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 twin objectives of growing both investors’ income and their capital. Its global mandate makes it an alternative for UK-based investors looking 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 overwhelmingly approved an extension of the trust’s life beyond May 2020. Then in June 2025, PCFT offered a 100% tender offer (holders of 56.17% of the shares stuck with the trust). These tender offers are held five-yearly, with the next planned for 2030.

Predominantly, the portfolio is invested in listed/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 £30.6bn at 31 March 2026 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

PCFT’s managers reiterate that this is an important sector, the second-largest after IT in the global index, and a diversified one – banks account for less than half of the sector’s market cap. They say that investors are fixating on US technology but nevertheless, until the end of 2025, financials were outperforming, as Figure 1 shows. They believe that, with little fundamental reason for the recent sell-off, there are good reasons to hope for a rebound.

Figure 1: MSCI ACWI Financials versus global equities

Figure 2: P/E ratios for major global sectors

Financials are cheap relative to other sectors and to history

Financials are also cheap relative to other sectors, as Figure 2 shows, and whilst they are more expensive than over recent history, the managers point out that the post-GFC period was largely one of artificially low interest rates, a much tougher regulatory environment, and constrained lending in the face of the need to rebuild balance sheets. They feel that although that period is behind us and consequently the prospects for the sector are much brighter, financials remain rated well below where they were pre-GFC.

Figure 3: MSCI ACWI Financials price/earnings ratio over past 20 years

Figure 3 shows a 20-year chart of the P/E ratio on the MSCI ACWI Financials Index. The first signs of the GFC emerged in 2006 with problems in subprime home loans. Ahead of this, financials tended to trade on mid-teens to early 20s ratios – the average over the 10-year period from June 1996 to June 2006 was 19.0x. By contrast, the average for the 15-year period from June 2011 to June 2026 is 12.6x. In a long-term context, financials appear inexpensive relative to historical averages.

Even without the impact of the Iran war, inflation and interest rates remained elevated in many economies, which suggests that there may be limited pressure on banks’ net interest margins. According to previous observations, default rates remain manageable. There is a possibility of global recession and rising bad debts, but PCFT’s managers state that this is not their central case.

Financials & AI – low disruption/big beneficiary?

Another significant influence on markets appears to be AI, particularly the ongoing data centre capital expenditure increases and the selloff earlier this year in stocks that were perceived as being threatened by agentic AI.

It could be argued that one reason for the financial sector’s relatively low rating is that it appears to have been less affected by the increase in valuations of IT hardware stocks and the attention surrounding hyperscalers and creators of LLMs. A similar pattern appears to have occurred during the tech boom, as Figure 3 shows.

Financial stocks may be the biggest beneficiaries of AI

In our last note, we included a chart (Figure 5 on page 5 of that note) which showed that Accenture Research believed that the banking and insurance sectors could be amongst the biggest beneficiaries of AI. Some sources suggest there is potential to cut costs and improve service offerings with the help of AI. Figure 4 is taken from PCFT’s most recent presentation. It presents the team’s view on which businesses they believe are most at risk from AI disruption.

Figure 4: Change in P/E versus AI disruption score for stocks in PCFT’s portfolio

Figure 5: PwC estimate of cost impact on banks that embrace AI transformation

PwC estimates that banks may be able to reduce their efficiency ratio (operating costs/revenue) by 15 percentage points, as shown in Figure 5. Bank of New York Mellon is referenced on page 9 as supporting evidence for this.

Some of PCFT’s holdings were affected by the agentic-AI related sell off

Notwithstanding this aspect of the AI story, PCFT was impacted by the sharp sell-off in stocks perceived as threatened by agentic AI. Within the portfolio these included trading platform FlatexDEGIRO, credit ratings agency Moodys, investment bank Morgan Stanley, and London Stock Exchange Group. The managers sold PCFT’s holding in the latter before it increased in value following news that the activist Elliott announced that it had taken a stake in the company and was seeking changes.

In the area of payments, the Mastercard and VISA share prices were also affected. Insurance brokers experienced declines when Spanish business Tuio launched an AI-enabled product, but this was not an area that PCFT had exposure to. The managers increased their position in Moody’s following a decrease in the company’s share price.

The real-world effect of agentic AI on these businesses remains uncertain, and discussion on this topic may continue for some time.

Key themes

The managers have identified a number of themes that are represented within the portfolio. Percentages refer to the weight in each theme as at the end of April 2026.

Trading platforms (7%)

Trading platforms are viewed as potential beneficiaries of the increased market volatility observed in 2026, which appears to have been influenced by retail investor flows and macroeconomic events. Stock positions include Plus500, FlatexDEGIRO, and IBKR – Interactive Brokers.

