The best is yet to come for PolarCap Global Financials


#1

Originally published at: https://whichinvestmenttrust.com/the-best-is-yet-to-come-for-polarcap-global-financials/

It’s a sector that is still unloved by investors with the mindset of 2008, ignorant of the beneficial effect of regulatory and structural changes, which have created a tailwind to profit from an area of the market which is experiencing strong growth in earnings and dividends. Brief background and Meet the manager Polar Capital Global…


#2

I’m glad you’ve opened the commenting on this article, I couldn’t figure out why it was closed!

This is one of the few areas of the market that does represent good value but i don’t think this trust is very well known, to be honest i had forgotten about it which maybe explains the discount.

I think it looks good value though and good way to invest in the financial sector.


#3

Yeah it wasn’t on my radar either @smithy101 I think it is difficult for these little trusts to be noticed.

I’m not at all keen on the performance fee which looks overly generous, but I think if you sell out before it matures it won’t effect you.

I think this might be worth adding to my portfolio, it will one of those types of investments that might do very little for a long time then do a lot at once. It pays a decent divi while you wait. None too shabby.


#4

The trouble with the large banks is they go bust or do something silly every decade or so, which means this trust isn’t really a buy and hold forever.

Just as well as it has a fixed life.

It is an area of the stock market that is looking pretty cheap though. This could do well but if there is another financial crisis before investors take notice it could bloody well bomb.


#5

After how the banks went bust in 2008 and almost took the whole world down with them I don’t understand why anyone would invest in polar Cap Financials.

Banks are basically the highest leveraged businesses in the universe. All it needs is a CEO with a huge incentive to growth the share price to qualify for their huge bonus and the bank is up for taking humongous risks again.

Not for me thanks.


#6

In the article they talk about all the reasons why banks are cheap and a good area to invest in now @khalidkhan did you read the whole article?

The reasons make sense to me, banks have to keep more capital, less competition, rising interest rates makes it easier for them to make cash, they’re paying more back to shareholders.

I don’t disagree with your criticisms of banks but I think its like a lot of instances when investing, when things go bad, sometimes very bad, if they don’t go bust, someone comes in, turns them around and the stock market takes too long to notice things have changed.

It looks to me like for the moment at least, banks are probably a pretty safe bet.


#7

This trust does not invest in the main banks as a whole but rather the smaller ones dotted across the US and the world. I have an issue with banks. Investors say they are cheap, better protected, etc. etc. BUT are they expecting the profits to shoot back to 2006 levels and beyond? I don’t think so. If you don’t lend you don’t make much.

They are also responsible for keeping zommbie companies afloat. These companies sell at margin cost and force competitors down to their level, ask John Lewis. Why are banks doing this, are they not really ready for another debt default cycle? Is it really liquidity that has them turning green?

Rates are lower than banks can make supernormal profits from and they are focused mainly on core operations, which yield little. These low rates are going to stay low in UK, Europe and Japan, but maybe something will come of the US. This trust certainly launched too early because this is the same schpiel I heard all those years ago, and look at the performance.


#8

You might be right @james_pigott but the banks don’t have the same level of competition as they did before and when interest rates go up they make more money.

You might be right about the jam tomorrow implication you make when you said you were told the same spiel years ago but I am a little bit tempted here just because i think they will start to make more money. My real worry is that a stock market crash will happen before they get a chance to coin it, as it where.


#9

As banks are such a high percentage of the index and are cheap even if they still have issues I think you have got to own some of them. The question is, do you do it through a general fund or do you by a specialist fund like Polar Cap Financials? I’m not sure of the answer, though I suspect there is not just one answer coz it’ll depend on you’re own view.

i think this down sound like an interesting, maybe even convincing set of reasons to invest, I don’t think I’m quite ready yet. I think I’d prefer to monitor it a little bit more.

It has been around fro a while though, it’s either adopting a low profile or maybe it’s only aimed at stockbrokers and other large institutions.


