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HIM focuses on financial income

HIM Capital has introduced the HIM income fund for former New Star financial opportunities manager Nick Brind.

The company, known as Hiscox Investment Management before a management buyout in December 2007, has been running financial funds since 1993.

HIM income will target a 6 per cent yield by investing in equities and bonds issued by financial institutions. Brind, who joined HIM Capital in May, believes now is a good time to launch a fund which will benefit from the recovery of global financial companies.

Brind says that the recent rally in global equities has been characterised by a sharp recovery in sectors that were most affected by the financial crisis. He expects the next stage of the recovery to be more selective, driven by quality companies that have the strongest balance sheets.

To identify companies in the financial sector that will provide the best returns, Brind and his team will focus on several themes. One of these is strong companies getting stronger, which refers to firms with strong balance sheets becoming winners by gaining market share.

Another theme is the tightening of lending standards, where niche businesses can fill a gap left by the banks in providing credit to higher risk customers

Dislocation of credit markets is also creating opportunities for HIM income. This theme refers to fixed-income securities issued by financial companies remaining attractively priced following a collapse in prices during the later stages of the credit crunch.

HIM Capital currently manages three other financials funds – Hiscox Insurance portfolio, Hiscox Far Eastern financial and Hiscox European financial. It says that investors are looking for income because historically low interest rates have made deposit accounts unattractive, while historically low valuations make financial companies very attractive.

However, IFA Hargreaves Lansdown says that as the financial sector recovers, yields could potentially drop so that Brind could be forced to chase high yielding stocks at the expense of potential capital growth potential.

The fund could also face competition from the Jupiter financial opportunities fund, particularly as former New Star Global Financials Fund manager Guy de Blonay is due to join Jupiter in January.


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