Marten & Co

Recent performance attribution

The manager supplied us with some performance attribution data that covers the six-month period to the end of October 2025.

Returns from positions in Alpha Bank, Bank of Cyprus, and Permanent TSB contributed to returns relative to the performance benchmark, as did underweight or nil positions in Fiserv and Interactive Brokers, which underperformed.

Figure 18: Five largest positive contributions to relative returns six months to 31 October 2025

Source: Polar Capital Global Financials Trust

Alpha Bank

Figure 19: Alpha Bank (EUR)

Source: Bloomberg

Alpha Bank (alpha.gr) is a financial sector business in Greece and one of PCFT’s larger emerging market positions within its portfolio. Major Italian banking group UniCredit recently increased its stake in Alpha Bank to 29.5%. UniCredit has been the largest shareholder since 2023, when it purchased the Hellenic Financial Stability Fund’s stake and acquired control of Alpha Bank’s Romanian subsidiary. The two companies are co-operating to expand Alpha’s business.

Alpha Bank is targeting a 10%+ EPS CAGR over 2024–2027 and states that it is on track to achieve this, with share buybacks contributing to this target.

Figure 20: Five largest negative contributions to relative returns six months to 31 October 2025

Source: Polar Capital Global Financials Trust

Fidelity National Information Services

Figure 21: Fidelity National Information (USD)

Source: Bloomberg

Fidelity National Information Services (fisglobal.com) experienced a significant decline in its share price after publishing its Q2 figures. Investors may have been concerned that foreign exchange moves appeared to be the main driver of near-term revenue growth. There may have also been an impact from disappointing numbers at competitor Fiserv (see above), whose share price declined this year ahead of a larger drop following its Q3 figures.

Premium/discount

Figure 22: PCFT’s premium/(discount) over the five years to 31 December 2025

Source: Bloomberg, Marten & Co

Over the 12 months ended 31 December 2025, PCFT’s discount moved within a range of 1.2% to 8.5% and averaged 4.0%. At 6 January 2026, PCFT was trading on a discount of 2.1%.

PCFT offers five-yearly exit opportunities. It also operates a discount control policy whereby if, under normal market conditions: (i) PCFT’s three-month average discount to NAV is greater than 5%, and (ii) the discount to NAV is currently greater than 5%, PCFT will buy back shares with the intention of reducing the discount to NAV to a level of no greater than 5%. These measures may help to keep the discount relatively tight.

Dividend – new enhanced dividend policy

Before its latest exit opportunity, PCFT was following a progressive dividend policy, paying two interim dividends in respect of each financial year in August and February.

With effect from the new financial year that commenced on 1 December 2025, PCFT has adopted a revised dividend policy under which it will aim to pay, in the absence of unforeseen circumstances, a regular dividend equivalent to approximately 4% of the NAV in a given year. Dividends are proposed to be paid quarterly at a level of 1% of NAV, calculated on the last business day of each prior financial quarter. The first of these is scheduled to be announced in March 2026 and paid in April 2026.

Figure 23: Dividend history – periods ending 30 November

Source: Polar Capital Global Financials Trust

Structure

Fees and costs

PCFT’s manager is Polar Capital LLC (Polar). With effect from 1 July 2025, PCFT’s management fees are based on 50% of the NAV (on a cum income basis) and 50% of the lower of market cap and NAV (on a cum income basis), and PCFT pays Polar a base management fee of 0.70% of NAV per annum on the first £500m of this and 0.65% on any balance. The investment management agreement may be terminated by either party giving 12 months’ notice. The base management fee is charged 80% to revenue and 20% to income.

There is no performance fee.

On a historic basis, PCFT’s ongoing running costs are 0.85% of NAV.

Capital structure and life

PCFT has a simple capital structure with a single class of ordinary shares in issue and trades on the Main Market of the London Stock Exchange. As at 6 January 2026, there were 162,705,218 ordinary shares with voting rights and a further 169,044,7482 shares held in treasury.

Five-yearly tender offers

PCFT has an unlimited life. The board intends to propose tender offers at five-yearly intervals, the next of which would be in 2030. These would allow any shareholder who wishes to exit the company to do so at a price close to NAV.

Shares bought back as part of the tender offer process and any other shares bought back in the normal course of discount control may be held in treasury and reissued at a premium to asset value.

PCFT’s accounting year end is 30 November and AGMs are usually held in April.

Gearing

PCFT may borrow up to 20% of net assets at the time of drawdown.

At end November 2025, PCFT had net gearing equivalent to 7.1% of NAV.

Management

The five-person global financials team at Polar Capital LLC was managing £404m, as of end October 2025.

