The UltraLatin America ProFund Class A (UBPIX) seeks “daily investment results, before fees and expenses that are 2x the return of the BNY Mellon Latin America 35 ADR Index for a single day.” This means that the fund aims for single-day returns only and that these returns are two times that of the underlying index. For instance, if the index rises by 2%, the fund will have returns close to 4%. The same applies for times when the index reports negative returns—the fund would fall nearly twice its value (adjusted for fee and expenses) in that case.
The fund’s literature states that “for periods longer than a single day, the Fund will lose money when the level of the Index is flat, and it is possible that the Fund will lose money even if the level of the Index rises.”
This kind of fund is known as a leveraged fund. These funds, by their very nature, are highly risky and are not suitable for conservative investors. Even aggressive investors should use caution when investing in these funds.
UBPIX’s assets were invested across 35 holdings as of September 2015, when it was managing assets worth $8.06 million. As of June 2015—the latest complete portfolio information available to us as of October 2015—the fund’s equity holdings included Embraer SA (ERJ), Coca-Cola FEMSA (KOF), Fibria Celulose SA (FBR), and Grupo Aeroportuario del Pacífico (PAC), which made up a combined 8.7% of the fund’s total portfolio.
Historical portfolios of UBPIX
For this analysis, we’ll be considering holdings as of June 2015, as this is the latest sectoral breakdown available to us as of October 2015. UBPIX’s holdings after that will reflect valuation-driven changes to the portfolio, not the actual holdings.
The fund mostly invests in ADRs (American depository receipts). And investors should remember that UBPIX is an index-tracking fund. So when we talk about the fund’s portfolio details, we’re essentially discussing the fund’s underlying index. Its passive nature is visible from the graph above as well, which shows a nearly consistent portfolio composition.
Here’s a breakdown of UBPIX’s sectoral holdings:
- The consumer staples sector is the largest sectoral holding of the fund, making up one-third of the fund’s assets.
- Financials follows consumer staples, which make up a little over 16% of the portfolio.
- Due to the composition of the underlying index, 12.7% of the fund’s assets are invested in the energy sector. One year previously, in 2014, energy stood at 18.8%. But there has been no turnover in the energy sector holdings over this past year, so this sharp drop was likely driven by the drop in energy prices and the subsequent fall in stock prices in this sector.
- The fund does not have any investments in the healthcare and information technology sectors.
But how did UBPIX fare in September 2015, and what factors contributed to its performance? Continue to the next part of this series to find out.