UBPIX Is Not for Everyone



UBPIX overview

We’ll be analyzing the UltraLatin America ProFund Class A (UBPIX) in this article. The UltraLatin America ProFund was managing assets worth $9.8 million as of January 2016.

As of December 2015, its assets were spread across 35 holdings and included companies such as CEMEX (CX), Ultrapar (UGP), Bancolombia (CIB), Enersis (ENI), Embraer (ERJ), and Empresa Nacional de Electricidad (EOC), which made up a combined 9.3% of the fund’s portfolio.

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UBPIX’s performance

From a purely net asset value return standpoint, UBPIX investors would probably like to forget both the one-year period until February 17, 2016, and 2015. The fund was dead last for both periods among its peer group.[1. When we refer to the peer group, we mean the group of nine funds chosen for this review.]

For return comparison, we have chosen two ETFs: The iShares Latin America 40 ETF (ILF) and the iShares MSCI Emerging Markets Latin America ETF (EEML).

UBPIX is different

We don’t need to do a full-fledged quantitative analysis of UBPIX. It has the highest standard deviation, the lowest information ratio, and the lowest alpha among all nine funds in this review. As seen in the graph above, it has been beaten down by twice the percentage that its peers have fallen. What’s the reason for this?

UBPIX is different from the other funds in this review. It is a leveraged fund and aims at single-day returns that are twice the returns of the BNY Mellon Latin America 35 ADR Index. Hence, if the index rises by 2%, the fund will have returns of close to 4%. The same applies for times when the index reports negative returns: The fund will fall nearly twice its value, adjusted for fees and expenses.

This is why the fund has been down about twice the percentage of the peer average. The nature of the fund is not suitable for moderate and conservative investors. Even among aggressive investors, all may not be comfortable with this sort of adventure.

However, due to its very nature, UBPIX could be a boon when Latin American stocks bounce back, as it will return twice the percentage of its underlying index. For example, the fund’s documents show that it tanked by over 86% in 2008, but it then surged by over 227% in the following year.

Only adventurous and aggressive investors in the retail segment may wish to venture into the leveraged arena when it looks like stocks from the region are ready to move upward.

In the last article of the series, we’ll look at the overall picture that emerges from this analysis.


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