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More interesting stuff on the Rydex funds, Ursa this time, with permission
from the author of the Walker MarketEdge. The url is http://www.lowrisk.com
begin quote
------ Bear Funds -------
In our last mutual funds issue we covered the Rydex Nova fund,
which is a "super bull" fund. We also mentioned the Rydex Ursa
fund, a bear market fund. With the recent market downdraft we
thought that we would give Ursa a bit more coverage.
You will recall that the Rydex family of mutual funds has several
funds that are designed for people who make frequent mutual fund
switches. If you open an account directly with Rydex, there are no
switching limits - you can switch funds every single day without
penalty. The Rydex Ursa fund is a bear market fund that is
designed to have an inverse relationship with the SP500. So if the
SP500 is up 10%, Ursa will be DOWN 10%. If the SP500 is down 10%,
Ursa will be UP 10%. In looking at Ursa's performance, we used the
Vanguard Index Trust 500 as a benchmark.
Performance since inception - 1/10/94
Rydex Ursa = -48.4%
Vanguard Index Trust 500 = 162.9%
Three year performance
Rydex Ursa = -41.5%
Vanguard Index Trust 500 = 111.1%
One year performance
Rydex Ursa = -11.0%
Vanguard Index Trust 500 = 19.2%
As you can see, the performance for the Ursa fund was pretty
dismal. But the period in the study was a very bullish one, and
this fund is designed to move in an inverse fashion to the SP500.
But Ursa did do better than would be expected from this fund. For
example, the one year number of -11.0% is better than you would
expect with the Vanguard SP500 fund up 19.2%.
To get another measure of this fund, we took a look at how it did
in down markets. These are the market conditions that Ursa is
designed for, and the fund did do very well. Since the Rydex funds
have only been in existence since 1994, we could not look at any
true bear markets. We selected three periods of short term market
weakness. Here are the funds performance in those periods.
10/8/97 - 10/27/97
Rydex Ursa = 11.8%
Vanguard Index Trust 500 = -9.8%
2/18/97 - 4/11/97
Rydex Ursa = 11.8%
Vanguard Index Trust 500 = -9.4%
7/1/96 - 7/24/96
Rydex Ursa = 7.9%
Vanguard Index Trust 500 = -7.2%
You can see that in each case, Ursa did a bit better than would be
expected. In the current downdraft from 7/17 to 7/31 we see
similar results. The Vanguard SP500 fund is down 5.5% while Ursa
is up 6.2%. So the fund does perform as advertised, and in fact
does a bit better than would be expected in both up and down
markets. Of course, even with the good performance compared to its
objective, this is not a buy and hold fund. You need to be a
nimble trader or speculator to profit with Rydex Ursa.
One final note, there is now another inverse SP500 fund, the
Profunds Bear fund (PBRIZ). We don't have much information on this
fund and it is very new (started this past January), but so far
its performance has tracked almost identically to the Rydex Ursa
fund.
end quote
Mike
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