ProFunds are designed to provide either 200%, -200% or -100% of index performance on a daily basis (before fees and expenses).
A common misconception is that ProFunds should also provide 200%, -200% or -100% of index performance over longer periods, such as a week, month or year. However, ProFunds' returns may be greater than—or less than—what you’d expect over longer periods.
How does this happen?
The hypothetical example below demonstrates how ProFunds' long-term returns may be different than what you'd expect:
Fund XYZ seeks to double the daily performance of Index XYZ. On each day, Fund XYZ performs in line with its objective (200% of the index’s daily performance). You might expect that over the entire five-day period, the fund’s total return would be double that of the index, but that’s not the case. For the entire period, Index XYZ gained 5.1% while Fund XYZ gained only 9.8%.
|
Index XYZ |
Fund XYZ |
|
Level |
Daily
Performance |
Daily
Performance
|
Net Asset Value |
| Start |
100.0 |
|
|
$100.00 |
Day 1
|
103.0 |
3.0%
|
6.0% |
$106.00 |
Day 2
|
99.9 |
-3.0% |
-6.0% |
$99.64
|
Day 3
|
103.9 |
4.0%
|
8.0% |
$107.61 |
Day 4
|
101.3 |
-2.5%
|
-5.0% |
$102.23 |
Day 5
|
105.1 |
3.7% |
7.4% |
$109.80 |
Total Return
|
5.1% |
9.8% |
Why does this happen?
This is due to several factors, but a significant one is index volatility and its effect on fund compounding. In general, periods of high index volatility will cause the effect of compounding to be more pronounced, while lower index volatility will produce a more muted effect.
To demonstrate this point, let’s compare Fund XYZ from the previous example to the less volatile (and also hypothetical) Fund ABC, designed to double (200%) the daily performance of Index ABC.
|
Fund ABC: Less Volatile |
Fund XYZ: More Volatile | 
At left, the steady uptrend of Index ABC led to a compounding effect (magnified gains upon gains) in Fund ABC that more than doubled the index’s return (10.4% vs. 5.1%). At right, the more volatile Index XYZ led to magnified fund gains and losses, producing less than 200% (9.8% vs 5.1%).
What it means to you
In the end, ProFunds are designed to accomplish their objectives on a daily basis. As a result, you shouldn't expect ProFunds to provide 200%, -200% or -100% of index performance over longer periods.
If you're interested in more details about ProFunds' long-term performance, please see the description of correlation risk in the ProFunds prospectus. Also, you can download the ProFunds statement of additional information for a deeper discussion of the factors that affect ProFunds' long-term performance, including a chart that estimates one-year fund performance based on index volatility.
A note about daily benchmarks
A fund could be designed with a benchmark that uses a time period longer than one day (for instance, a week, a month or a year), but index volatility and its effect on compounding will create a similar effect over multiple periods, regardless of their duration.
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