Polar Capital Global - Final Results
21/02/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230221:nRSU5043Qa&default-theme=true
RNS Number : 5043Q Polar Capital Global Financials Tst 21 February 2023
POLAR CAPITAL GLOBAL FINANCIALS TRUST PLC
Legal Entity Identifier: 549300G5SWN8EP2P4U41
AUDITED ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED
30 NOVEMBER 2022
PERFORMANCE HIGHLIGHTS FOR THE YEAR ENDED 30 NOVEMBER 2022
Performance (Sterling total return) For the year ended Since Inception
30 November 2022 % %
Net asset value (NAV) per ordinary share (1)* 1.9 125.9
Ordinary share price (2)* -7.6 102.8
Ordinary share price including subscription share value (3)* - 107.3
Benchmark (Sterling total return) (4) 6.8 123.4
MSCI ACWI Financials 6.8 134.9
Chain-linked benchmark
Other Indices and peer group (Sterling total return)
MSCI World Index -1.0 184.5
FTSE All Share Index 6.5 73.4
Lipper Financial Sector (5) -0.3 97.6
Performance since Reconstruction on 22 April 2020 (Sterling total return) Since Reconstruction %
NAV per ordinary share (6)* 73.6
Benchmark (4) 67.2
Financials As at As at %
30 November 30 November Change
2022 2021
Total net assets^ £541,272,000 £457,247,000 +18.4
NAV per ordinary share 166.3p 167.5p -0.7
Ordinary share price 154.6p 172.0p -10.1
(Discount)/premium per ordinary share* -7.0% 2.7%
Net gearing* 6.0% 5.2%
Earnings per Ordinary share (7) For the year ended For the year ended
30 November 2022 30 November 2021
Revenue Return 4.45p 4.42p
Capital Return (2.75p) 24.57p
Total 1.70p 28.99p
Expenses*
Ongoing Charges 0.87% 1.02%
Ongoing charges including performance fee (8) 0.65% 0.98%
Dividends (9)
The Company has paid or declared the following dividends relating to the
financial year ended 30 November 2022:
Pay date Amount per ordinary share Record date Ex-date Declared Date
Ordinary Shares
In issue
First interim: 2.40p 330,440,000 5 August 2022 4 August 2022 1 July 2022
31 August 2022
Second interim: 2.05p 324,779,000 3 February 2023 2 February 2023 18 January 2023
28 February 2023
Total (2021: 4.40p) 4.45p
Note 1
The total return NAV performance for the period is calculated by reinvesting
the dividends in the assets of the Company from the relevant ex-dividend date.
Performance since inception has been calculated using the initial NAV of 98p
and the NAV on 30 November 2022. Dividends are deemed to be reinvested on the
ex-dividend date as this is the methodology used by the Company's benchmark
and other indices.
Note 2
The total return share price performance is calculated by reinvesting the
dividends in the shares of the Company from the relevant ex-dividend date.
Performance since inception has been calculated using the launch price of 100p
to the closing price on 30 November 2022.
Note 3
The total return share price performance since inception includes the value of
the subscription shares issued free of payment at launch on the basis of one
for every five Ordinary shares and assumes such were held throughout the
period from launch to the final conversion date of 31 July 2017. Performance
is calculated by reinvesting the dividends in the shares of the Company from
the relevant ex-dividend date and uses the launch price of 100p per Ordinary
share and the closing price per ordinary share on 30 November 2022.
Note 4
Chain linked benchmark is a combination of 3 benchmarks which have been in
operation over the period. From inception until 31 August 2016 the Company's
benchmark was the MSCI World Financials Index, which included Real Estate as a
constituent until its removal that year. From 1 September 2016 to 23 April
2020 the benchmark was the MSCI World Financials + Real Estate Net Total
Return Index. From 23 April 2020, the benchmark changed to MSCI ACWI
Financials Net Total Return Index (in Sterling) due to the Company's exposure
to emerging market equities and its limited exposure to real estate equities.
Note 5
Dynamic average of open ended funds in the Lipper Financial Sector Universe
which comprised 43 open ended funds in the year under review.
Note 6
The total return NAV performance since the Reconstruction is calculated by
reinvesting the dividends in the assets of the Company from the relevant
ex-dividend date. The new performance fee period runs from the date of the
Reconstruction. The opening NAV for the performance fee of 102.8p is the
closing NAV the day before the tender offer was completed.
Note 7
Refer to Note 11 below for more details.
Note 8
The decrease in ongoing charges including performance fee reflects the write
back of the performance fee accrual in the year under review.
Note 9
Refer to Note 12 below for more details.
^ The change in net assets reflects shares reissued from treasury in the year,
new shares issued, placing, buybacks, dividend paid and market movements.
* Alternative Performance Measure, see below for further explanations.
Data sourced by HSBC Securities Services Limited, Polar Capital LLP and
Lipper.
Status of Announcement
The figures and financial information contained in this announcement are
extracted from the draft unaudited financial results for the year ended 30
November 2022 and do not constitute statutory accounts for that year. Once
finalised, the Annual Report and Financial Statements will include the Report
of the Independent Auditors which is expected to be unqualified and not
expected to contain a statement under either section 498(2) or Section 498(3)
of the Companies Act 2006. The Annual Report and Financial Statements for the
year ended 30 November 2022 have not yet been delivered to the Registrar of
Companies.
The figures and financial information for the year ended 30 November 2021 have
been extracted from the published Annual Report and Financial Statements for
the year ended 30 November 2021 and do not constitute the statutory accounts
for that year. The Annual Report and Financial Statements for the year ended
30 November 2021 have been delivered to the Registrar of Companies and
included the Report of the Independent Auditors which was unqualified and did
not contain a statement under either section 498(2) or Section 498(3) of the
Companies Act 2006.
The Directors' Remuneration Report and certain other helpful shareholder
information has not been included in this announcement but will form part of
the finalised Annual Report which will be available on the Company's
website and will be sent to shareholders in February 2023.
National Storage Mechanism
A copy of the Annual Report once published will be submitted to the National
Storage Mechanism ('NSM') and will then be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Neither the contents of the Company's website nor the contents of any website
accessible from the hyperlinks on the Company's website (or any other website)
are incorporated into or form part of this announcement.
CHAIRMAN'S STATEMENT
Dear Shareholders,
In this, my final report as Chairman of your Company, I look back on a
financial year in which Covid-related health concerns were replaced in the
headlines by a war in Europe; post-Covid supply disruptions; the return of
inflation; and, not just the end of whatever-it-takes quantitative easing
(QE), but a 180 degree policy reversal by major central banks in favour of
raising rates and quantitative tightening (QT). In the broad market
corrections that followed there were few places to hide. Highly unusually,
steep declines in public equity markets were mirrored in bond markets, private
equity strategies and a range of alternative asset classes, in particular
crypto currency.
With this background, I am pleased to report a positive net asset value (NAV)
total return, further growth in the issued share capital of the Company, and
an increase in the dividend.
