In the 1990s, a generation of investors suddenly found themselves the owners of banking shares as a wave of building societies, such as Halifax, Abbey National and Alliance & Leicester, demutualised and became quoted companies.

A decade on, those who held on to their shares through the tribulations of the bear market years of 2000-2003 should be sitting on decent profits. For example, if you had held Alliance & Leicester shares over the past ten years and reinvested all the dividends, you would have earned a return of 202%, or about 11.7% a year*. In comparison, if you had held on to an index of UK banking shares, you would have earned about a 139% return, or about 9% a year**.

That is a respectable return, but just investing in the UK financials sector may not always provide the best return. In fact, financials are the biggest, most diverse sector in global markets with companies capable of performing through a variety of economic conditions. This sector makes up about a quarter of the value of global markets and includes companies with a vast range of business operations, ranging from investment banks, insurance companies, hedge funds, emerging market banks, property companies, investment companies to many smaller niches such as inter-dealer brokers and stock exchanges.

At the time the building societies were demutualising, Jupiter launched the Jupiter Financial Opportunities Fund, managed by Philip Gibbs, with a remit to invest globally in this broad variety of companies.

The Fund recently celebrated its 10th anniversary and over this period it has returned a total of 688%, or a 23% compound annual return**. Of the 1,057 unit trusts that have been in existence that long, this Fund is the second best performer. Of note, this performance was maintained even during the bear market conditions of 2000-2003 - a period during which the FTSE All-Share lost 39%***, and bank stocks fell 15%. In comparison, the Jupiter Financial Opportunities Fund recorded a positive return of 17%. And since the market has started to recover, the Fund has also outperformed, returning 197% against 155% for the FTSE Financials Index***.

How has Philip managed to beat the market so consistently? As a high conviction investor, he has never shied away from taking large positions in the areas of the market that he regards as offering good value and, conversely, he has never been reluctant to change the profile of the Fund rapidly if he feels market conditions have moved on.

In the early years of the Fund, Philip played themes such as the convergence of interest rates in the EU, by buying banks in Ireland and Greece. But during the bear market years, Philip shifted the Fund's focus into the few areas of the market that stood to benefit from the resulting fall in interest rates. These included UK property companies and mortgage lenders, as well as emerging companies in growth industries such as interdealer brokers (market intermediaries who can trade large blocks of shares, bonds and derivatives cheaply and anonymously) and hedge fund operators. Indeed, the hedge fund industry was a major beneficiary of the fallout in equity markets which followed the dotcom bust, as big pension fund investors attempted to diversify away from volatile equity markets.

After a rapid end to the war in Iraq, Philip took advantage of an anticipated strong recovery in equity markets. One major change was to cut back the Fund's UK holdings in favour of continental Europe, in anticipation of higher interest rates and weaker consumer sentiment in the UK. In contrast, European stocks, which traded on very attractive valuations, were also geared towards rising equity markets as many of them, such as Credit Suisse and UBS, also have large asset management and investment banking businesses.

Another significant shift in the portfolio, which Philip initiated in 2004, was to buy into fast growing emerging markets. He has done this by buying both local institutions in countries such as Hungary, Turkey, China and India, and western banks with major operations in emerging markets, such as France's Société Générale, which has substantial operations in Eastern Europe.

Many of these themes persist in the portfolio now. In Philip's view, many European banking stocks are still extremely cheap - many of them have strong growth prospects, particularly in emerging markets.

"In the medium term," says Philip, "equity markets look good value, while financial stocks are cheaper than the market as a whole. There are certain areas of the market where I would be cautious in the shorter term, particularly banks that are exposed to US and UK consumers, but outside of those I think that financials currently offer exceptional prospects."

* Source: Bloomberg, 06.06.97 to 01.06.97 (weekly data), net income reinvested, zero trading costs assumed
**Source: Morningstar 02.06.97 to 04.06.07. All figures bid to bid, net income reinvested.
***Source: Morningstar 01.03.00 to 10.03.03 and 10.3.03 to 4.6.07. All figures bid to bid, net income reinvested

Past performance should not be seen as a guide to future performance. The value of an investment in a unit trust and the income from it can go down as well as up.