One of the best performing bank funds says small banks will continue to outpace their bigger, better known rivals.
The Forward Banking and Finance Fund HSSAX.O, managed for the past 11 years by Kenneth Mertz, has avoided household names such as Citigroup and Wachovia in favor of community banks such as PrivateBancorp Inc in Chicago, Prosperity Bancshares of El Campo, Texas, and Bank of the Ozarks in Little Rock, Arkansas.
“We saw a new trend in the late ’90s that turned out to be correct, which was that the smaller community banks would be the winners in a consolidating industry,” says Mertz, chief investment officer of fund sub-adviser Emerald Advisors in Lancaster, Pennsylvania. “That focus helped the $65 million fund outperform all but three bank sector funds in the past year, down 3 percent versus a 62 percent drop by the S&P Financial Services Index.”