To adopt a popular sporting cliche, the year under review became a game of two
halves. The financial year began with continued strong demand for the
Company's shares and a persistent share price premium to NAV, satisfied by
further share sales from the treasury account and the issuance of new shares.
However, following the Russian invasion of Ukraine and the reversal of the
easy money policy by major central banks, trading in the Company's shares
could not resist the negative sentiment that pervaded markets generally. As a
result, the Company's shares moved from trading at a premium to NAV to a
discount.
Throughout the financial year the Company has been very proactive in, firstly,
responding to appetite for the Company's shares in the early months of the
year, and subsequently intervening to support trading in the Company's shares
through buy-backs once sentiment across markets deteriorated. This extensive
activity is described in the share capital changes section of my report below.
The end of the financial year also saw the completion of the second stage of
our Board succession plan as detailed in my report last year. On the first day
of the 2023 financial year we said goodbye to Katrina Hart and welcomed to the
Board two new members, Angela Henderson and Susie Arnott. Katrina had been
with the Company as Chair of the Management Engagement Committee since its
launch in 2013. On behalf of the Board and Shareholders I want to thank
Katrina for her diligent service to the Company. More details on the execution
of our succession plan can be found below.
Investment Performance
2022 was a year of wealth destruction not seen in over a generation. A wide
range of capital markets and alternative asset classes reeled under the
onslaught from an outbreak of war in Europe, an unexpected surge in inflation
and a monetary policy response that marked the end of an unprecedented easy
money era. It heralded a central bank race to slam the brakes on with official
interest rate rises and liquidity draining QT programmes.
Despite the geopolitical and economic maelstrom, I can report that the Company
generated a total return of 1.9% over the financial year helped by a decline
in sterling and the value attributes of much of the financials sector. This
return was behind that of the Company's benchmark, the MSCI ACWI Financials
Index, which delivered a total return of 6.8%, but ahead of the negative 0.3%
return of the Lipper open-ended peer group of financial equity funds, both in
sterling terms.
Since its launch in 2013 the Company's total return has been 125.9% compared
to 123.4% for the MSCI ACWI Financials Index and 97.6% for the Lipper open
ended peer group. Since the Company's restructure in April 2020, it has
delivered a total return of 73.6% compared to a benchmark return of 67.2%.
Over the financial year the Company's share price did not mirror the positive
NAV total return. Reflecting the sharp deterioration in market sentiment, the
Company's shares moved from a premium to NAV of 2.7% at the start of the
financial year to a discount of 7.0%. As a result, the Company's ordinary
share price fell by 10.1% over the financial year.
Complicating investment management over the year were significant disparities
in the performance of subsectors within the investment universe. From a share
price perspective, financials did not behave as an homogenous sector. For
example, significant share price declines were experienced in companies priced
for growth such as small cap US banks and certain FinTech companies, and in
capital market sensitive asset managers, whereas general insurance companies
showed strong share price gains. Similarly, there was little correlation in
share price performance by country where, for example, commodity producing
countries fared better as they were relative beneficiaries of some of the
developments that hurt the broader markets.
At the start of the year the portfolio was positioned for further post-Covid
recovery. This made the portfolio vulnerable to the war in Ukraine and the
subsequent inflation and monetary policy response. The Manager responded by
positioning the portfolio more defensively, principally switching certain bank
exposures in favour of non-life insurers, and into fixed income securities
following the sharp rise in bond yields. Gearing was also eliminated during
the year in response to the poor market background. However, by the end of the
financial year gearing was restored to around 6% of the portfolio as the
Manager sought to exploit better valuations and specific opportunities from
the sector's performance disparity. The Manager's investment activity is
described in detail in the Investment Manager's Report.
Share Capital Changes
In April 2020 a Company reconstruction took place in the form of a 100% tender
offer and the replacement of the fixed end-of-life with a five yearly tender
offer. In last year's statement I reported on the extraordinary growth in the
Company's share capital that followed. In the 2021 financial year the Company
responded to a persistent share price premium to NAV and strong demand for the
Company's shares by issuing a total of 76,555,000 new ordinary shares
following the conversion of a successful C Share issue. In addition, a further
73,374,000 shares were re-issued from treasury.
The extraordinary volatility witnessed broadly across capital markets during
the 2022 financial year is reflected in changes to the Company's share capital
in the latest reporting period. The year began with continued strong demand
for the Company's shares which quickly exhausted the remaining 6.35m shares
held in treasury. To accommodate further demand the Company issued new shares
under its AGM authority which by the end of January 2022 was almost completely
depleted. Consequently, the Company sought a refreshed authority at a GM held
on 1 February 2022. The total number of new ordinary shares issued under these
two authorities during 2022 financial year amounted to 25.645 million shares.
At the same time the Company utilised its ability to place further new shares
as per the 2021 C share Prospectus. Two such placements took place on 1
February and 25 February 2022 for a total of 26.775 million new ordinary
shares.
In total, during the first half of the 2022 financial year, a total of 58.77
million ordinary shares were issued at an average price of £1.74 and an
average premium to NAV of 1.85%, with an accretive effect on NAV of 0.23p per
share and adding £102.12m to the Company's NAV.
The Russian invasion of Ukraine on 24 February 2022 brought an abrupt end to
share issuance as investors withdrew demand from stock markets.
Coupled with a reversal of monetary policy by major central banks in the face
of a surge in inflation to 50-year highs, market sentiment deteriorated across
the board. The Company's share price moved from a premium to NAV to a discount
in keeping with the trend in the investment trust market generally.
At the time of the Company's reconstruction in April 2020 the Board made a
commitment to provide support to the trading of the Company's shares if and
when required. Specifically, the Board stated that it would take a proactive
approach to providing liquidity in the Company's shares with the intention
that, in normal market conditions, the shares will trade at a discount to NAV
of no wider than an average of 5 per cent over the longer term.
The Board delegated authority to the Manager and our Corporate Broker to
purchase shares in order to support liquidity under clear parameters
consistent with the Board's commitment. These parameters are designed to
ensure that the Company does not displace any market demand for shares, but is
available to support liquidity if required once market demand is satisfied.
The first purchase under this delegated authority was made on 10 May 2022.
During the 2022 financial year the Company bought back shares on 91 occasions,
purchasing in total 6.356 million shares at an average discount of 8.99% and
an average price of £1.44 for a total of £9.2m. These purchases have been
accretive to NAV equivalent to 0.26p per share.
The Board remained in close dialogue with the Manager and Corporate Broker
throughout this period. As a result, the Board was able to adjust the
delegated share buyback parameters on three occasions during the year to allow
more discretion and capacity to meet its commitment as market conditions
changed. As a result, only on one trading day was it necessary to request the
Board's special permission to exceed the terms of the parameters - the
permission was granted.
