Gregg Greenberg

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Funds Get Hit by Fannie Mae Selloff

Gregg Greenberg

After a turmoil-filled week, every Fannie Mae (FNM Quote) shareholder knows how it feels to hold a crumbling stock.

But as always, some are feeling more pain than others. A look at which mutual funds were the biggest holders of Fannie at the end of last quarter can help you, humble mutual fund investor, figure out how badly you may have fared in the recent tumult.

By now the Fannie story is familiar to the financially with-it. The stock plunged 15% last week after the Washington-based company's regulator accused the company of playing fast and loose with accounting rules. Many of the allegations made by the Office of Federal Housing Enterprise Oversight dovetail nicely with the case that RealMoney.com's Peter Eavis has been building for the better part of two years against Fannie's bookkeeping.

The darkening clouds forming over Fannie have hit individual shareholders hardest, of course. Even so, investors in many mutual funds will have felt the impact of the selloff too, as many funds have big stakes in this widely held Wall Street favorite.

According to fund tracker Morningstar, the $485 million (SSLAX Quote)Sun America Focused Large-Cap Value fund had the largest exposure of all diversified stock funds as of July 31, with 10.66% of its 24-stock portfolio in Fannie shares. (To give you a sense of the scale of this stock, however, consider that that stake amounts to just 0.07% of Fannie's outstanding shares.)

Another loser in the Fannie selloff stands to be the $1.4 billion (THPGX Quote)Thompson Plumb Growth fund. It listed 7.92% of its holdings as of June 30 in Fannie. That's 0.16% of the stock.

The well-known (PBFOX Quote) Clipper Focus PBHG and the (CFIMX Quote)Clipper funds, both of which hold Morningstar's highest rating of five stars, are also large Fannie holders at 6.23% and 5.83% of fund assets, respectively.

As would be expected, a number of sector funds focusing on financial stocks will see their performance shaken on account of Fannie's slip. The top three financial sector funds with the largest percentage of Fannie are (JVVAX Quote)Janus Adviser Focused Value fund, at 8.59% of assets; (KDFAX Quote)Scudder Dreman Financial Services fund, at 8.57%; and (FSVLX Quote)Fidelity Select Home Finance fund, 7.33%.

In terms of total Fannie shares, the (AWSHX Quote)Washington Mutual Investors fund is the largest holder of stock at over 21 million shares, or 2.2% of Fannie's outstanding stock.

Morningstar, which also provides independent research on individual stocks, says it remains positive on Fannie Mae's business model despite the cloud over its accounting. Morningstar analyst Ryan Batchelor says he believes the company's primary growth driver, mortgage debt outstanding, remains strong. Nevertheless, Morningstar has suspended its individual stock rating on Fannie "because of our lack of confidence in the financial statements needed to accurately value the business."