An open letter from ProFunds Group
Leveraged and inverse funds, designed to pursue a multiple, or inverse multiple, of an index or benchmark on a daily basis, have grown in number and popularity in recent years. As the leading manager of these funds1, we feel strongly that investors should fully understand how they work before investing. Since ProFunds Group's founding in 1997, we have been committed to providing fair, balanced and accurate information to investors and financial advisors about the features, benefits, and potential risks of these funds.
How the funds perform for periods longer than a day—particularly in volatile markets—has been raised as a concern in numerous recent press articles. These performance concerns have been subject to a great deal of misunderstanding. It is important for all investors to understand how any investment works, whether in upward-trending, downward-trending, flat, or volatile markets over a short-term or longer-term period. We firmly believe leveraged and inverse funds can be effective portfolio tools, if used properly and monitored regularly, to express a view of the overall market, a sector, or an industry.
Because of the daily objective of leveraged and inverse funds, investors should monitor their performance, as frequently as daily. By doing so, investors can see if their leveraged or inverse funds are achieving the daily target multiple over periods greater than one day, and, if necessary, rebalance fund positions to maintain the targeted exposure. Rebalancing can be an effective strategy, although additional trading costs may be incurred. Remember, trading also has tax consequences.
You will find an array of materials on our web site to help you understand what to expect when investing in leveraged and inverse funds—from educational information to fund prospectuses, annual reports, and statements of additional information that contain more detailed information.
If you have questions about how leveraged and inverse funds work, or about how they may fit within your investment portfolio, please contact your financial adviser or broker/dealer representative. You may also contact ProFunds Group directly at the numbers listed below.
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