By the end of the financial year, trading in the Company's shares steadily
improved, narrowing the discount in the share price to 7.0%. This improvement
continued into the early weeks of the new financial year during which, at the
time of writing, only 205,000 shares have been purchased in the market as the
discount settled close to 5%. All shares purchased under this delegated
authority have been placed in treasury.
For the financial year as a whole, the net effect of this proactive approach
to share capital management was to increase the outstanding shares in public
hands by 52.414 million with a further 6.356 million shares held in treasury.
The net cash proceeds raised over the year were £92.95m and the market cap of
the Company rose from £470m at the beginning of the financial year to £503m
at the end of the financial year. We warmly welcome all our new Shareholders
and thank our existing Shareholders for their continuing support through this
tumultuous time.
Dividends
For the previous two financial years the Company was able to maintain its
total dividend at 4.40p per ordinary share despite a sharp fall in the income
generated by the Company's investment portfolio in the face of Covid and the
recession that followed. It had been able to do so by exploiting one of the
advantages of the investment trust structure, drawing on distributable
reserves built up in previous years.
In August 2022 the Company paid an unchanged first interim dividend for the
current financial year of 2.40p per ordinary share. Although income from
investments began to recover as the world economy opened up following an
easing of the Covid pandemic, distributable reserves were required once again
to support the August 2022 dividend.
On 18 January 2023 the Company announced a second interim dividend for the
2022 financial year of 2.05p per ordinary share payable on 28 February 2023,
bringing the total dividend for the financial year to 4.45p, a small increase
on previous years. This second interim dividend was almost fully covered by
earnings in the period, requiring minor support from distributable reserves.
Looking ahead, the Manager has discretion to invest up to 10% of the portfolio
in fixed income securities and the recent rise in bond yields presents an
opportunity to increase revenues from this source. The recent trend in
distributions from the underlying equity holdings has been positive as well.
However, looking forward, further growth in the Company's dividend
distribution remains uncertain given brewing economic headwinds.
Costs
At the time of the Company's reconstruction in 2020, the Manager agreed to a
reduction in its base management fee from 0.85% per annum of the lower of the
Company's market capitalisation and NAV, to 0.70% per annum of the Company's
NAV. The Company continues to maintain tight control of other expenses. For
the 2022 financial year the Ongoing Charges Ratio ("OCR") fell from 1.02% of
the Company's NAV to 0.87%, the lowest OCR in the life of the Company.
In addition to a management fee, the Manager can also earn an investment
performance fee. The fee is calculated on performance since the reconstruction
in April 2020 and is accrued and only paid at the time of the five yearly
tender. The performance fee is calculated as 10% of the excess performance
over the total return of the benchmark plus a hurdle of 1.5% p.a. Any
performance fee accrual can be reduced by subsequent underperformance of the
benchmark plus hurdle rate measured over the five-year period. The Strategic
Report within the Annual Report provides further detail.
In the previous two financial years investment performance generated a
performance fee accrual. However, due to underperformance in the 2022
financial year, the performance fee accrual has been reduced to nil. As a
result, the OCR including performance fee fell from 0.98% of NAV in financial
year 2021 to 0.65% in financial year 2022. Although NAV performance since the
reconstruction relative to the benchmark remains positive, there was no
performance fee accrual balance remaining at the end of the 2022 financial
year. The Board continues to believe that the performance fee structure aligns
the interests of Shareholders and the Manager by providing a performance
incentive with safeguards for Shareholders that rewards only long-term
excellent performance.
Board Succession
The Company was launched in June 2013 with three Directors, Ms Elliot, Ms Hart
and me. A fourth Director, Simon Cordery, joined the Board in July 2019. As
the AIC Code recommended 9-year tenure approached for the original directors,
the Board tabled a succession plan in 2021 that would provide refreshment
while ensuring sufficient retention of Company knowledge and avoiding a
cliff-edge of Director departures in the future.
I have reported on the completion of phase one of this plan with the
appointment in November 2021 of Cecilia McAnulty replacing Joanne Elliot as
Audit Chair. In order to allow an orderly transition of her role, Joanne
stepped down from the Board following the AGM in April 2022.
I am pleased to report the completion of phase two of the succession plan.
During the second half of 2022 the Board undertook an extensive and thorough
search for a replacement for Katrina Hart, Chair of the Management Engagement
Committee. The search was sensitive to maintaining an appropriate diversity
and experience mix among Board members.
I am pleased to report that the search was concluded successfully. On 1
December 2022 Katrina retired from the Board and at the same time two new
Directors were appointed.
After a career as a buyside analyst and portfolio manager specialising in
global financials, Susie Arnott transitioned into a number of advisory roles
focused on sustainable investing and social impact. Susie has replaced Katrina
as Chair of the Management Engagement Committee where she will be able to
bring her experience to engaging on portfolio management and ESG issues with
the Manager and other service providers.
At the same time Angela Henderson has also joined the Board. With a career
foundation in financial services and capital markets, Angela now has long
experience as a non-executive director on a variety of boards including asset
management companies and closed-ended investment vehicles. Angela brings a
strong governance record and a clear understanding of the financials sector.
On behalf of the Board I would like to thank Katrina for her service to the
Company over the past 9 years. The Board has benefited from Katrina's industry
experience in her role as Chair of the Management Engagement Committee,
ensuring appropriate oversight of the Manager and other service providers. As
a Board colleague, Katrina has demonstrated exemplary diligence and a
collegiate style that has positively contributed to the workings of the Board.
She leaves with the very best wishes from those with whom she has shared the
Polar Capitals Global Financials Trust journey.
Following a Board Nominations Committee held on 1 February 2023, I am pleased
to confirm that Simon Cordery has been invited by the Board and has accepted
the role of Chair (subject to re-election by Shareholders at the AGM) when I
retire at the forthcoming AGM on 30 March 2023. The Board believes that Simon
will bring a fresh perspective to its proceedings and the Board looks forward
to seeing the Company make further progress under his guidance.
Environmental, Social and Governance (ESG) Considerations
The Board welcomes the growing expectations placed on the financial community
to adopt more sustainable and inclusive behaviour and business practices. As
well as delivering better outcomes for society as a whole, the Board believes
that ESG factors will increasingly drive successful investment performance.
The Company outsources all its business operations and therefore has limited
control over environmental and social deliverables. Instead, it works with and
through its suppliers to better understand their ESG strategy. The Board
succession plan described above specifically included ESG as a key search
parameter, reflecting the importance the Board places on its ESG oversight
responsibilities. The appointment of Susie Arnott, with her deep social
finance background, extends the Board's skills mix into this important area.
As Chair of the Management Engagement Committee, Susie has been asked to
review the Committee's terms of reference to ensure that ESG factors are fully
integrated into the Committee's and Board's work.
