During the first quarter, fund managers demonstrated a focused interest in the U.S. financial sector, according to regulatory filings. However, this period was marked by volatility for lenders’ shares, primarily due to the severe banking crisis experienced since 2008. The S&P Regional Banking Index, which serves as a gauge for the performance of regional banks, recorded a significant decline of approximately 25% during the quarter.

This decline was exacerbated by a run-on deposit that led to the failures of Silicon Valley Bank and Signature Bank in March. These two failures were notable as they represented the largest banking failures since the Great Financial Crisis. The poor performance of the S&P Regional Banking Index continued throughout the year, resulting in a total decline of 36% year-to-date.

Fund managers’ positions were disclosed in their quarterly securities filings, commonly referred to as 13Fs. While these filings provide a retrospective view, they offer insights into the holdings of hedge funds and institutional investors on the last day of the quarter. However, it’s important to note that these filings do not provide information about the precise timing of purchases or sales and may not reflect the current holdings of the funds.

On Saturday, Treasury Secretary Janet Yellen expressed her view that the existing banking landscape, along with the challenges faced by certain U.S. regional banks, could result in consolidation within the sector. Yellen suggested that regulators would likely be receptive to such mergers. In line with this, London-based investment management firm Marshall Wace opted to sell its entire position of 51,300 shares in First Republic during the first quarter.

In other developments, Berkshire Hathaway, the conglomerate led by billionaire Warren Buffett, made some notable changes to its holdings in the financial sector. The company added a new position in Capital One Financial, indicating its increased interest in that particular bank. However, Berkshire Hathaway dissolved its positions in US Bancorp and Bank of New York Mellon Corp, signifying its decision to exit investments in those two banks, as revealed in the recent filings.

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