As banks continue to merge and become full-line financial institutions, the top U.S. banks will control a greater percent of the assets. This type of activity can improve the value of an overall sector and deliver strong performance. The Japanese financial companies were compartmentalized and the reforms will allow for competition from Japanese and foreign firms, which should result in better prices for consumers and better products. This competition should eliminate poorly run companies and stabilize the Japanese financial markets. Again, there is ample opportunity for portfolio managers.
Performance typically drives sales with sector funds.
The most successful sector funds to date have been Technology and domestic Financial Service funds. That remains to be seen. When European or Asian financial service companies start to outperform their U.S. counterparts, look for sales to pick up in the current small contingent of Global Financial Services funds as well as the introduction of more such funds.