By LUCIENNE FILD

INVESTORS have a myriad of local unit trust funds to choose from - the 135th fund was launched this week - but investment possibilities in the financial services sector have in the past been limited to only one fund.

This week, Old Mutual Unit Trusts launched their Financial Services Fund, bringing to two the number of local funds investing in banks and other financial service providers.

The high-performing Sage Financial Services fund was the first.

Kokkie Kooyman, fund manager of the new Old Mutual fund, is confident it will show returns of about 25% over the next year.

The fund was established two and a half years ago and run internally by Old Mutual as a pilot portfolio. Over this period, the fund achieved a return of 167%.

The fund's targeted investment, says Kooyman, is to invest 40% in large commercial banks, between 30% and 40% in smaller banks, life insurance companies, black merchant banks and micro-lenders, and 20% in offshore-based financial service providers (mainly in emerging markets).

He says for the past five years banks have shown a very strong earnings growth, and a particularly sharp rise was experienced over the past 12 months.

"We believe there is considerable scope for further gains as banks become more efficient and utilise new technology," says Kooyman.

He says local banks are inefficient compared with most of their offshore rivals, but they are taking rapid strides to cut costs.