Magazine article American Banker

Fidelity Creates Mutual Fund That Invests Exclusively in Stocks of Thrifts

Magazine article American Banker

Fidelity Creates Mutual Fund That Invests Exclusively in Stocks of Thrifts

Article excerpt

NEW YORK -- Fidelity Investments has added a new mutual fund whose portfolio is made up of stocks exclusively from the thrift industry.

The thrift fund is one of eight new portfolios the Boston-based mutual fund firm introduced this week. The others, also made up of stocks from specific industries, will concentrate on life insurance, property and casualty insurance, air transportation, American gold, biotechnology, energy service, and retailing.

The new funds bring the number of Fidelity's so-called sector portfolios to 23. In addition to the new thrift fund and two insurance funds, the firm also ahs a financial services sector fund and one that concentrates on brokerage houses and investment advisers.

Fidelity sector funds currently represent $1.35 billion in assets, with more than 200,000 customer accounts, according to Michael Hines, marketing manager for Fidelity Select Portfolios.

Mr. Hines said the specialized funds "offer the benefits of professional management and the economies traditionally associated with mutual funds, but they are much more volatile than funds -- moving as much as 20% in a single month."

Mr. Hines said that because of the risks, the sector funds by themselves are not a balanced investment plan. He recommended that investors treat sector portfolios "more like stocks than mutual funds." Typical investors include brokerage customers, financial planners, and sophisticated mutual fund investors.

The manager of each portfolio focuses his or her investments on attractive stocks in a single industry, giving investors the potential for greater appreciation than diversified mutual funds, index funds, or the broad stock market indices.

David Ellison, portfolio manager for the newe thrift fund, said it was created because "there's a significant opportunity in the industry."

Thrifts, he said, "are under-followed, and when they go public, the motivation of management is opposite to the traditional motivation. …

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