A research group that specializes in picking community bank stocks for investors has started a mutual fund.
Banc Stock Group of Columbus, Ohio, formed the Banc Stock Group Fund in August. The fund has attracted 800 investors and $12 million of assets, according to American Data Services Inc., the transfer agent and administrator.
Mutual funds invested in financial services businesses are a hot property, experts said, and a company that specializes in research of bank stocks is in a good position to offer a financial services mutual fund.
"It's a fascinating area," said Geoffrey H. Bobroff, an East Greenwich, R.I., consultant. "As you look at the financial service-type funds that are out there-the John Hancock fund that was very successful and others-this is just another way to play that angle in the marketplace."
"It is the fertile ground, obviously, for acquisitions," Mr. Bobroff added. "We are either seeing ... major regional banks consolidating with other major regional banks or the regional banks acquiring the mid-to- larger community banks."
The 21-year-old Banc Stock Group focuses on banks throughout the country that have $100 million to $7 billion of assets. The group's fund, which is open to individual retail investors, currently invests in 110 community bank stocks. Its net asset value started at $10 in August and is now $12.20, the company said.
Michael E. Guirlinger, president and chief executive officer of Banc Stock Group, said community banksasked the company to create a mutual fund. He said the company looks for stocks that return 12% to 16% a year.
He said Banc Stock Group is not looking for stocks of banks that will be acquired.
"When we do our investor analysis, we do not factor in the proposition that an institution can be a buyout candidate," Mr. Guirlinger said. "We do not have a crystal ball."
"We are real advocates for community banks and independent banks," Mr. Guirlinger added. "If the compression in the industry continues, it is likely an investment in a community bank portfolio will be bought out."
Mr. Guirlinger said Banc Stock Group has agreements with 22 companies - including Raymond James Investment Management and Research, Advest, and Howe Barnes-to sell the fund. Mr. Guirlinger added the company is negotiating a sales contract with A.G. Edwards & Sons.
Mutual funds that invest in the stocks of financial services companies have been a prized commodity in the last few years. Financial services stock funds posted staggering average returns of 45.2% for 1997, according to Lipper Analytical Services, Summit, N.J.
General equities returned 24.3% for the year, and all equities returned 17.6%.
Other mutual funds that invest in the stocks of financial services companies include the John Hancock Regional Bank Fund, T. Rowe Price's Financial Services Fund, and Fidelity's Select Brokerage, long the top performer in this niche, with returns of 62.3% for 1997.
In November, Scudder, Stevens & Clark added the Scudder Financial Services Fund to the growing list of financial services mutual funds.
