Skip to main content

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Investors showed renewed confidence in the U.S. financial system after

Bank of America

(BAC) - Get Bank of America Corp Report



(C) - Get Citigroup Inc. Report

announced plans to raise capital after recent

stress tests

revealed shortfalls. That optimism carried over to the

mutual funds

and exchange traded funds that hold them.

Treasury Secretary Timothy Geithner evaluated 19 major


and found that nine didn't need additional capital, including

JPMorgan Chase

Scroll to Continue

TheStreet Recommends

(JPM) - Get JPMorgan Chase & Co. Report


Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. Report

. The remaining 10


are trying to tap non-governmental sources, suggesting that liquidity has returned to the financial markets.

Image placeholder title

Investors embraced the banks' plans. During the five trading days through May 7, financial fund advanced 8.6% on average, excluding inverse funds that sell securities short. That's double the rate of the S&P 500 Index.

The best performing financial fund was the 300% leveraged

Direxion Daily Financial Bull 3X Shares

(FAS) - Get Direxion Daily Financial Bull 3x Shares Report

, which rose 28%. The fund got a boost from

Capital One Financial

(COF) - Get Capital One Financial Corporation Report

, which gained 58% after it said it wouldn't need additional capital.

The fund also holds Bank of America, which gained 51% after executives laid out plans to convert preferred equity into common equity. The company must raise $33.9 billion to weather two years of weak economic conditions.

The best performing open-end fund, the

ProFunds Banks UltraSector ProFund

(BKPIX) - Get ProFunds Bnks UltraSect Inv Report

, gained 25% this week on half as much leverage. The fund bets on banks and thrifts using 150% leverage. The strategy helped the fund take advantage of the 39% gain of

Huntington Bancshares

(HBAN) - Get Huntington Bancshares Incorporated Report

, which raised $120 million in new capital. It also benefited from the 30% rise of

Fifth Third Bancorp

(FITB) - Get Fifth Third Bancorp Report

, which committed to raising $1.1 billion from the private market even though it doesn't need to it because it passed its stress test.

The financial funds that lost money include three exchange traded funds that short the sector. The

ProShares Short Financials Fund

(SEF) - Get ProShares Short Financials Report

lost 10%, while the

ProShares UltraShort Financials Fund

(SKF) - Get ProShares UltraShort Financials Report

dropped 21% and the

Direxion Daily Financial Bear 3X Shares Fund

lost 32%.

For more information, check out an

explanation of our ratings


Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.