In 2012 the MSCI AC World Financials index made 23.08 per cent, more than double the MSCI AC World’s returns of 11.03 per cent. De Blonay, who runs the Jupiter Global Financial Opportunities fund, says the sector can continue to outperform, as financial companies have undergone huge restructuring, making a number of key changes to their business models.
"Our view of the financial sector is that we expect, with of course a few blips along the way, that it will perform well throughout the year," he said.
"That’s very much because companies, especially in the sector, are focusing more on profitability rather than revenue growth. There are several ways they are making improvements to their return on equity."
"Firstly, there has been a headcount reduction. Secondly, there has been the sale of non-core assets which has translated into the release of capital, especially if those non-core assets are capital-intensive."
"Then there has just been general cost-cutting via the re-allocation of resources," he added.
The manager says it is because of these three reasons that the sector will continue to perform well.
He adds that more and more financials will be able to pay out improving dividends to their shareholders, making them more attractive to the typical income-seeking investor.
"In the current low-rate environment, market participants are constantly looking for yield," he said.
"When they see a company that has gone through a decent capital management exercise, it will look attractive because that should translate to more capital being redistributed to shareholders in the form of dividends."
"With equities being the last asset class providing a yield story, and combining that with financials with good cost-control, investors are waking up to the attractive offering from the sector," he added.
"For instance, Australian banks are yielding 5 per cent plus. In the insurance sector – especially the Swiss insurance sector – there are companies that have a 6 per cent yield and in some cases 10 per cent."
"Take the Japanese bond market: it is yielding 2 per cent. However, as its central banks print more money, those could turn into negative yields. What is going to happen to those billions of savings? They are going to go into yielding equities."
"Financials are a good place to find yield. Within the sector there are good yield stocks that will continue to re-rate."
"There are also good growth stories that are richly valued and pay lower dividends, but have good growth prospects."
"Thirdly, there are companies that have just started restructuring now and will be reducing their headcount, selling non-core assets and re-allocating their resources."
De Blonay says the most important aspect when constructing his fund is making sure he has the right balance between those three company "baskets" and maintaining a global focus.
He does not currently aim to distribute income to investors as he says that his mix of income-paying and growth-orientated companies does not allow it.
However, he says that when yield becomes a bigger theme within the sector he will reconsider his fund’s distribution.
De Blonay has been lead manager of the £511m Jupiter Financial Opportunities fund since January 2011, but has been heading up portfolios of this kind for more than a decade.
According to FE Analytics, he has returned 192.89 per cent over 10 years, significantly beating his peer group composite.
Performance of fund vs index over 10yrs
Source: FE Analytics
He previously ran Henderson Global Financials and New Star Financial Leaders.
The manager runs a diverse portfolio that consists of 110 holdings. He counts multinational blue chips such as Citi Group, Prudential and Morgan Stanley in his top-10.
De Blonay says that though the outlook for the sector does look good, he has not seen the level of inflows he would have expected as yet.
"There has been a pickup in interest, there is no doubt about that. However, when it comes down to inflows, they have been relatively benign."
"However, with the sector being the most attractive in the equity market at the moment, due to low valuations and the yield potential, this interest should translate into higher inflows," he added.
Jupiter Financial Opportunities has an ongoing charges figure (OCF) of 1.79 per cent and requires a minimum investment of £500.