Top US Financial Equity Mutual Funds

Today we are featuring “financial equity” mutual funds, which invest at least 50% of their assets in financial services and related companies.

FBR Small Cap Financial (FBRSX) invests at least 80% of its assets in securities of small-cap companies with market capitalization of less than $3 billion. The fund focuses on companies that invest in real estate, usually through mortgages or other consumer-related loans.

Since its inception in December 1996, this Zacks#1 Rank fund has been managed by FBR Fund Advisers Inc.’s David Ellison. Ellison was earlier a portfolio manager with Fidelity Investments. The fund distributes dividends and capital gains annually. As of October 2008, its portfolio turnover was 147%.

Investors have to make minimum initial investment of $2,000 to enter the fund. FBRSX’s top holding include Hudson City Bancorp Inc. (HCBK), People’s United Financial Inc. (PBCT) and Danvers Bancorp Inc. (DNBK).

Fidelity Select IT Services (FBSOX) seeks capital appreciation and invests at most of its assets in securities of companies engaged in providing information technology services. The fund is nondiversified.

The fund may also invest in securities of foreign issuers. The Zacks#1 Rank fund offers dividends and capital gains twice a year - in April and December. In 2008, FBSOX outpaced 120.11% of its peers. It had a portfolio turnover of 135% as of last October.

Its top holdings include Accenture Ltd. (ACN), Visa Inc. (V) and Fiserv Inc. (FISV). FBSOX has an expense ratio of .97%.

Burnham Financial Services A (BURK) seeks capital appreciation and invests primarily in U.S. companies in the financial services sector with market capitalization of $8 billion or less.

The fund may invest up to 20% of its assets outside the financial services sector and in debt securities from any government or corporate issuer. It may also invest up to 15% of assets in foreign securities. The fund pays dividends and capital gains annually. As of September 2008, the fund had a turnover of 174%.

Anton Schutz has been the lead manager of the fund since June 1999. J.P. Morgan Chase & Co. (JPM), TFS Financial Corporation (TFSL) and Citigroup Inc. (C) are among the key holding of the fund. BURKX outstripped 301.48% of its peers in terms of annual return in the last year.

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