Financial ETFs are among the best-performing sectors so far this year after solid fourth-quarter earnings from major banks and on expectations the economy will continue to improve in 2013. However, a narrowly-focused fund tracking broker-dealer firms is leading the pack.

The iShares Dow Jones U.S. Broker Dealers Index Fund (IAI) is up about 18% year to date.

"This ETF provides an opportunity for investors to participate in the recovery of the capital markets industry without taking on firm-specific risks," Morningstar says in a profile of IAI. "This ETF's targeted (and unique) exposure might appeal to those seeking a surgical way to gain access to some of the marquee names in the investment-banking and brokerage business."

It notes the "broker/dealer" rubric covers a wide variety of firms, including Wall Street banks with large trading businesses, retail and online brokers, exchanges and market specialists.

The fund's top three holdings are Goldman

Bank lending to small and medium-sized businesses continues to expand, up 10.5% in the year ending Feb. 13th. This is a good sign that the economy continues to grow.

This measure of bank lending to businesses has been rising at double-digit rates for over two years. With banks absolutely flush with reserves, the only constraint on bank lending is a) willingness to lend and b) willingness to borrow.

The time to buy is when there's blood in the streets. - Baron Rothschild

I came across a Bloomberg BusinessWeek article from June, 2012 discussing about finding hidden opportunities in Greece. Since the Greek equity market was decimated during the previous few years as a result of the Greek crisis and the ensuing recession, George Elliott of hedge fund Naftilia Asset Management seemed to believe that investing in Greek stocks was a wonderful investment opportunity. In fact, he raised $63 million from investors for his Greek Opportunity Fund which planned to invest in nothing but Greek stocks.

One of the best times to invest in stocks is at the depth of a crisis when investors' fear is at the highest peak. The following chart shows the performance of three benchmark indices from the lowest point attained during a crisis:

Click to enlarge

Source: A Hedge Fund Hunts for Greece's