Unlike the UK, where there are comparatively few banks, in the US there are several thousand regional banks. However, there is now a spate of takeover bids by the bigger US banks and European banks such as RBS and BNP for many of the smaller US ones and some bigger ones too at share prices a long way above their currently quoted prices. This trend has been continuing for quite a long time.
The best way to take advantage of this is to invest in the Hiscox US financial fund, which, since launch around nine-and-a-half years ago, has gone up by 260 per cent against 139.5 per cent for the S&P 500 index.
It has also outperformed in the past year and has recently benefited from the Sun Trust takeover of National Commerce Bank and the Wachovia takeover of Southtrust. National Commerce, formerly a top-performing bank, had suffered recently because of poor management decisions.
David Astor, the investment manager, has had a good record with Eldon Capital Management, part of Fox-Pitt Kelton. He moved to Hiscox when it acquired Eldon's fund management business. He also manages the Hiscox European financial fund, which again invests mainly in banks in Europe as well as the UK.
He sees great potential for Irish banks and also invests in banks in nine other European countries. This fund is up by 18 per cent over the past year.
The third fund managed by Astor is the Hiscox Far Eastern financial fund. He sees financial sector opportunities as the leading way to play the China game.
My own view is that the US financial fund is less risky than the others and has potential, no matter how stockmarkets perform. It is sensible for bigger investors to consider these funds, particularly because of the excellent management.