Equity funds exposed to the 2023 banking crisis

The failure of SVB and the subsequent crash in banking stocks sent shockwaves through the global banking sector as explained in my newsletters titled "Banking blow-up" and "That escalated quickly". Since those newsletters, the situation has continued to evolve quickly with UBS buying Credit Suisse in a deal sanctioned by central banks.

Prior to the deal the Stoxx Europe 600 Bank index had fallen 16% between 8th March, when the banking turmoil first started, and the 17th March. Yet this masks some significantly larger moves. In the US, the index tracking bank stocks in the S&P 500 was down 18% over the same period. But the broader market has been hit as well since the banking crisis started. 

With still so much uncertainty around possible contagion within the banking sector some investors have become increasingly wary of the risks associated with investing in bank stocks. As a result, some are looking to diversify their portfolios and reduce their exposure to bank stocks. This is relatively easy if you invest in an ETF that tracks a certain sector or index such as the FTSE 100 as its exposure to bank stocks is widely publicised.

However, if you are looking at actively managed funds (which usually means unit trusts) it is often a difficult and time consuming task to determine their exposure to a certain sector or individual bank. While it may be possible to screen funds for their exposure to the financial sector, it is a sector definition that doesn't just include bank stocks. That therefore limits its usefulness.

To help investors navigate this issue, I have analysed over 2,000 unit trusts to identify the equity funds most exposed to some of the major banks in Europe, the US and the UK. This analysis has involved an examination of each fund's top 10 holdings, including their exposure to individual banks and their overall allocation to bank stocks. The results are summarised in the pdf below which you can download by clicking on the image.

Bank stock exposure

The table includes those funds with over 15% exposure to financial stocks. I have then highlighted, with a red square, if the fund has exposure to a given US, UK or European bank. Then in the final column I've given an approximate value, based on the data provided by the fund managers, of the total exposure to the stated banks. A blank field in this column doesn't mean that the fund doesn't have exposure to bank stocks, just that it has no exposure (or negligible exposure) to the banks listed at the top of the table.

The table will prove a useful starting point for any research into funds you currently hold in your portfolio or those that you might plan to invest in. Be sure to then check the latest fund factsheet available for the fund to confirm its holdings.