Morningstar data indicates that mutual funds managed by Morgan Stanley, Fidelity, and BlackRock could be among those most affected by the collapse of Signature Bank and Silicon Valley Bank. The recent market selloff has caused over $100 billion in losses for U.S. banks.
While few funds had holdings large enough to cause significant damage on their own, Todd Rosenbluth, head of research at data analysts firm VettaFi, suggested that continued selloffs in regional bank shares could increase pressure on mutual funds.
He noted that mutual fund investors benefit from portfolio diversification, but the impact of the bank failures on individual funds will depend on their other holdings. Rosenbluth added that financials in general, and regional banks in particular, are being hurt by the uncertainty and risks associated with the possibility of further bank failures.
The closure of Signature Bank on Sunday, which followed Friday’s collapse of Silicon Valley Bank, marks the third-largest bank failure in U.S. history. While shareholders of both banks lost their investments, U.S. authorities have taken emergency measures to protect customers of the failed banks.
Morgan Stanley, Fidelity, and BlackRock’s Mutual Fund Portfolio
According to Morningstar, the Morgan Stanley Institutional Global Concentrated Portfolio Class R6, valued at $102 million, had 4.1% of its assets invested in Silicon Valley Bank at the end of December, the second highest amount held by any U.S. mutual fund. The fund’s value decreased by 3.3% on Friday but increased by 1.2% this year.
The BlackRock Future Financial and Tech ETF, with a value of $3.9 million, had 3% of its assets invested in Signature Bank and 1.7% in Silicon Valley Bank at the end of December. The fund’s value had fallen by 3.9% as of Monday afternoon.
Lastly, the Fidelity Disruptive Finance fund, worth $47 million, had 4.2% of its portfolio invested in Signature Bank and 2.3% in Silicon Valley Bank at the end of December. The fund’s value dropped by 4.5% on Friday and is down almost 4% this year.
On Monday, the shares of regional banks plummeted as investors feared the collapse of Silicon Valley Bank would have a contagious effect on other banks. First Republic Bank fell more than 65%, while Zions Bancorp dropped more than 25%. The KBW Regional Banking Index fell by 15.1% for the year, lagging behind the S&P 500, which increased by approximately 1.3%.
Before Silicon Valley Bank’s collapse, financial shares had attracted some U.S. investors who anticipated that rising interest rates would increase bank margins. According to BofA Global Research, investors put $500 million more into financial stocks last week, the third-highest inflow of all U.S. sectors.