Jupiter Financial Opportunities
has begun to recover from an extended period of underperformance over the last few months on the back of central banks’ monetary easing measures, and FE Alpha Manager Guy de Blonay (pictured)
thinks this is a sign of things to come.
The fund has posted poor returns since the financial crash in 2008, and mass outflows have followed as a result; according to FE data, Jupiter Financial Opps has shrunk from £1.4bn to £441.5m over the past three years.
However, de Blonay believes that the extent of monetary easing – particularly in the US – will see cheap financial stocks surge in the short- to medium-term.
The manager is now “risk-on” as he feels that certain banks and other financial institutions are currently trading on very low valuations.
He believes that Jupiter Financial Opps’ performance will continue to spike due to Federal Reserve chairman Ben Bernanke’s pledge to implement potentially unlimited quantitative easing.
"Earlier this year a large proportion of the fund was in high yield stocks and the rest, to a lesser extent, was in growth assets and special situations. So the fund was in quite a defensive position," he said.
"During the summer, however, we got more comfortable with central banks in the US and Europe’s monetary policies. Therefore we increased the fund's proportion to growth and special situations assets, and cut back on yielding stocks."
De Blonay added: "In turn, the fund recovered well with the stock markets."
"Part of our growth portion is in special situations. For instance, we have increased our holding in Barclays on the back of the Libor scandal. We believe that companies like that one are trading on overly depressed valuations."
Like most managers focused on financials, de Blonay has struggled since the financial crisis hit. His Henderson Global Financials
portfolio lost 40.78 per cent in 2008 alone, eradicating much of the gains made in the preceding few years.
De Blonay left the Henderson fund in October 2009 and took charge of Jupiter Financial Opps in January 2011. Since then the fund has lost 14.53 per cent – around 9 percentage points more than its MSCI AC World Financials benchmark.
By contrast, the MSCI AC World index is up 2.53 per cent.
Performance of fund vs indices since Jan 2011
Source: FE Analytics
However, the manager thinks financial stocks are due a reversal in fortune and will soon close the gap on the wider equity market.
He says the US economy will continue to spike with the implementation of QE3 and believes the fund is in a strong position to benefit from it, given his significant overweight in the country.
"Due to Bernanke’s announcement, we are seeing relatively quiet but attractive developments in the housing markets and I believe mortgage origination is picking up,"
"The success of the banks is intrinsically linked to the health of the housing market. I believe, due to Bernanke’s decision, that the US housing market is bottoming out."
He added: "We see that state-focused banks have done very well recently. US banks' loan-to-deposit ratio has collapsed to 70 per cent. Also the leveraging process in the US will be very beneficial to the country's banks."
According to FE data, Jupiter Financial Opportunities has 45.19 per cent of its assets in North America and has banking giants US Bancorp, Capital One and American Express among its top-10 holdings.
The manager has already seen an uptick in performance in recent months. His fund is up more than 20 per cent over the last year, and is ahead of the MSCI AC World and MSCI AC World Financials indices over one, three and six months.
Performance of manager vs peer group composite over 10-yrs
Source: FE Analytics
has performed well against his peer group composite over a lengthy period, with particular success in rising markets.
According to FE Analytics
, he has returned 141.89 per cent over the last decade, compared with 62.42 per cent from his peer group composite. De Blonay has beaten his rivals in all seven rising markets over this period.
The £441.5m Jupiter Financial Opportunities portfolio has a total expense ratio (TER) of 1.76 per cent and a minimum investment of £500.
De Blonay also manages Jupiter International Financials
and Jupiter Global Financials, which he took over in January 2011.