Jupiter Global Financials to shift from banks to fintech

Mr De Blonay has changed its investment objective because he thinks the shift to these types of companies will “shape and dominate” the financial industry. The fund will still hold banks, but only those that are changing to become more digitally savvy. It will also invest in suppliers to companies operating in mobile finance, data analytics and payment systems.

This follows a similar move by AXA Framlington Financial Fund (GB00B5BHKC62), which has been renamed AXA Framlington FinTech Fund. Its objective has been changed so that it can invest in the financial services supply chain. Its manager, Vincent Vinatier, said the change reflects the underlying industry.

Both funds have already been investing in these areas for some time. For example, PayPal (NSQ:PYPL) was one of Jupiter Global Financial's top 10 holdings and accounted for 4.3 per cent of its assets at the end of July 2018. However, a year earlier, the company only accounted for 2.5 per cent of its assets.

Mr De Blonay has also added Visa (NYQ:V) and Mastercard (NYQ:MA), and doubled the holding in JPMorgan Chase (NYQ:JPM) for reasons including that bank's technological advancement. Some of the largest holdings at the end of July 2017, such as Citigroup (NYQ:C), Bank of America (NYQ:BAC), Prudential (PRU), Unicredit (MIL:UCG) and HSBC (HSBA), have been removed or reduced.

Analysts believe the changes made to the Jupiter Financial Innovation and Axa Framlington FinTech funds could be followed by other financials funds, which have lost popularity since 2008. Gavin Haynes, managing director at wealth firm Whitechurch Securities, says this is because financial technology is a key growth theme.

“The financial sector is ripe for disruption and fintech is a significant opportunity," he said. "Mr De Blonay is of the view that the sector is seeing significant change and the traditional financial institutions are under pressure to change or face competition from IT-based solutions. I’m not sure whether more financials funds will describe themselves as fintech funds. But technology is going to be an integral part of this sector, so any fund focused on financials should be looking at this change and investing in companies that are adapting to the shifting environment."

However, Ben Seager-Scott, chief investment strategist at Tilney, said investors should not be taken in by marketing gimmicks. “Jumping on fintech is picking up on a key investment theme, just like technology funds have picked up on terms such as bitcoin or blockchain," he said. "Financials funds have been less exciting of late, so describing a fund's investment focus as fintech might give it a broader appeal. But thematic funds should broaden out and invest in everything that benefits a sector. Buying supply chains and banks diversifies financials funds, which is a good thing because fintech is the way the industry is broadening out."

The shift in focus by financial funds will also change how they perform against benchmarks and make them less like these. Large-cap banks and insurers make up significant proportions of broad indices such as the MSCI World and FTSE 100, so in the short term it could make it harder to judge a financial fund’s relative performance.

For example, Jupiter Global Financials Fund is benchmarked against MSCI All Country World Financials index which has a 49 per cent weighting to banks, and its largest constituents include Bank of America, HSBC and Citigroup. When the fund was more focused on banks, comparing its performance to that of this index was fair. But as this fund's composition changes this may no longer be the case.

Jupiter Global Financials (LU0262308454)

Source:  Morningstar as at 20/11/2018 *Jupiter as at 31/10/2018

Performance

Source: FE Analytics, at as 20/11/2018

Top ten holdings as at 31/10/2018 (%)

Source: Jupiter Asset Management

Geographic breakdown as at 31/10/2018 (%)

Source: Jupiter Asset Management