During the course of the past year, the Board has continued to engage with the
Manager to monitor progress on its adoption of ESG principles in both its
investment process and its corporate conduct. During the year the Manager has
worked to refine further external third party ESG rating methodologies and
matrices for use in its investment process. As a result, the investment team
has developed a proprietary scoring process, assigning its own internal ESG
ratings. The analysis incorporates both quantitative and qualitative factors
derived from company disclosures, management meetings, regulatory reports and
third-party ESG ratings providers. The Board supports the proprietary approach
adopted by the Manager given the team's expertise, experience and proximity to
companies in the financials investment universe. The Board will continue to
monitor and input into the implementation of the Manager's proprietary ESG
ratings in stock selection as well as their engagement with investee
companies.
Further detail is provided in the ESG Report within the Annual Report and
Accounts.
Following the appointment of Ms Henderson and Ms Arnott the Board complies
with the FCA Diversity and Inclusion policy as it relates to minimum
participation by women and, with Cecilia McAnulty as Audit Chair, at least one
female member of the Board holding a senior Board position. The Board is aware
of the FCA policy target concerning ethnic minority background which the Board
currently does not fulfil. It is a particular challenge for a small Board to
meet all the experience, skills and diversity criteria required to perform its
duties on behalf of Shareholders. Our search process and recent experience is
described in the Corporate Governance Report in the Annual Report and
Accounts.
Management Team
The portfolio is currently co-managed by Nick Brind, John Yakas and George
Barrow. As referenced in the announcement released on 14 February 2023, John
Yakas will be retiring from Polar Capital with effect from 30 June 2023 and
stepping back to an advisory role. The Board would like to express its thanks
to John who has been part of the investment team since the launch of the
Company in 2013 and has seen it through some very difficult and some very
rewarding times. John's expertise and views on the financials sector along
with his affable character will be missed. The team responsible for the
management of the portfolio has significant experience of investing in the
financial sector having grown both its size, from three to five since the
Company's inception in 2013, as well as the assets for which they are
responsible. As part of the transition process, George Barrow, who has been
part of the team since 2008, was named co-manager in 2020. We wish John every
happiness in his retirement.
Outlook
As we look forward in early 2023, the global economy and investors have a lot
to deal with. The long list of headwinds is well known - war and geopolitics,
decades high inflation, painful monetary tightening, structural labour market
challenges, energy supply shortages, China and its Covid policy, to name a
few. The predicament for policy makers and investors determining how far, how
fast and for how long, will characterise the outcomes. It is not surprising
that the most common description of the near-term outlook is 'uncertain'.
Initially not taking the inflation threats seriously, major central banks
ended 2022 trying to restore some severely damaged credibility. In public
statements that echoed the 'whatever it takes' mantra that underlay their
previous 'too-easy-for-too-long' monetary stance, central bankers insisted
they were serious about dealing with inflation. Even the Bank of Japan threw
in the towel on its particularly long standing easy monetary policy stance.
Despite this noise, concerns remain that inflation in developed countries will
remain above central bank targets for a while, given stubbornly strong labour
markets, and that fiscal and monetary policy may be at odds with each other.
This concern can be seen in that, for the first time since 2014, the 2023 new
year started with no sovereign bonds available at negative yields. Only 2
years ago more than 4000 such bonds, worth $18.4 trillion, were in negative
yield territory.
Perceived as a cyclical sector with value characteristics, the prospects of
the financials sector are balanced in this environment, as seen by its
performance in 2022. The largest sub-sector, banks, are typically seen as
vulnerable cyclicals in an economic slowdown. However, this traditional view
requires qualification. In part driven by regulatory and accounting changes,
banks in developed markets have better quality balance sheets and are better
provisioned with greater capital and liquidity buffers than at any time since
the global financial crisis (GFC). Banks delivered these improvements despite
the huge hurdle of prolonged easy money and zero interest rates. This hurdle
is now firmly in the past, and, although there are likely to be adjustment
headaches for the broad economy, banks are one of the clear winners from this
return to monetary policy normality.
The underlying recovery in the banking sector post the GFC has yet to be
reflected in valuations, especially in Europe. Despite bumper profits, higher
dividends and share buybacks, investors have not re-rated banks. For now, they
choose to focus on the risk of greater non-performing loans despite evidence
that the system is generally well-provisioned and has capacity to grow profits
and provide further provisions given buoyant net interest income. The
emergence of the "shadow banking" sector since the GFC which has pursued new
lending aggressively, and the somewhat anaemic loan growth which many
established banks have experienced in recent years are likely to now prove
helpful in mitigating the need for large provisions. On the balance of risks,
investors may be surprised by how well banks perform through the expected
economic slowdown.
Beyond banks, in other sub-sectors there are different drivers for risk and
performance, offering good performance diversification and opportunity. Asset
managers and investment banks are vulnerable to further market corrections and
depressed capital market activity, while general insurers have more stable
earnings. Although troubled at the moment, we anticipate that FinTech will
respond positively to any sign that interest rates have reached a peak and
growth is back on the agenda. In addition, the significant rise in bond yields
has re-opened another income opportunity for the Company given its discretion
to invest up to 10% of its portfolio in fixed income securities. Overall, the
breadth, depth and diversity of the sector offer both risk management
potential and attractive return opportunities as the uncertain headwinds
overhanging the global economy are played out.
While the near-term uncertainty remains high, the portfolio is balanced
between cyclically exposed banks, both small and large cap, and more defensive
sectors such as non-life insurers and fixed income securities. This puts the
Company in a good position to navigate further economic and political
setbacks, ready to turn more aggressive when the time is right. The Board
believes that once investors look through the current negative market
sentiment, the financials sector will be seen as an attractive home for
capital given its breadth and diversity of opportunity, its relative
valuations and its pro-cyclical correlation.
This year's AGM, to be held on 30 March 2023 at Polar Capital's London
offices, will be my last as Chairman and a Director of your Company.
I was fortunate to join the Board of the Company at its launch in 2013.
Although the financial sector was still recovering from the fallout from the
global financial crisis, sufficient shareholders saw its potential at launch
for further rehabilitation. Many of them remain shareholders today. At first
our journey together was relatively uneventful, only to become a rollercoaster
as the original fixed term end-of-life coincided with the outbreak of Covid
and the worst economic crisis since the War. Again, despite it being the most
difficult of times, enough shareholders were willing to look through local
difficulties and supported the continuation of the Trust. Their loyalty and
belief were rewarded as, shortly afterwards, the Company experienced an
extraordinary period of growth in its share capital base with its market cap
quintupling over a two year period.
I step down from the Board as the sector faces a different menu of headwinds.
However, I am confident that the great strides taken broadly across the sector
to strengthen balance sheets, risk management processes and operational
efficiency will be recognised in performance. I want to express my sincere
thanks to our shareholders who have supported our vision for the sector at
launch and during the Company's rather eventful life.
Throughout my time as Chairman, I have been highly fortunate to receive first
class support from the Company's sponsor, Polar Capital - from investment
management, operational risk controls, financial reporting, to best-in-class
sales and marketing and company secretarial services. The management of Polar
Capital has consistently engaged constructively with the Board in dealing with
the needs of the Company, always acting in the best interests of your Company
despite any potential or actual conflicts of interest. I am confident they
will continue to do so and will remain committed to the investment trust
sector.
