Patriot Financial Advisors LP, Philadelphia, said it raised $387 million from government, corporate and union pension funds, charities, and wealthy families to buy bank stocks.

Patriot Financial Partners III LP is the group's third investment fund targeting small banks since it was founded by former Philly bankers John Lynch, Kirk Wycoff, and their partners, with backing from Philadelphia investor Ira Lubert, in 2007.

Patriot investors, including the Pennsylvania State Employees' Retirement System, are betting that community banks will earn more as U.S. interest rates rise and that the long-running consolidation of neighborhood U.S. banks into large, national lenders will continue, at premium prices.

The firm has bought into local-bank stocks such as Beneficial Bancorp Inc., the largest bank still based in Philadelphia, which agreed last month to be purchased by WSFS Financial Corp., Wilmington. The new fund has so far plowed $65 million into six banks, including First Bancshares of Texas and Fortis Financial Inc., and plans additional investments.

The company reports annualized returns for the original Patriot fund of over 15 percent a year, with much of the capital returned to investors this year. Through Dec. 31, the Pennsylvania pension fund said it had invested $25 million with Patriot, and collected back an initial $45.6 million. SERS paid Patriot around $65,000 in fees last year.

The group raised $311 million for its second fund three years ago; that fund is now worth around $401 million, according to Patriot.