Similar claims are being made again now, but it’s tough to believe we’ve hit rock bottom.
Just because RBS, Lloyds, Barclays and co’s share prices have fallen off a cliff since the start of the year, that doesn’t mean they can’t fall further still.
Yet financials funds and their providers still espouse their sector of choice.
Blue Planet Investment Management is a Malta-based investment company that specialises in managing investments in financial companies.
On its site the company says: "Blue Planet believes investors should only invest in those sectors that have superior long-term economic prospects and crucially, which are undervalued. It believes the world’s financial sector is one such sector."
In 2006/7 before the financial crisis hit, the Blue Planet Financials Growth and Income trust’s share price increased 55.9%, compared to a benchmark increase of 9.4%.
Since then every year has seen the trust perform worse than the benchmark apart from 2009-10 when financials went through a brief recovery period.
From the second quarter of 2010 to the second quarter of 2011 (the latest annual performance statistics available) the trust’s share price fell 28%, compared to the benchmark’s 12.6% rise.
In his August review the fund’s manager, said: "In August our NAV fell 5.6% to 61.2p per share unit. The benchmark index return was -8% in sterling terms. The fund fell less than the benchmark as exposure to equities had already been reduced in prior months.
"However, it is clear that the balance sheets of the vast majority of financials are much stronger now and liquidity is far higher. Valuations are very low. We expect a bumpy ride ahead, but there will be excellent opportunities to pick up good value stocks from these indiscriminate falls."
Still bullish then…
Of course it’s not just the small guys that have been blinded by financials, the big guns have these sector-specific machines too.
Henderson Global Financials fund, formerly New Star Global Financials fund, has seen negative returns over five, four, three, two and one years.
In August the fund fell 13%, underperforming the benchmark, and yet its manager, Emily Adderson still views the valuation levels of financials "attractive so long as a benign slowdown in GDP growth comes about and if a rational approach is taken in dealign with the European sovereign crisis".
I think we’ve got more chance of seeing a leopard change its spots.
While managers of financial funds will never tire of telling you their funds are not all about banks and insurers, a quick look at the data soon affirms their performance is pretty tied up with those two sub-sectors.
Even Jupiter Financial Opportunities fund, managed by the pre-eminent Philip Gibbs from launch in 1997 until January this year, has fallen 8.2% over one year, compared to a fall of 0.8% of the benchmark.
It has, since January, been managed by Guy de Blonay who previously managed the New Star Global Financials fund.
If two old hands such as Gibbs and de Blonay can’t manage to eke a return out of financials I think it’s about time the rest of us threw the towel in.