Finally, to my Board colleagues, past and present, I wish to express my
heartfelt gratitude for their collaboration on my tour of duty. I have seen up
close how their wisdom, professionalism and dedication have benefitted the
Company through both good and bad times.
I am the last of the original three directors whose tenure has required them
to step down from the Board. Having overseen the transition to a new Board,
under the leadership of Simon I am confident that the Company will continue to
receive the stewardship shareholders should expect during the next phase of
the Company's life.
Robert Kyprianou
Chairman
20 February 2023
INVESTMENT MANAGER'S REPORT
Investment Review
Performance
Equity markets fell over the period under review (1 December 2021 to 30
November 2022) as the impact of rising interest rates, further lockdowns in
China, Russia's invasion of Ukraine and the resulting impact on energy prices,
and volatility in the UK gilts market hit sentiment and more than offset
better corporate earnings. The strength of the US dollar cushioned falls for
sterling investors, as did a late rally in equity markets in October and
November.
Government bonds fell sharply over the year as the US Federal Reserve,
European and other central banks raised interest rates at a faster pace than
previously expected. However, concern about the impact on the outlook for
growth resulted in the US yield curve inverting (when the interest rate on
long term bonds is lower than that on shorter dated bonds), to levels not seen
since the early 1980s, a historically good predictor of recessions.
Against this background, financials outperformed wider equity markets. During
the 12 months, the Trust's net asset value total return rose 1.9%, while its
benchmark index, the MSCI All Country World Financials Net Total Return Index,
rose 6.8%. In contrast, global equity markets, as illustrated by the MSCI All
Country World Total Return Index, fell 1.4% and the Lipper open-ended peer
group of financial equity sector funds fell 0.3%. Since launch, the Trust's
net asset value has returned 125.9% against the MSCI All Country World
Financials Net Total Return Index return of 123.4% and the Lipper open-ended
peer group return of 97.6%.
Notwithstanding the good performance of the sector and that the Trust's net
asset value outperformed its peers and wider equity markets, relative
performance was disappointing. The Trust's outperformance versus its peers, we
believe, was probably due to the Trust's lower exposure to FinTech companies
which performed poorly, and higher exposure to insurance companies, which
performed extremely strongly over the period.
While we had strong performance from our holdings in the insurance sector -
Arch Capital and Beazley both benefited from large rises in their share prices
- the Trust's large overweight holding in faster-growing, smaller US banks
more than offset this and was the most significant drag on performance
relative to benchmark, along with a holding in PayPal Holdings.
Underweight exposure to commodity-exporting countries such as Australia, Saudi
Arabia, Brazil and South Africa, but also Japan, impacted performance and more
than offset positive contributions from the positioning in the likes of the
UK, Indonesia and Ireland. Gearing was a small positive contributor to
performance while currency and fixed income were small negative contributors,
with exposure to fixed income having been reduced materially in recent years.
Market Review
In what was one of the worst years for financial markets, with bond markets
suffering sharp falls, markets finished the year where they started, namely at
odds with Federal Reserve guidance on the outlook for interest rates. As
central banks turned more hawkish at the beginning of the financial year,
there was a steep rise in bond yields which also led to a sharp sell-off in
equity markets. This led initially to a rally in stocks tagged as value and a
decline in growth stocks, albeit against a background of falling equity
markets.
Financials is primarily a value sector due to its low valuation metrics and,
in the main, benefited from rising interest rates and bond yields. However,
there are a number of companies within the sector that are deemed growth
stocks and consequently trade at high valuations - these fell sharply. While
highly-rated stocks did see further pressure over the year, it would be an
oversimplification to say value stocks outperformed while growth stocks
underperformed.
Financial sub-sector performance
Banks +6.9%
Insurance +20.8%
Diversified financials 0.0%
FinTech -23.5%
Source: Bloomberg; MSCI/Factset
Russia's invasion of Ukraine in February 2022 coupled with a stronger than
anticipated international response understandably overshadowed other news.
There was a significant impact on commodities, especially energy markets in
Europe, exacerbated by the strength in the US dollar, albeit the prices of
many commodities fell over the second half of the year. The impact of China's
zero-Covid policy and political ructions in the UK also impacted markets to
dampen sentiment.
Sector Review
At the beginning of the period, financials saw significant outperformance.
This was led by banks, but also insurance companies due to the positive
correlation they have with higher bond yields, in anticipation that it would
boost the earnings of banks as yields on their loans rise faster than what
they had to pay out on deposits. However, banks gave up that outperformance as
investors pulled back from the subsector with concerns about the outlook for
growth, following the invasion of Ukraine, and therefore the increased risk of
higher loan losses which would act as a headwind to earnings.
Equally, diversified financials, where we are underweight the benchmark, also
struggled to perform against this background. While the subsector covers a
broad spectrum of companies, from stock exchanges, asset managers and
investment banks to information service companies, those that are more
sensitive to the level of financial markets - in particular asset managers -
suffered sharp share price falls as fund flows turned negative and
expectations for performance fees and future fund raises fell. Investment
banks were also weak in anticipation of lower activity in capital markets.
Conversely, non-life insurance companies proved far more resilient. First,
they are more defensive, being less economically sensitive as insurance losses
are for the most part driven by weather-related losses and accidents. Second,
insurance rates continued to increase faster than claims costs, albeit with
exceptions including UK motor insurance. Third, like banks, they are a
beneficiary of rising interest rates and bond yields as this increases their
investment income.
FinTech companies were extremely weak over the period, primarily due to very
high valuations coming under significant pressure as discount rates increased
and disappointment around earnings, while regulatory concerns impacted the
'buy now/pay later' sector. This also reflected broader weakness in the
technology sector, with unprofitable companies the worst affected and some
large, well-known unquoted FinTech businesses seeing significant falls in
their valuations, while others saw their business models questioned.
Investment Activity
At the beginning of the reporting period, the Trust's investment portfolio was
positioned in the expectation that growth would remain respectable, as
economies continued to open up post-Covid and rising interest rates and bond
yields would be a boost for banks' earnings and therefore share prices.
Consequently, the portfolio was overweight banking stocks, notably
faster-growing, smaller regional banks in the US which we saw as the biggest
beneficiary of this trend.
Gearing had already been reduced to 5.2% at the end of November 2021 from a
high of 12.7% in November 2020, reflecting the fact that valuations had risen
sharply over the preceding 12 months. However, with the onset of war in
Ukraine, rises in commodity prices and concerns around the impact on growth of
rising interest rates, we positioned the portfolio more defensively. As a
result, the proportion of the portfolio in banks was reduced by close to seven
percentage points, largely through a reduction in our holdings in US and
European banks, while exposure to more defensive companies within the sector,
such as non-life insurers, was increased.
