Close Close

Financial Planning > Behavioral Finance

Like Money In The Bank

Your article was successfully shared with the contacts you provided.

The financial services industry has recently come under some harsh and unwelcome glare in light of the ongoing collapse of the subprime mortgage lending sector. However, financial services represents a very broad and highly diversified business, including insurance, banks, asset management, real estate, and many others. Investors are drawn to financial services stocks–accounting for the largest portion (21.31%) of the S&P 1500 index– because they typically provide high dividend yields, a stable income stream and relatively modest volatility.

The average financial services equity mutual fund has roughly matched the performance of the broader S&P 500 index over the past year, but has outperformed the index over the longer term.


One of the best performers in this arena, the Royce Financial Services Fund (RYFSX), focuses on mid-, small- and even micro-cap companies–the average market cap is $770 million. Lead manager Charles Royce had 108 positions as of year-end 2006, but kept turnover to 9%.

By sub-sector, the fund is dominated by financial intermediaries (55.9% of total assets at year end) and financial services (25.7%). Top five individual holdings comprised AllianceBernstein Holding (AB), KBW (KBW), Epoch Holding, Capital Trust (CT) and Highbury Financial.

One of the top long-term performers among this asset class, the Gartmore Global Financial Services Fund (GFISX) has a diversified international strategy. U.S. stocks accounted for the largest piece of the pie (43.9% of assets as of December 31), followed by allocations in the U.K., Japan, Switzerland, and Australia.

Portfolio manager Douglas Burtnick had 85 holdings as of December 31, with a median market cap of $30.7 billion, reflecting his larger-cap bias. However, turnover is high, reaching 206% last year. As of January 31, 2007, the fund’s top five holdings comprised Wachovia Corp. (WB), 3.4%; Goldman Sachs Group (GS), 3.3%; Unicredito Italiano, 3.1%; BNP Paribas, 2.8%; and Banco Bilbao Vizcaya (BBV), 2.7%.–Palash R. Ghosh



© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.