Kinetics Market Opportunities has made money by focusing on exchange stocks. By Elizabeth Leary, Contributing Editor April 7, 2008 A big shortcoming of sector funds is that there's no place for a manager to hide when a fund's niche collapses. That makes it all the more remarkable that Kinetics Market Opportunities, a financial-sector fund, gained 4% over the past year, a period during which the Dow Jones U.S. Financials index sank 28%.By now, the sector's woes are well known. What started with subprime mortgages has spread to Citibank, Merrill Lynch, Fannie Mae and other giants of finance. You won't find any of these troubled giants among Market Opportunities' holdings. What you will find is a wad of financial-exchange stocks, such as Nasdaq Stock Market, CME Group and London Stock Exchange. In fact, at last word eight of the ten biggest holdings, accounting for a third of the fund's $115 million in assets, were exchanges. The rationale: The health of exchanges depends more on trading volumes than on credit conditions or the direction of stocks. The new year hasn't been kind so far to exchange stocks or Market Opportunities (KMKNX), which lost 22% in the first ten weeks of 2008. Paul Mampilly, one of the fund's co-managers, says the group has "been lumped in with the companies that are in the cross hairs of the credit problem because they are categorized as financials." If he's right and investors come around to his way of thinking, Market Opportunities may rebound faster than its rivals.