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Shockwaves rippled through the global banking sector earlier this year, first with the collapse of Silicon Valley bank in the US, swiftly followed by the failure of the Swiss financial giant Credit Suisse before its subsequent takeover by long-time rival, UBS.

The immediate aftermath of these seismic events resulted in a rocky ride for owners of bank shares, but the longer-term picture for the sector has been rosier.

Not only is the FTSE All-Share Banks Index up about 25% over the year to September 2023, but banks are regarded as good ‘defensive’ stocks in times of economic uncertainty. Assuming, of course, that they do not need to write off bad loans from customers who are unable to service their debts in a deteriorating financial climate.

Banks also tend to be a good source of dividends and can also provide a portfolio with diversification, with financials offering an ‘old economy’ counterpoint to portfolios crammed with fashionable tech stocks.

Investors without the time, experience, or inclination to research individual banks, but who are still keen to obtain exposure to the sector, could consider buying into specialist exchange-traded funds (ETFs) that focus on financials, including sizeable exposure to banks.

Below, we explain in more detail how ETFs work. We’ve also asked Nick Vaill, senior investment director at Investec Wealth & Investment (UK), for his pick of the specialist funds suitable for investors looking to gain exposure to banks in particular and financials in general.

His choices include key details for each fund, including fees, and the thinking behind his selections.

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