Sector ProFunds allow you to invest in mutual funds that concentrate in securities that represent a particular part of the economy, such as energy, financial services or semiconductors. Economic sectors can behave much differently than the market as a whole—and from each other. For instance, when the S&P 500
®
is down, the energy sector may be up—but the semiconductor sector could be doing even worse than the S&P 500.
UltraSector ProFunds
So what's the difference between "actively managed" sector funds and UltraSector ProFunds?
First, UltraSector ProFunds are closely aligned with the sector index. Each UltraSector ProFund is benchmarked against a specific Dow Jones sector or industry index, so you know what you're getting. Managers of actively managed funds may decide to leave companies within the sector out of their funds or include companies that aren't in the sector.
Second, using leverage, each UltraSector ProFund's goal is to produce daily returns that are 150% of the performance of its index.
This means that on a day when an index goes up by 1%, the value of the corresponding UltraSector ProFund should increase by 1.5%. Likewise, on a day when the index declines by 1%, the corresponding UltraSector ProFund should decrease by 1.5%.
By itself, an UltraSector ProFund is not a complete investment program. But you can use them to increase your portfolio's exposure to a specific economic segment, or employ a more active strategy and "rotate" your investments to perceived strong sectors and out of perceived weak sectors as market and economic conditions change.
UltraSector ProFunds may invest in futures contracts on stock indexes, options on futures contracts, and other financial instruments such as equity caps, collars, floors, swaps, depository receipts, and options on securities and stock indexes.
Want to learn more about the above investment terms? Visit our Glossary .
Inverse Sector ProFunds
For investors who believe a particular sector is poised to decline, Inverse Sector ProFunds offer an alternative to sitting out the downturn.
Each Inverse Sector ProFunds seek to increase in value when its sector benchmark declines and decrease in value when its sector benchmark rises—a result that is the opposite of traditional sector funds. They are each benchmarked to a Dow Jones U.S. Industry index , so investors will know how they should perform on a daily basis as each sector strengthens or weakens.
Inverse Sector ProFunds can be used:
- To seek profit from a potential decline in the fund's sector benchmark index. (However, you'll experience a loss if the benchmark index rises.)
- To seek to mitigate volatility in or losses on stocks or funds in these sectors that you don't want to sell.
Investing in these ProFunds involves certain risks, including in all or some cases, leverage, liquidity, concentration, non-diversification and repurchase agreement risks. These risks can increase volatility and decrease performance. Please see the
prospectus
for a more complete description of these risks.
In addition, because sector funds are concentrated in a single area of the market, they can be more volatile and riskier than more diversified mutual funds, and therefore in themselves, don't constitute a complete investment program. All ProFunds permit active investment strategies that can decrease performance and increase expenses.
Notes:
There is no guarantee that any ProFund will achieve its investment objective. See the
prospectus
for more information.
These ProFunds routinely employ leveraged investment techniques that magnify gains and losses and result in greater volatility in value. These ProFunds invest in a single industry. Their shares do not represent a complete investment program. As non-diversified and single industry funds, the value of their shares may fluctuate more than shares invested in a broader range of industries and companies.
There are no restrictions on the size and frequency of trades and no transaction fees. The frequent exchanges our policies permit can decrease performance, increase expenses and incur tax consequences. All ProFunds permit active investment strategies can decrease performance and increase expenses. In addition, it is important to note that some ProFunds are not suitable for all investors, because of aggressive investment techniques many of the funds employ.
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