The managers compiled performance data of various platforms during periods of market weakness, which is shown in Figure 6.

Figure 6: Relative performance during market drawdowns

European banks (18%)

The portfolio has a bias to European banks based on valuation considerations. Stock positions include Santander, BPER Banca, Alpha Bank, and UniCredit. The managers highlight the discount at which European banks trade relative to the wider market (about 34% on average during the negative interest rate period and into the present day versus about a 15% discount before the GFC).

The managers also state that European banks, insurance companies, and diversified financials are among a narrow group of sectors that have seen positive EPS revisions.

Insurance (18%)

Within insurance, the portfolio has a bias to life assurers with stock positions such as AIA, Prudential and Globe Life. According to the managers, part of the rationale is the growth opportunity in Asia. PCFT’s managers have trimmed positions in AIA and Prudential recently.

Hiscox was acquired as a replacement for Beazley, which was subject to a bid. In May, Hiscox shares rose following rumours of a bid from Intact Financial Corp.

US banks (19%)

The easing of regulation is viewed by some as beneficial for US banks. The portfolio has exposure to companies such as JPMorgan, Bank of America and BNY Mellon. The managers are also expecting an acceleration of M&A activity amongst US banks, observing that recent deals appear to be approved on shorter timescales than in previous years. FirstBank’s March 2025 acquisition of Southern States Bancshares took three months to close. The US banking market remains fragmented; the Federal Reserve lists 3,849 domestically chartered commercial banks as at the end of December 2025.

Emerging markets (14%)

The main argument for EM exposure is the growth opportunity that may arise as local populations become wealthier and use more financial products. PCFT holds stocks such as Korea’s Shinhan Bank, Brazil’s Nubank, and Mexico’s Banorte.

Figure 7: Mortgage penetration versus GDP per capita

The managers point to the relatively low penetration of mortgage products in Asia and India in particular, as shown in Figure 7 (India highlighted in red, Australia included for comparison).

Alternative asset managers (now underweight)

Another story that has been reported in the media concerns issues in private credit. The portfolio currently has an underweight exposure to alternative asset managers, but PCFT did hold Blackstone when this story began to receive attention. The managers suggest that media coverage may be overstating the situation. For example, the managers observe that Partners Group’s gated funds represent a relatively small proportion of its AUM, and the company was still seeing net inflows in Q1.

Portfolio – asset allocation

At the end of May 2026, there were 69 positions in PCFT’s portfolio, one more than at the end of November 2025 (when last published). Relative to the benchmark MSCI ACWI Financials Index, PCFT’s active share at 31 May 2026 was 68.5%, marginally down from the figure at end November.

The managers state that there is diversification within the portfolio, which is shown in Figures 8 and 9.

Figure 8: PCFT geographic exposure as at 31 May 2026

Figure 9: PCFT sector exposure as at 31 May 2026

PCFT’s geographic asset allocation appears to be largely unchanged since the last publication (using data as at the end of November 2025). Exposure to Europe has decreased from 19.4% to 16.4%. The allocation to the UK has increased from 10.8% to 13.2%.

On a sector basis, exposure to banks and insurance has increased while exposure to financial services has decreased.

Top 10 holdings

Since the last publication (using data as at end November 2025), BPER Banca, AIA Group, Erste Group Bank, and Globe Life are no longer included in the top 10. The replacements were Bank of New York Mellon, Morgan Stanley, IG Group Holdings, and Mizuho Financial.

Figure 10: Top 10 holdings as at 31 May 2026

Figure 11: Bank of New York Mellon (USD)

Bank of New York Mellon

Bank of New York Mellon (bny.com) was the 10th-largest US bank by assets at the end of 2025. It is the world’s largest custodian, with over $59trn of assets under custody and/or administration, and is also one of the largest asset managers in the US.

Q1 2026 figures show a 13% year-on-year increase in revenue, while costs increased by 5%. This appears to have allowed for widening margins, a 3.5 percentage point improvement in ROE (to 16.1%), and EPS up 42%.

Figure 12: Examples of where BNY is using AI

Figure 12, which is an extract from the bank’s Q1 results presentation, provides examples of where AI is being used.

The business has introduced AI training and development programmes for employees, upgraded its in-house AI platform Eliza (launched in 2024), and entered into a multi-year collaboration with OpenAI.

Figure 13: Morgan Stanley (USD)

Morgan Stanley

Morgan Stanley (morganstanley.com) is an investment bank, investment manager (with AUM of $1.9trn) and wealth manager (bringing the total AUM closer to $9.3trn).

Q1 2026 numbers were above analysts’ expectations, with revenue up 16%, ROE rising from 17.4% to 21.0%, and EPS up 32%, which may have been supported by improved cost control. The wealth management business reported net inflows of $118bn.