#10

@brianpip Ah yes, but mine really was schpeel, or maybe schpiel! Anyway, these guys do know banks very well, on that I have no doubt, I just can’t see that this is not a value trap. There are off-sheet balance sheets, much unknown here, and apart from the US, rates are very slowly rising. Here, we should have higher rates but the B word is taking its toll. Europe is even further behind. Although banks have less debt “with each other” the level of debt is higher than pre GFC for corporates. I hope you are right but I’m not prepared to go in with better fundamentals elsewhere. Good luck.


#11

I put most of the cash in my SIPP in to this this morning. Interesting to read different opinions on it tonight., I read the newsletter in bed last night (it was raining hard, couldn’t sleep and my beautiful wife unfortunately snores like the pig she is not).

I’ll let you know how I got on but I’m pretty optimistic right now.

We’ll see if I regret that. :wink:


#12

I think this is worth a punt because it pays a reasonable dividend so while you wait to see if/when bank share prices will rocket, or if not rocket, respectably go up, you get paid in the meantime and then in 2020 the fund matures so the discount will narrow a lot, and you will benefit from that too.

It’s not quite a no brainier because a market crash would spoil any party but it doesn’t seem like a huge risk to me.


#13

The discount has narrowed to -4.6% as of yesterday. I’ve noticed sometimes when articles are published on here the discounts narrows as people buy the trusts.

I hesitated buying yesterday because of the narrowing discount but now I’ve had to time to consider it a percent here or there shouldn’t make much difference. I expect the discount to disappear as we draw closer to 2020 and hopefully we see share prices of banks taking a little.


#14

I think the Polar chaps have made a reasonably compelling argument in favour of investing in the financial sector because it is cheap, less competition, safer because of more capital, rising rates (have I missed anything?). So i get that, and I also get that while you wait for the stock market to get it, as it were, you get a good dividend in the meantime…but…I wonder if Polar Financial fund would be the best way to capture this rather than buying banks.

I have never heard of this fund until today, and I worry if a fund from a firm like Polar will benefit enough even if market sentiment turns because not enough people know about their fund.

With smaller firms like Polar there’s the risk that they don’t put in the leg work telling their story to investors. Who knows if they even have a marketing team, a number of smaller firms don’t, they think marketing is a waste of time.

Maybe it’s better to buy a basket of 2 or 3 banks yourself.


#15

It does have a continuation vote in 2019 or 2020 @cameronmun that should mean the discount will disappear and any advancement in the valuation of the financial sector should flow through to the share price of Polar Financial, providing they own the right financial stocks, which as an experienced team I’d expect them to.


#16

@cameronmun Polar and the broker Panmure certainly do have highly qualified and active marketing teams. I recently saw this trust present to over 200 investors. Maybe you didn’t get the invite but it is doing the rounds. Besides, this is a closed-ended trust and so a lack of interest would only show up in a discount, not in NAV performance. The trust owns many banks I have never heard of, let alone been able to analyse to the level they get to. Seems odd to think you can beat them at their own game with just 3 banks.


#17

Point taken @james_pigott and @mammon. I think I’m yet to be convinced by this trust, and that’s the nib of the issue for me. It is not one that is well known or understood.

I am not completely against the idea of investing in it though. I’ve actually added it to my watch-list. I’ll get a little bit more familiar with it before deciding on how investable it is.


#18

One thing that is missing from this article on Polar Capital Global Financials (what a bloody long name!) is how much the managers have invested in the fund. In some of your articles you talk about you know, skin in the game, how much of their own wonga they’ve got in the fund.

You see if you read a number of the comments here, people like the story as it where, they like the investment case being made, but probably most of us ain’t never come across this fund before and I think that knowing that the geezers who manage the fund have got something to lose if they don’t run it well is important information to get you over the line.

I notice you’ve got it plasterered over Witan which is great but could you do this for all your articles @Alex_Simpson @RichardOwen @dicem


#19

As I understand it most fund managers are reluctant to confirm their personal holding except to state they own some shares @jamaicabound. I’m told that because the manager of Witan is also a director his personal holding is public knowledge.

Where we have the information we will always confirm managers holdings in their investment trusts.

Thanks