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Important Notes:

  1. Manulife Advanced Fund SPC – US Bank Equity Segregated Portfolio (“Manulife US Bank Equity Fund” or the “Fund”) invests primarily in equities and equity-related investments of US banks, which exposes investors to concentration and equity market risk.
  2. The Fund may invest in equities of small- and mid-capitalisation companies, which can involve liquidity and volatility risks, and is subject to greater risk than is customarily associated with investments in larger capitalisation companies.
  3. Investment involves risk. The Fund may expose its investors to capital loss. Investors should not make decisions based on this material alone and should read the offering document for details, including the risk factors, charges and features of the Fund and its share classes.

US banking sector: Long term growth potential with attractive valuation

Against the backdrop of solid loan growth, strong financial position with near-record levels of capital, improved underwriting standards and a continuation of merger and acquisition (M&A) activity when the economy reopens, US banking sector has revealed its long-term growth potential and attractive valuation. Absent a prolonged economic slowdown, we remain optimistic for the sector as US banks have shown the resiliency of their business model as they continue to support their customers through the global health crisis. US banks are part of the solution today, which contrasts vastly with their role during the global financial crisis.

4 strong fundamentals of US banking sector

Solid revenue and loan growth

In today’s environment, banks started to build loan loss reserves for possible future loan losses related to the global health crisis. When the economy begins to grow again, we believe US banks should see faster normalisation of earnings. Revenue and loan growth may hold up better in today’s environment as banks provide support to their customer’s borrowing needs.

 

US banking industry: Total loans (USD billions)1

 

Strong financial position with near-record levels of capital

While loan loss provisioning and net charge-off are expected to increase as a result of the global health crisis, we believe the strength of the US banking system today enables banks to be part of the solution to support business and customers.

 

US banking industry: Excess capital levels2

 

Creating synergies via M&A

We believe the current environment is conducive to M&A activity. The consolidations not only unleashed values of the acquired banks, with a direct impact on boosting stock prices, but also create synergies to the acquiring bank with a sizable reduction in operating costs.

 

US banks: continued consolidation3

 

Attractive valuations relative to history

US banking industry valuation is trading below its historical average today, with the price-to-book ratio hitting the lowest since 2011 and near levels during the global financial crisis. Historically, periods of heightened volatility have provided opportunities to purchase higher quality banks with above peer profitability at attractive valuations.

 

US banking industry: Price-to-Book Ratio4

 

Key features of Manulife US Bank Equity Fund

Experienced team with boutique structure

  • Specialised investment team that owns investment process from research through portfolio construction
  • Well-resourced investment team with deep sector expertise averaging 27 years’ experience
  • Managed by a lead fund manager with investment focus exclusively on US Banks

 

Time-and market-tested research process

  • Relative-value approach to investing in US banks
  • Long-term outperformance achieved by taking advantage of the market’s focus on short-term factors
  • Fundamentally driven research process using regulatory-based CAMELS5 framework to analyse a bank’s business strategy

 

Manulife's investment expertise

27+ years

Average experience of
portfolio managers

 

80% of assets6

Substantially invested
in regional banks

 

475+

Investment
professionals7

  1. Source: Federal Deposit Insurance Corporation, as of 31 December 2019.
  2. Source: Federal Deposit Insurance Corporation, as of 31 December 2019.
  3. Source of number of deals: number of deals are measured by total bank acquisitions announced, SNL Financial, as of 31 March 2020. Source of Number of FDIC-Insured financial Institutions: Federal Deposit Insurance Corporation, 31 December 2019.
  4. Source: SNL Financial, as of 31 March 31 2020, in USD. US banking industry is represented by SNL US Bank Index, which is a custom Index provided by SNL Financial.
  5. This is illustrative guideline. Portfolio holdings and characteristics are subject to change at any time. Information about the asset allocation is historical and is not an indication of the future composition. Source: Manulife Investment Management, as of 30 April 2020.
  6. This is illustrative guideline. Portfolio holdings and characteristics are subject to change at any time. Information about the asset allocation is historical and is not an indication of the future composition.
  7. Source: Manulife Investment Management, as of 31 Demember 2019. Total is comprised of investment professionals of Manulife Investment Management (Asia) and of Manulife TEDA. Includes Public Markets investment professionals (IP) and Private Markets investment professionals from Hancock Natural Resource Group (HNRG) and Real Estate. Does not include IPs from Renewable Energy, Private Equity & Private Credit, and Commercial Mortgage Loans.

 

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