held a meeting yesterday with financial advisors affiliated with the likes of Bear Stearns
and Charles Schwab
at The Sky Club in New York City to help educate advisors about its niche index funds.
, president of the $1.1 billion ProFunds headed the informative meeting by saying that he was going to teach the attendees about his products rather than give them a big sales pitch.
In ProFunds 101, Mayberg told the advisors how his fund family creates index funds that mirror one another. For example, the Bull ProFund tracks the S&P 500 index while the Bear ProFund shorts it. The additional twist is that investments like the UltraBull ProFund seek to double the performance of the S&P 500 index or the Bull ProFund by leveraging the account. The inverse is done with the UltraBear ProFund.
The funds are primarily targeted towards those using an asset-allocation or market-timing strategy, or those creating a specified investment exposure to a particular segment of the securities market or hedging an existing portfolio.
The Bear ProFund yielded -19.46% as of December 31, 1998 but the Bull ProFund yielded 26.57%. If it was an exact inverse the numbers would obviously be the same. Inverse compounding is what causes the negative number to be less than the positive number, Mayberg explained.
Because of these technical strategies, Mayberg says he is able to appeal to a specific segment of investors. "Our investors are seeking profits in both rising and falling markets."
Many of ProFunds' investors are traders and mutual fund market timers who are shooed away from many mutual funds. Marvin Appel
, CEO of Appel Asset Management
in Great Neck, New York, said he does not presently use the funds but finds them very appealing because they allow market timers.
When queried on the market timer issue Mayberg said that he does not fully support it but added that there is no sense in turning people away. "We are not a timing fund but it does not hurt anything. Why not take them if no one else wants them?"
To add to trading ease ProFunds has set up Web site trading, expected to launch in the next 30 to 60 days, that will allow shareholders to trade their accounts online.
"The site will allow the individual client to track and
trade online," Mayberg said. The site is expected to be used by smaller investors freeing up ProFunds' phone lines for larger customers who wish to make more complex trades.
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