Volatile equity markets following the outbreak of the Iran war appear to have contributed to higher trading revenues. The firm also participated in the SpaceX IPO.

Figure 14: IG Group Holdings (GBp)

IG Group Holdings

IG Group (iggroup.com) provides trading services to almost 1.4m customers, dealing in OTC leveraged derivatives (it is the leading global provider of CfDs) and spread-betting (in the UK and Ireland only), exchange-traded derivatives (offered in the US through “tastytrade”), stocks, ETFs, and other instruments including forex, crypto, and commodities.

In its AGM statement published in May (which covered Q1 2026) the company reported organic revenue growth of 19% YoY, which it attributed to a growing number of first-time customers. Assets under administration passed £20bn.

IG Group has provided guidance of 10%-15% revenue growth for 2026 as a whole and expects to sustain 40%+ EBITDA margins.

Performance

Figures 15 and 16 show 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 June 2026. The factors influencing PCFT’s historic performance have been discussed in previous notes, a list of which is provided on page 16.

Figure 15: Cumulative total return performance over periods ending 30 June 2026

PCFT’s recent relative returns appear to have been influenced by its overweight exposure to Europe and corresponding underweight exposure to US financials. PCFT’s managers state that when the market rotated back into US stocks during April, financials did not fully participate in the US rally.

Figure 16: PCFT NAV, share price, and MSCI ACWI Financials five years to 30 June 2026

However, stock selection appears to have been the main driver of PCFT’s relative returns.

Recent performance attribution

The manager supplied performance attribution data covering the six-month period to the end of May 2026. The data indicates that over this period, PCFT’s return was 1.7 percentage points ahead of the benchmark.

Figure 17: Five-largest positive contributions to relative returns six months to 31 May 2026

The effects of higher market volatility on trading volumes are shown in the table in Figure 17, with all of the top four stocks appearing to have benefited. Hiscox was the subject of bid speculation, as discussed on page 7.

Figure 18: StoneX (USD)

StoneX

StoneX (stonex.com) is a platform that serves over 80,000 institutional, commercial, and payments clients, and over 400,000 self-directed retail investors. It provides 24-hour trading access to over 120 global markets. Over the 12 months to the end March 2026, StoneX generated operating revenues in excess of $5.2bn and net income of $462m (up 40% and 57% on the previous year, respectively).

The Q1 2026 numbers are significantly higher year-on-year, which may be related to market volatility following the US/Israeli attack on Iran. In particular, revenue from listed derivatives increased by 148%, OTC derivatives by 98%, and physical contracts by 162%.

StoneX is seeking to expand its operations in Asia and EMEA.

Figure 19: Five largest negative contributions to relative returns six months to 31 May 2026

Four of the five negative relative contributions relate to stocks that PCFT does not hold or is underweight in, but which increased in value.

Figure 20: Nu Holdings

Nu Holdings

Nu Holdings (investidores.nu) is a Brazilian digital bank listed in the US, owned by PCFT since it was founded in 2013. The company has expanded into Colombia and Mexico and currently reports 135m customers, almost double the number reported three years ago.

The company reports a reduction in its efficiency ratio, which it attributes to AI efficiencies and the absence of branch overheads typically incurred by banks. Revenue per user is reported at $16, up from $12 in Q1 2025. The company states that this increase has been supported by an expansion of its net interest margin, which stood at 21.1% for Q1 2026.

In Brazil, Nu reports an 18% share of the market for credit/debit cards, 8% for unsecured loans, and 4% for deposits. Operations in Mexico and Colombia are described as earlier-stage businesses.

The share price fall has been attributed by some market participants to the departure of CFO Guilherme Lago and missing analysts’ forecasts, despite record results. Some commentators suggest it may also reflect profit-taking and retail investors reallocating funds into AI stocks.

Premium/discount

Figure 21: PCFT’s premium/(discount) over the five years to 30 June 2026

Over the 12 months ended 30 June 2026, PCFT’s discount moved within a range of a premium of 0.2% to a discount of 7.5% and averaged a discount of 4.1%. At 3 July 2026, PCFT was trading on a discount of 4.0%.

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%. Management believes that both of these measures may help keep the discount relatively tight.

Ahead of the outbreak of the Iran war, PCFT briefly traded at a premium. However, the discount appeared to reopen in the more nervous and volatile markets that followed.

Dividend – enhanced dividend policy

Figure 22: Dividend history – periods ending 30 November

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. It is proposed that dividends will 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 was announced in March 2026 and paid in April 2026.

Previous publications

QuotedData has published several notes on PCFT. These can be accessed through the links in the table below or by visiting the QuotedData.com website.

Figure 23: QuotedData’s previously published notes on PCFT

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