The shift to a more defensive portfolio was also reflected in individual stock
positioning. For example, new holdings were purchased in, among others, Visa,
Intact Financial Corporation, Marsh McLennan and Royal Bank of Canada, while
we added to holdings in Berkshire Hathaway, Chubb and Wells Fargo. All of
these are seen as more defensive, with insurance companies and Visa being less
economically sensitive while the two banks are seen as more defensive when
compared to their peers, the former in part due to the resilience of the
Canadian economy. We also added to holdings in other commodity-driven
economies such as Norway and Indonesia for the same reasons.
Conversely, holdings in JPMorgan, Citizens Financial Group, UBS Group, SVB
Financial Group and Signature Bank - all seen as more sensitive to volatility
in financial markets - were reduced, and the residual holdings in the latter
two were sold later in the period. Holdings in Intesa Sanpaolo and ING Groep,
both European banks, were sold as the proximity of the war to Europe led us to
reduce our European bank exposure in the expectation it would have a
significant impact on the region, albeit the banks have performed much better
than we expected at the time of the invasion.
With equity markets suffering significant weakness at the end of September, we
started to reverse some of the more defensive positioning as we felt financial
markets were discounting a much deeper downturn than was justified. This was
done through a combination of; adding to our holdings in JPMorgan, HSBC and
Toronto-Dominion; starting new holdings in, among others, AIB Group and BOC
Hong Kong; selling holdings in Baloise Holding, First Republic Bank and
Shinhan Financial Group: reducing holdings such as Arch Capital, Berkshire
Hathaway and Western Alliance.
We remained underweight asset managers and reduced our holding in Blackstone,
the US alternative asset manager which suffered from having to cap redemptions
from its listed property fund. We sold the remaining position later in the
year in preference for a holding in Ares Management, which we perceived as
more defensive. Alternative asset managers are an area we like for the long
term due to the locked-up capital on which they earn fees and demand for
underlying asset classes. In the short term, we saw risks around their ability
to continue to grow at the pace they have in recent years.
In Asia, we continue to have a large overweight to Indian private sector banks
which continue to see attractive growth. We do not invest in state banks as we
do not believe they are good underwriters of risk. We made small changes to
our holdings in AIA Group and Hong Kong Exchanges and Clearing which we saw as
beneficiaries of China relaxing its zero-Covid policy, while adding to our
holding in Prudential which should also be a beneficiary.
In Indonesia and Malaysia, both commodity-boosted economies, we added to
holdings in Bank Central Asia and Bank Rakyat Indonesia Persero and started a
new position in Hong Leong Bank. This was partially offset by reductions in
our exposure to Thailand, an economy which has struggled as tourism and
domestic consumption has been impacted by the delayed reopening of China and
less government support during Covid.
The reinsurance sector has had a difficult few years, as a succession of
natural disasters and other losses led to disappointing returns. During the
year, a number of companies in the sector reduced the amount of capital
allocated to reinsurance. Consequently, as reinsurance rates were expected to
rise sharply, reflecting continued increase in demand for reinsurance due to
climate change and inflation, for the first time since the launch of the Trust
we also took a small position in Hannover Rueck, a reinsurance company -
albeit other holdings in the portfolio with exposure to reinsurance would also
benefit.
At inception close to 10% of the Company's portfolio was invested in fixed
income securities, primarily to generate extra income. These holdings were for
the most part sold in recent years as the yields on offer fell and became much
less attractive. However, with the back-up in yields in 2022, we significantly
increased exposure in October and November acquiring new holdings in bonds
issued by, for example, AIB Group, IG Group Holdings, Nationwide Building
Society, Legal & General Group, Rothesay Life and BNP Paribas at yields of
between 8% and 12%.
We have been cautious of investing in unquoted companies in the past few
years, in part as valuations appeared very unattractive but also as we saw
better value in listed companies, especially with the fall in equity markets
during the pandemic. Nevertheless, we did participate in a fund raising for
Moneybox, a UK wealth and savings platform, in February 2022 which we believe
has exciting potential.
Gearing, which dropped at one point during the middle of the year to a
position where we had net cash available, ended the period at 6%.
Active Share
Active share - a measure of how actively a portfolio is managed with 0%
reflecting a fund that replicates its benchmark and 100% where none of the
securities overlap with the underlying benchmark- fell again this year to
69.6% at the end of the period under review from 76.5%. A higher number
increases the probability that a fund will outperform or underperform its
benchmark. The fall over the year reflects the changes highlighted above where
the portfolio was positioned more defensively albeit that there remain
significant differences between the portfolio and the benchmark.
The high active share in part reflects companies which we consider part of the
wider universe but which are not included in the Trust's benchmark, such as
Mastercard, or in the case of HDFC Bank, India's largest private bank, that,
due to restrictions on foreign ownership, does not meet the threshold required
by MSCI for index inclusion. However as indicated by the attribution analysis
chart in the Annual Report, which lists the active positions, there are also
many companies where we have a much larger or smaller position than the
benchmark. For example, the portfolio has a smaller holding in Berkshire
Hathaway than the benchmark and no holdings at all in Commonwealth Bank of
Australia or Goldman Sachs.
Outlook
Looking forward, we remain very constructive on the outlook for financials,
despite the shorter-term uncertainties which would argue for caution in a
sector that is cyclical. Today, banks are more robust with significantly
greater levels of capital and liquidity than before the global financial
crisis. Importantly, their risk appetite coming into this downturn is at a
level which would suggest much lower loan losses. In plain English, banks have
made far fewer bad loans than they have in previous cycles.
Furthermore, banks have been benefiting from the rise in interest rates which
has led to their net interest margins widening, that is to say the interest
income they earn on loans has increased faster than the increase in what they
have to pay out on savings accounts. Despite inflationary pressures, costs
have been contained at a manageable level. Consequently bank earnings have
risen over the year as analysts have had to factor in the changing interest
rate environment. For some banks this has been significant, albeit not enough
in many cases to offset weaker sentiment resulting in bank stocks derating.
The unknowns looking forward for bank investors will be the degree and
duration of the downturn and therefore the cost to bank profitability. There
are good reasons to believe loan losses will be modest, but this is
complicated by the fact that the amount of loan loss provisions banks will
have to set aside is likely to be larger than the actual losses due to
accounting rules. As we saw during the pandemic, this led to banks taking
significantly more loan loss provisions than they needed as the majority were
written back when bad debts did not increase to the extent expected.
A cautious investor may look at the rise in interest rates and inflation,
anecdotal stories of individuals and small businesses struggling with bills,
the inversion of the yield curve, swill the tea leaves and quite reasonably
assume that the downturn will be severe. Conversely, the evidence so far shows
that savings built up during the pandemic and more robust corporate balance
sheets, plus help from governments to offset increased energy costs, has
allowed consumers and corporates to withstand the slowdown which explains why
delinquencies have not yet risen meaningfully. The increase in loan loss
provisions seen in recent results announcements does not undermine this view
as it is driven by accounting rules.
