Star manager Guy de Blonay (pictured right) says investors are missing out by maintaining a cautious outlook on financials.De Blonay, who has been the sole manager of Jupiter Financial Opportunities since January, said the financial sector has transformed following the market crash of 2008.
"The whole sector is trading very close to book and we think the credit rating could get very good for us as confidence returns."
Jupiter Financial Opportunities has returned 174 per cent over the last decade compared with losses of 32 per cent from the FTSE Global Financials index. De Blonay took over the vehicle from Philip Gibbs at the start of 2011, following a stint of underperformance for a couple of years.
Performance of fund vs index over 10-yrs
Source: Financial Express Analytics
The Trustnet Alpha Manager drew upon the rapid response of the G7 economies to the disaster in Japan as an indication that authorities have become much better at responding to problems.
"This serves as a reminder that we are in a bailout environment. I don’t think investors are focusing on this enough. Politicians and central bankers are much more efficient in responding to bad news," he added.
"One thing people fail to recognise is the frequency and efficiency of government market intervention to support weakness. If regulatory risk is too high then government steps in to bring down expectation."
De Blonay believes that the lessons learned from extraordinary market conditions will lead to increased strength in the banking sector going forward.
"Stock markets are being more and more driven by macroeconomic factors. We identify themes or trends and try to find the right stocks which fit in with the trend. We would not be interested in a stock that looks cheap if it is not in a favourable environment," he continued.
"If you buy a cheap Indian bank, for instance, then inflation could make it cheaper still."
De Blonay believes the Eurozone debt crisis could create opportunities for many investors but prefers exposure to economies that have strong balance sheets.
"There are two ways of looking at Europe. There is the Europe that is cheap following the sovereign debt crisis, where investors are looking for stocks to rally following improvements, and the countries that are creating jobs and have healthier balance sheets like Switzerland and parts of Scandinavia," he said.
"For the time being, we have been focused on the stronger economies. We avoid areas where wages are coming down and there are still recessionary conditions."
De Blonay is also positive about investment opportunities in US banks. He says quantitative easing and GDP growth are signs that the economy is recovering in the region. He also likes financial subsectors - life insurers, brokers, mergers and acquisitions, asset managers and private equity groups - many of which are showing evidence of picking up.