Financials have been on a tear since the beginning of this year following optimism over a higher rate environment. At the end of its policy meeting last month, the Fed decided to increase its key interest rate and signalled two more rate increases this year. Moreover, with key Fed officials indicating two to three additional rate hikes this year, the prospects for the financial sector improved.

Financial companies including brokerage firms, insurance companies and banks are likely to be one of the biggest beneficiaries of the rate hike, which is expected to drive margins. Further, the increased interest rates would enable banks to earn more on the spread between interest rates for savings accounts and certificates of deposit.

Below we share with you three top-rated financial mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

Fidelity Advisor Financial Services A (FAFDX – Free Report) invests more than 80% of its assets in securities of companies principally engaged in providing financial services to consumers and industries. FAFDX seeks growth of capital. The fund invests in both U.S. and non-U.S. companies. Fidelity Advisor Financial Services A returned 26% over the last one-year period.

As of February 2017, FAFDX held 50 issues, with 5.99% of its assets invested in Berkshire Hathaway Inc.

Emerald Banking and Finance A (HSSAX – Free Report) seeks growth of capital and income for the long run. HSSAX generally invests a bulk of its net assets in common stocks of companies involved in financial and banking services industries. The fund focuses on investing in those companies whose market-cap is not more than $1.5 billion. Emerald Banking and Finance A returned 39.9% over the last one-year period.

HSSAX has an expense ratio of 1.48% compared with the category average of 1.51%.