The uncertainty is whether the banking sector will see further weakness along
with wider equity markets, in anticipation that the downturn will be more
severe than that priced in by financial markets, before recovering as
investors realise this is not a repeat of the global financial crisis or the
early 1990s downturn. Or do investors start to see through the shorter-term
weakness and see the value in buying banking shares and bid up share prices to
reflect their longer-term value and earnings potential?
Unlike the banking sector, where investors have understandably stepped back as
they see risks of a recession impacting short-term earnings and have for the
most part ignored the longer-term improvement in their earnings from higher
interest rates, for non-life insurance companies, investors are willing to
look through the shorter-term impact to their earnings. We have been very
constructive on the non-life insurance sector and continue to be, though we
are conscious that its performance as described above was in part due to its
defensive characteristics.
However, with non-life insurance companies there has also been a material
improvement in underlying earnings, from better underwriting returns, due to
higher insurance premiums relative to claims costs as well as higher
investment income. Understandably, investors have willingly paid a higher
multiple for that stream of earnings. Reinsurance companies that write
property-catastrophe insurance and other risks have equally performed well
despite 2022 being a poor year for returns, as reinsurance premium rates have
risen sharply.
We continue to remain cautious on asset managers and investment banks, the
former as, notwithstanding the recent rally in financial markets, we believe
flows will likely continue to remain weak, and in the latter as they rely on
activity in capital markets which we believe will be slow to recover. We own
shares in MSCI and S&P Global as beneficiaries of the continued demand for
ETFs and demand for data and services across their product areas, in the
latter instance as a credit rating agency.
As highlighted in the interim report to the end of May 2022, S&P and MSCI,
which compile many US and global indices, include FinTech companies within the
technology sector not the financial sector. Any investments in this area
continue to be off-benchmark and effectively result in us having an overweight
position. However, they have announced that they will be moving certain
payment companies, notably PayPal Holdings, Visa and Mastercard, into the
financial sector indices in March this year.
The portfolio remains overweight banking stocks, albeit by not as much as this
time last year, where we see material upside in share prices. Otherwise,
broadly the portfolio remains positioned in more defensive areas of the
sector, notably non-life insurance, payments, fixed income securities and
information services companies. Nevertheless, we have increased our exposure
to Asia to benefit from the recovery of China's self-imposed zero-Covid
policies as well as Europe, at the expense of the US. Gearing has also
increased by a couple of percentage points.
The rally in financial markets over the last few months on the back of lower
energy prices, in particular, in Europe, and softer inflation data has
increased the probability of a shallower downturn and led to hopes of a "soft
landing". Financials outperformed wider equity markets in both 2021 and 2022
and if this proves to be correct we would expect them to extend this
outperformance for a third consecutive year. However, much will depend on how
central banks react to the more positive data on inflation. Furthermore, will
inflation come down quickly, as implied by financial markets, or will it prove
to be more stubborn as history would suggest, albeit history is largely from
the 1970s and 1980s when unions had greater power? Either way, we believe the
next 10 years will be far better for the financials sector now the era of
cheap money has ended.
Nick Brind, John Yakas & George Barrow
20 February 2023
Note
We would draw shareholders attention to
www.polarcapitalglobalfinancialstrust.com
(http://www.polarcapitalglobalfinancialstrust.com) for regular monthly
portfolio updates and commentary.
Full Investment Portfolio
As at 30 November 2022
Ranking Market Value % of total net assets
£'000
2022 2021 Stock Sector Country 2022 2021 2022 2021
1 (1) JP Morgan Chase Banks North America 30,627 26,539 5.7% 5.8%
2 (2) Bank of America Banks North America 25,887 18,455 4.8% 4.0%
3 (6) CHUBB Insurance Europe 22,493 11,340 4.2% 2.5%
4 (-) Berkshire Hathaway Diversified Financials North America 21,302 - 3.9% -
5 (3) HDFC Bank Banks Asia (ex-Japan) 21,022 13,111 3.9% 2.9%
6 (37) Wells Fargo Banks North America 20,754 5,957 3.8% 1.3%
7 (23) HSBC Holdings Banks United Kingdom 14,656 8,153 2.7% 1.8%
8 (26) AIA Group Insurance Asia (ex-Japan) 13,874 7,833 2.6% 1.7%
9 (-) DBS Group Banks Asia (ex-Japan) 13,200 - 2.4% -
10 (8) PNC Financial Services Banks North America 13,112 11,112 2.4% 2.4%
Top 10 investments 196,927 36.4%
11 (7) Toronto-Dominion Bank Banks North America 12,439 11,305 2.3% 2.4%
12 (15) Sumitomo Mitsui Financial Banks Japan 11,789 9,264 2.2% 2.0%
13 (-) Visa Software & Services North America 11,108 - 2.1% -
14 (5) Arch Capital Insurance North America 10,533 12,572 1.9% 2.7%
15 (-) Marsh & McLennan Insurance North America 10,041 - 1.8% -
16 (-) DNB Bank Banks Europe 9,896 - 1.8% -
17 (22) Bank Central Asia Indonesia Banks Asia (ex-Japan) 9,890 8,204 1.8% 1.8%
18 (12) Mastercard Software & Services North America 9,805 9,466 1.8% 2.1%
19 (49) Bank Rakyat Banks Asia (ex-Japan) 9,183 4,235 1.7% 1.0%
20 (-) U.S. Bancorp Banks North America 8,972 - 1.7% -
Top 20 investments 300,583 55.5%
21 (-) AIB Group Banks Europe 8,949 - 1.7% -
22 (35) Beazley Insurance United Kingdom 8,909 6,767 1.6% 1.5%