Nick Brind

Nick joined Polar Capital following the acquisition of HIM Capital in September 2010, and is co-manager of PCFT and the Polar Capital Financial Credit Fund. He has 29 years’ investment experience across a range of asset classes and since 2003 has focused on global financials. Before joining HIM Capital, Nick worked at New Star Asset Management. While there, he managed the New Star Financial Opportunities Fund, a high-income financials fund investing in the equity and fixed-income securities of European financials companies. Prior to that, he worked at Exeter Asset Management and Capel-Cure Myers. Nick has a Masters in Finance from London Business School.

George Barrow

George has been co-fund manager of PCFT since December 2020. He joined Polar Capital in September 2010 and is also the co-manager of the Polar Capital Financial Opportunities Fund. He has 15 years’ industry experience and over 10 years’ experience analysing Europe, Asia, and emerging markets. Prior to joining Polar Capital, George was an analyst at HIM Capital from 2008, where he completed his IMC. He has a Master’s Degree in International Studies from SOAS, where he graduated with merit.

Tom Dorner

Tom joined the team in December 2023 from Aberdeen, where he was a senior investment director in the developed markets team and managed the Aberdeen Europe ex UK Income Equity Fund. He was responsible for analytical coverage of European financials and managed a number of other European investment funds during his nine years there. Prior to this, Tom was an analyst specialising in the European Insurance sector at Citi and Lehman Brothers in London. He qualified as a Chartered Accountant with Ernst & Young in the Insurance Audit practice and has a BA (Hons) in War Studies from Kings College London, and an MA in Philosophy from the University of Nottingham.

Nabeel Siddiqui

Nabeel joined the Polar Capital Financials team as an analyst in August 2013, working with John Yakas and Nick Brind, with a focus on the US, Latin America, and Australia.

Prior to this, Nabeel worked as an operations executive at Polar Capital. He began his career in August 2008 with Habib Bank, where he worked in various functions. He has a Master’s Degree in Money and Banking and has passed all three levels of the CFA.

Jack Deegan

Jack joined the Polar Capital Financials team as an analyst in October 2017 and is co-manager with Nick Brind on the Financial Credit Fund.

Prior to this, he worked at DBRS Ratings, covering the Swiss market as a lead analyst, as well as UK, Dutch, Japanese and Australian banks. Before DBRS, Jack worked in the Markets Division of the Bank of England for four years, assessing financial institutions with a view to determining access to the Bank’s Sterling Monetary Framework (SMF) facilities, and internal counterparty trading limits. He has a BA in Classical Archaeology & Ancient History from Oxford University and a Master’s Degree in Islamic Politics from SOAS.

Board

The board comprises four non-executive directors, all of whom are independent of the investment manager and who do not sit together on other boards.

Figure 24: Board member – length of service and shareholdings

Source: Polar Capital Global Financials Trust. Note 1) last available information as at 30 November 2024.

Simon Cordery (chair)

A director since 2019, Simon was appointed chair of PCFT on 30 March 2023. He has over 40 years’ experience working within financial services, of which nearly 30 years have been focused on the wealth management industry. Most recently he was head of Investor Relations and Sales at BMO Global Asset Management, where he spent almost 25 years in senior roles. Previously, Simon held roles with Invesco Fund Managers, Jefferies & Co, Kleinwort Benson Securities and Rea Bros Merchant Bank. He has knowledge of the investment trust industry and remains actively involved with the AIC. He is a Chartered Fellow of the Chartered Institute for Securities and Investment.

Susie Arnott (non-executive director)

Susie began her career in fund management over 20 years ago. Her work has primarily focused on the financial sector, including periods concentrating on emerging markets investments and global financials portfolios. Susie also spent several years working in “Impact Investing,” combining her experience in social investment and impact measurement. In her current role, she continues to focus on investment with a global impact, incorporating ESG as a consideration.

Susie is a director of Sableknight Limited and Lockfold Communications.

Angela Henderson (non-executive director)

Angela qualified as a solicitor and initially focused her career on corporate law before moving into financial services, where she worked as an in-house lawyer and a director of global equities. She has invested in and held non-executive board positions at small UK companies in the technology and asset management sectors, and has previously served on the governing body of a London hospital foundation trust. Angela is currently a non-executive director and chair of risk for Macquarie Capital (Europe) Limited, non-executive director and chair of the Management and Service Provider Engagement Committee of Hargreave Hale AIM VCT Plc and Wells Fargo Securities Limited, and has various other private interests.

Cecilia McAnulty (chair of the audit committee)

Cecilia is a non-executive director and Chartered Accountant with almost 30 years’ investment and financial services experience. Her executive career included senior investing roles at Royal Bank of Scotland, Barclays Capital and Centaurus Capital and encompassed a range of asset classes including public and private debt and equity.

Cecilia is a non-executive director and audit chair of Northern 2 VCT Plc, and non-executive director of RIT Capital Partners Plc and Eurobank Cyprus Limited.

Previous publications

QuotedData has published a number of notes on PCFT. You can read these by clicking the links in the table below or by visiting the QuotedData.com website.

Figure 27: QuotedData’s previously published notes on PCFT

Source: Marten & Co

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