Financials in focus: strategies for investing in a trillion-dollar sector

Financial services firms play crucial roles in our lives. They lend money, grow wealth and insure our most prized possessions. The huge demand for their products and services has resulted in this sector becoming one of the world’s most powerful and influential. It’s also turned its leading companies into multi-billion dollar industry giants that are hugely attractive to would-be shareholders.

Here we take a closer look at this flourishing area, reveal the key drivers, consider the negatives, and suggest ways of getting exposure.

What is the ‘financials’ sector?

It’s an umbrella term for companies involved in financial services. These include banks, insurance companies, credit card providers, asset managers and fintech firms. The biggest names are household names with a huge global customer base and influence in numerous international markets. JPMorgan Chase, Visa, Mastercard and Bank of America are among the world’s largest, each boasting market capitalisations of more than £200 billion. However, there are also thousands of smaller businesses coming up with innovative payment methods and financial solutions.

Why is it worth considering?

Financial services is an important global sector. As well as the traditional providers, there are now fintechs that offer services that rely heavily on technology. In the UK alone, the financial and insurance services sector contributed £243.7 billion to the economy in 2023 – 12% of total economic output – according to official data*.

Financial services and related professional services also contributed £110.2 billion to the public purse in 2023, according to City of London Corporation figures**. On a global scale, reports suggest this area could grow at a compound annual growth rate of 7.2%, meaning the entire sector could be worth a staggering $47.34 trillion by 2029***.

What are the key trends?

The broad financial services sector is made up of many different industries, each with its own headwinds and tailwinds.

These include:

• Innovative payment systems in e-commerce
• Emergence of challenger banks and apps
• Decentralised finance such as cryptocurrencies
• Cybersecurity developments
• Artificial intelligence in insurance underwriting
• Regulatory changes in global markets

How to invest

You can get ‘pure’ exposure to leading companies in this sector through buying their shares that are traded on the global stock markets. When demand for these shares rise – on the back of strong performances or positive news flow – it pushes up their price and the subsequent value of your holding. However, prices can also fall. It’s also worth remembering that even single shares can be very expensive, so building a decent portfolio this way may be costly. A better move for most people is to buy into an investment fund whose manager will be tasked with finding the best opportunities available in the sector.

There are different ways to get exposure to financial services via investment funds – and you’ll need to decide which best suits your needs. There are three main options: a specialist fund that’s focused on financial services; a regional fund with sector exposure; or a global fund with a decent allocation to this area.

This decision will be based on a combination of your investment objectives and the amount of risk you’re willing to take. Consider seeking financial advice to help make the right call.

The specialist approach

One option is Polar Capital Global Insurance. As its name suggests, this portfolio invests in companies operating within the international insurance sector. This includes commercial, retail, reinsurance, insurance brokers, life and health, and multi-line insurance sub-sectors. The US has the largest geographical weighting of almost 75%****. One of the main benefits of this fund is the experience of lead manager Nick Martin, who worked in the risk and casualty insurance markets for many years. His knowledge of the area provides investors with access to what is a specialist and often undervalued sector.

The regional approach

The second option is having a regionally-focused portfolio with allocations to financial services companies based – or operating – in that specific area. We have a few suggestions. 

Let’s start off in the United States, where we like the Brown Advisory US Flexible Equity fund, managed by Maneesh Bajaj. Capital growth is the aim of this portfolio, while financial services has the largest sector weighting of 28.1%****. Its largest holdings include credit card giants Visa and Mastercard, as well as Berkshire Hathaway, the multinational conglomerate of legendary investor Warren Buffett****. Maneesh is free to select companies from across the market-cap spectrum and we believe this is one of the reasons why it’s managed to regularly outperform the S&P 500 Index.

Additionally, financial services plays a prominent role in the Invesco Asian fund, which aims to generate capital growth by investing in companies across Asia and Australasia. The sector has a 23.7% share of assets under management, with investments in companies such as HDFC Bank of India and AIA Group, the Hong Kong-based insurance giant****. The fund’s manager, William Lam, looks for companies where the market is underestimating earnings growth, while stocks are chosen with a three-year investment horizon.

Of course, it’s possible to invest in financial services companies that are closer to home. Financial services is the largest sector in the Jupiter UK Dynamic Equity fund with a 18.2% share of assets****. This fund, which is managed by the experienced Alex Savvides, offers investors access to a well-diversified portfolio of predominantly larger companies. This currently includes UK bank, Barclays****. Alex looks to buy stocks that are out of favour and identifies them by screening to find cheap stocks and then analysing their 10-year average earnings.

The global approach

The final option is considering funds that search the world for attractive holdings. For example, Morgan Stanley Global Brands currently has roughly a quarter of the fund allocated towards financial services^. The team behind this fund, which operates as a boutique within the broader business, looks for high-quality companies with defendable and visible future earnings.

There’s also the Liontrust Sustainable Future Global Growth fund, which aims to deliver capital growth over the long term. Financials currently has the second highest sector weighting of 19.7%, only trailing information technology. Holdings include Visa, the London Stock Exchange Group, and Ringkøbing Landbobank, the Danish bank****.

Our final contender is Lazard Global Equity Franchise. The four-strong team at the helm of this fund looks for companies that have an edge in their respective business sectors. Financials is the second largest sector in the portfolio with a 16.3% share. H&R Block, a tax preparation company, is one of its biggest individual holdings^. The team can invest in companies of all sizes but generally favour industry leaders. The fund’s systematic approach to portfolio construction also means behavioural biases should be removed. 

We recently caught up with Bertrand Cliquet, co-manager on the fund, who told us why the portfolio has a significant underweight to the US, the impact of geopolitical uncertainty, and how tariffs are reshaping global economic dynamics.

*Source: pwc, Economic growth will depend on the success of our financial services sector

**Source: pwc, Global M&A Trends in Financial Services

***Source: Research and Markets, Financial Services Market Report 2025

****Source: fund factsheet, 30 April 2025

^Source: fund factsheet, 31 March 2025