23 (4) Citizens Financial Group Banks North America 8,570 13,086 1.6% 2.9%
24 (10) UBS Group Banks Europe 8,488 10,279 1.6% 2.3%
25 (-) Charles Schwab Diversified Financials North America 7,967 - 1.5% -
26 (32) Sampo Insurance Europe 7,909 6,858 1.4% 1.5%
27 (16) Morgan Stanley Diversified Financials North America 7,558 9,083 1.4% 2.0%
28 (-) IndusInd Bank Banks Asia (ex-Japan) 6,898 - 1.3% -
29 (-) Intact Financial Corporation Insurance North America 6,836 - 1.3% -
30 (44) Standard Chartered Banks United Kingdom 6,552 5,129 1.2% 1.1%
Top 30 investments 379,219 70.1%
31 (-) The Travelers Companies Insurance North America 6,484 - 1.2% -
32 (-) Prudential Insurance United Kingdom 6,402 - 1.2% -
33 (43) Bank of NT Butterfield Banks North America 6,310 5,240 1.2% 1.1%
34 (-) Royal Bank of Canada Banks North America 5,858 - 1.1% -
35 (36) Tisco Financial Banks Asia (ex-Japan) 5,805 5,999 1.1% 1.3%
36 (53) Hong Kong Exchange and Clearing Diversified Financials Asia (ex-Japan) 5,746 4,081 1.1% 0.9%
37 (19) Enterprise Financial Services Banks North America 5,685 8,424 1.0% 1.8%
38 (13) East West Bancorp Banks North America 5,660 9,452 1.0% 2.1%
39 (-) Mitsubishi UFJ Financial Group Banks Japan 5,629 - 1.0% -
40 (9) Nordea Bank Banks Europe 5,502 10,907 1.0% 2.4%
Top 40 investments 438,300 81.0%
41 (-) MSCI Diversified Financials North America 5,497 - 1.0% -
42 (-) Hannover Rueck Insurance Europe 5,456 - 1.0% -
43 (60) FinecoBank Banca Fineco Banks Europe 5,293 2,781 1.0% 0.6%
44 (-) Cullen Frost Bankers Banks North America 5,263 - 1.0% -
45 (31) Allianz Insurance Europe 5,078 7,079 0.9% 1.6%
46 (41) Lancashire Insurance United Kingdom 5,024 5,485 0.9% 1.2%
47 (33) S&P Global Diversified Financials North America 4,923 6,826 0.9% 1.5%
48 (-) Comerica Banks North America 4,914 - 0.9% -
49 (-) CaixaBank Banks Europe 4,851 - 0.9% -
50 (-) Hong Leong Bank Banks Asia (ex-Japan) 4,775 - 0.9% -
Top 50 investments 489,374 90.4%
51 (-) Regions Financial Banks North America 4,710 - 0.9% -
52 (-) Macquarie Diversified Financials Asia (ex-Japan) 4,644 - 0.9% -
53 (-) Bank of China (Hong Kong) Banks Asia (ex-Japan) 4,634 - 0.9% -
54 (-) Ares Management Diversified Financials North America 4,236 - 0.8% -
55 (47) Direct Line Insurance Insurance United Kingdom 4,091 4,763 0.7% 1.0%
56 (-) Axis Bank Banks Asia (ex-Japan) 3,789 - 0.7% -
57 (58) Ares Capital Diversified Financials North America 3,393 2,998 0.6% 0.7%
58 (21) Housing Development Finance Banks Asia (ex-Japan) 3,206 8,209 0.5% 1.8%
59 (-) Pension Insurance 7.375% Prep Bond Fixed Income Fixed Income 2,576 - 0.5% -
60 (73) International Personal Finance 9.75% 2025 Bond Fixed Income Fixed Income 2,563 1,357 0.5% 0.3%
Top 60 investments 527,216 97.4%
61 (-) Rothesay Life 4.875% Prep Bond Fixed Income Fixed Income 2,548 - 0.5% -
62 (-) Legal General Group 5.625% Prep Bond Fixed Income Fixed Income 2,542 - 0.5% -
63 (-) Golub Capital Diversified Financials North America 2,465 - 0.5% -
64 (61) VPC Specialty Lending Investments Fixed Income Fixed Income 2,428 2,392 0.4% 0.5%
65 (-) Lancashire 5.625% 2041 Bond Fixed Income Fixed Income 2,348 - 0.4% -
66 (-) Moneybox (unquoted) Diversified Financials United Kingdom 2,310 - 0.4% -
67 (-) IG Group 3.125% 2028 Bond Fixed Income Fixed Income 2,284 - 0.4% -
68 (65) Atom Bank (unquoted) Banks United Kingdom 2,241 1,921 0.4% 0.4%
69 (-) AIB Group 6.25% Prep Bond Fixed Income Fixed Income 2,056 - 0.4% -
70 (-) Aviva 6.875% Prep Bond Fixed Income Fixed Income 2,030 - 0.4% -
Top 70 Investments 550,468 101.7%
71 (74) Riverstone Credit Opportunities Fixed Income Fixed Income 2,026 1,325 0.4% 0.3%
72 (-) Barclays 8.875% Prep Bond Fixed Income Fixed Income 1,978 - 0.4% -
73 (-) Societe Generale 5.375% Perp Bond Fixed Income Fixed Income 1,978 - 0.4% -
74 (-) Phoenix Group 5.625% 2031 Bond Fixed Income Fixed Income 1,919 - 0.4% -
75 (-) BNP Paribas 7% Perp Bond Fixed Income Fixed Income 1,867 - 0.3% -
76 (-) Nationwide Building Society 5.75% Perp Bond Fixed Income Fixed Income 1,785 - 0.3% -
77 (-) CaixaBank 5.875% Perp Bond Fixed Income Fixed Income 1,771 - 0.3% -
78 (-) Rothesay Life 6.875% Perp Bond Fixed Income Fixed Income 1,675 - 0.3% -
79 (-) Natwest Group 2.105% 2031 Bond Fixed Income Fixed Income 1,646 - 0.3% -
80 (66) Gresham House Diversified Financials United Kingdom 1,625 1,803 0.3% 0.4%
Top 80 Investments 568,738 105.1%
81 (70) Provident Financial 2032 8.875% Bond Fixed Income Fixed Income 1,593 1,706 0.3% 0.4%
82 (-) Chesnara 4.75% 2032 Bond Fixed Income Fixed Income 1,275 - 0.2% -
83 (-) Shawbrook Group 9% 2030 Bond Fixed Income Fixed Income 480 - 0.1% -
84 (77) Jupiter 8.875% 2030 Bond Fixed Income Fixed Income 456 528 0.1% 0.1%
85 (-) Rothesay Life 5% Perp Bond Fixed Income Fixed Income 206 - 0.0% -
Total Investments 572,748 105.8%
Other net liabilities (31,476) (5.8%)
Total net assets 541,272 100.0%
Note: Figures in brackets denote comparative rankings as at 30 November 2021.
Portfolio Review
As at 30 November 2022
Geographical Exposure* Benchmark weighting 30 November 2022 30 November 2021
as at 30 November 2022**
North America 50.1% 47.6%
53.0%
Asia (ex-Japan) 19.8% 19.9%
18.0%
Europe 15.5% 19.2%
14.5%
United Kingdom 9.4% 11.7%
4.6%
Fixed Income 7.8% 2.2%
-
Japan 3.2% 2.0%
3.8%
Latin America - 1.7%
-
Eastern Europe - 1.1%
-
Other net liabilities (5.8%) (5.4%)
-
Total 100.0% 100.0%
Sector Exposure* Benchmark weighting 30 November 2022 30 November 2021
as at 30 November 2022**
Banks 60.1% 70.2%
48.3%
Insurance 20.7% 13.7%
22.0%
Diversified Financials 13.3% 14.9%
29.6%
Fixed Income 7.8% 2.2%
-
Software & Services 3.9% 4.4%
-
Other net liabilities (5.8%) (5.4%)
-
Total 100.0% 100.0%
Market Capitalisation* Benchmark weighting 30 November 2022 30 November 2021
as at 30 November 2022**
Large (>US$5bn) 98.7% 85.6%
98.6%
Medium (US$0.5bn - US$5bn) 5.9% 18.2%
1.4%
Small (