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After the rocky ride in financial shares anyone would wonder why you would want to invest in the sector. The reality is that financials makes up more than a fifth of the world stock markets and therefore has a significant impact on everyday life. Banks are needed for savings and mortgages. Insurance companies are required to cover for any mishaps. Property companies are required to supply us with the homes and a place to work. It is important to remember the financials sector is not just about banks.

The weakness in the financials sector is not a new phenomenon either. We have been here before with the Asian financial crisis in the late 1990s. Japanese banks went through their problems throughout the 1990s. In each case these sectors came fighting back. For example, investors who were brave enough to invest in Asia at its low point in September 1998 would today be handsomely rewarded. The FTSE Asia Pacific ex Japan Index is up 267 per cent in sterling terms over that time, according to Lipper.

Admittedly I’m not going to preach about whether we are past the worst of the woes in the financials sector. It is virtually impossible to time markets in this way. If, however, there is an expert in this field who has the consistent proven ability to call markets and pick the winners, it has to be Philip Gibbs manager of the Jupiter Financial Opportunities Fund.

Mr Gibbs has made many astute decisions since launching this fund. In the 1990s he took advantage of the demutualisation of several life assurers and building societies. In the late 1990s, he built exposure to Irish financials having recognised their growth prospects on the back of the Irish boom. In 2003, he anticipated a recovery in global stock markets. He subsequently broadened the fund’s exposure to the fast-growing emerging markets. Each of these decisions has proven beneficial.

In 2007, he was early in recognising a credit crunch and became extremely cautious favouring the more defensive companies. His views have also led him to significantly increase the fund’s exposure to cash and gilts to the extent that these currently make up around 73 per cent of the portfolio. He has also made use of shorting techniques in order to hedge against the sector falls. This means the fund currently has around 15 per cent net exposure to the equity market. This has proven extremely helpful in a market where financial stocks have been sold indiscriminately.

According to Mr Gibbs, economic conditions and profits are likely to worsen if the western property market remains under pressure. Therefore, he is avoiding businesses with a high exposure to the US and UK. He also expects emerging markets to slow down as higher inflation will lead to higher interest rates and they will be affected by the western slowdown.

While he is gloomy about the economic situation Mr Gibbs is relatively positive about the prospects for his portfolio. He has lost less money than his other peers by a considerable margin. Over the last year, this fund is down by 9 per cent while JPM Global Financials has lost 24 per cent and New Star Global Financials is down by 22 per cent over the same period.

Managers like Mr Gibbs that have the rare skill to call markets in this way are of a superior class. This has been one of the most challenging periods for any fund manager and he has demonstrated his skill time and again in a variety of market conditions. If financials start to rally, this fund could underperform in the short term, but one advantage is that the fund is well placed to move back into the market quickly when Mr Gibbs anticipates a sustainable recovery. This could be an exciting opportunity to invest in a sector with huge recovery potential.