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Rating:Rydex's Futures Fund Crosses $100-Million Mark Not Rated 2.8 Email Routing List Email & Route  Print Print
Monday, May 21, 2007

Rydex's Futures Fund Crosses $100-Million Mark

News summary by MFWire's editors

Rydex officials said assets in the Rydex Managed Futures Fund have passed the $100-million mark. The fund was launched in March.


Rydex Investments continues to build on its history of bringing institutional-style investment strategies mainstream, announcing today that assets in Rydex Managed Futures Fund have surpassed $100 million since the fund launched in March 2007. Rydex Managed Futures Fund—the firm’s latest alternative investment offering—provides first-time access to managed futures strategies within a traditional mutual fund product structure. In addition to low mutual fund minimums and daily liquidity [1] , the fund aims to provide investors with a cost-effective means of gaining exposure to U.S. commodity and global financial futures.

“Rydex Managed Futures Fund gives us the ability to access managed futures strategies at a significantly lower fee structure compared to hedge funds and commodity pools,” said P.J. DiNuzzo, chief investment officer of DiNuzzo Investment Advisors in Beaver, PA. “We’re using the fund to diversify our client portfolios and to assist in our ultimate investment management goal, which is to make our clients as much money as possible with as little risk as possible.” [2]

Rydex Managed Futures Fund seeks to provide the potential diversification benefits of managed futures by aiming to mirror the daily performance of the Standard & Poor’s Diversified Trends Indicator (S&P DTI)©. Rather than investing in futures markets directly, the fund uses structured notes to gain exposure to the S&P DTI. Comprised of 14 sectors, with 50% allocated to financial futures and 50% to commodity futures, the S&P DTI has the ability to go long or short based on price momentum.

“From a diversification standpoint, the S&P DTI may be beneficial as it has historically shown a very low or slightly negative correlation to traditional investments such as fixed income and equities, while exhibiting an attractive risk/return ratio,” said Edward Egilinsky, managing director of alternative investments at Rydex.

From January 1985 through December 2006, the S&P DTI had a correlation of -0.078 to the S&P 500 Index and 0.038 to the Lehman Aggregate Bond Index. Over the same time period, the S&P DTI returned 11.04% with a standard deviation of 6.01 compared to the S&P 500 Index’s returns of 12.93% at a standard deviation of 14.88 and the Lehman Aggregate Bond Index’s returns of 8.33% at a standard deviation of 4.35.

“Alternative investment strategies such as managed futures are playing an important role in asset allocation as the industry begins to recognize their potential to reduce portfolio risk,” said Egilinsky. “Through Essential Portfolio Theory, a modernization of Markowitz’s renowned Modern Portfolio Theory, Rydex has been encouraging investors to pursue true diversification. Investors can now move beyond stocks, bonds and cash to incorporate non-correlating assets that may help offset risk and potentially enhance returns regardless of market conditions.”

Rydex Managed Futures Fund’s ability to quickly attract assets coincides with the growing popularity of alternatives among the financial advisor community. According to a national survey by AdvisorBenchmarking, registered investment advisors (RIAs) plan to increase their use of alternatives over the next five years. Survey findings indicate that 42% of advisors have moderately increased their use of alternatives over the past five years (up to 25%), while 24% has increased alternative usage by more than 100%. [4]

With the introduction of Rydex Managed Futures Fund this past March, Rydex expanded its lineup of institutional-style investment products. In addition to managed futures, the firm offers access to a variety of alternative asset classes and investment strategies via traditional, open-end mutual funds and ETF product structures.

About Rydex

Rydex Investments continues to drive change in the financial industry by introducing investment products and services that challenge conventional thinking, empower investors and provide essential new options for uncertain market conditions. Rydex manages $15 billion in assets via more than 80 mutual funds and exchange traded products.

An important note to the S&P DTI Performance:

For purposes of analysis, Standard & Poor’s constructed a pro forma version of the S&P DTI from January 1985 through December 2003. This methodology differs only slightly from the current methodology of the indicator. Note: Beginning in January 2004, the actual S&P DTI methodology are used.

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any investment will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of the hypothetical performance results and all of which can adversely affect actual trading results. When there are no actual trading results to compare to the hypothetical results, customers should be particularly wary of placing undue reliance on these hypothetical performance results.

Rydex Managed Futures Fund is subject to a number of risks and may not be suitable for all investors. The fund’s use of derivatives such as futures, options, structured notes and swap agreements may expose the fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. A highly liquid secondary market may not exist for the

commodity-linked structured notes the fund invests in, and there can be no assurance that a highly liquid secondary market will develop. The fund’s exposure to the commodities market may subject the fund to greater volatility as commodity-linked derivative investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity. This fund is subject to tracking error risks, which may cause the fund’s performance not to match that of or be lower than the fund’s underlying benchmark. When the fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses. Further, in part because of these additional expenses, the performance of an ETF may differ from the performance the fund would achieve if it invested directly in the underlying investments of an ETF. See the prospectus for details. This fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. Securities are not guaranteed by any bank, are not insured by the FDIC or any other agency and involve investment risks, including the possible loss of the principal amount invested.

For more complete information regarding Rydex Managed Futures Fund, call 800.820.0888 for a prospectus. Investors should carefully consider the investment objectives, risks, charges and expenses of a fund carefully before investing. The fund’s prospectus contains this and other information about the fund. Please read the prospectus carefully before you invest or send money.

The information provided here is intended to be general in nature and should not be construed as investment advice or a recommendation of any specific security or strategy.

Rydex Investments and its affiliates are not affiliated with Standard & Poor’s. “S&P”, “Standard & Poor’s” and “S&P DTI” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Rydex Investments. Rydex Managed Futures Fund is not sponsored, endorsed, sold or promoted by S&P, or Alpha Financial Technologies, Inc. (“AFT”), the owner of the S&P DTI, and S&P and AFT make no representation regarding the advisability of investing in the fund.

Rydex Distributors, Inc., an affiliate of Rydex Investments, is the distributor of Rydex funds.  

Edited by: Erin Kello


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