Let’s look now at the UltraLatin America ProFund – Class A (UBPIX). It was managing assets worth $12.5 million as of February 2016. As of December 2015, its assets were spread across 35 holdings and included stocks of companies such as CEMEX (CX), Ultrapar (UGP), Bancolombia (CIB), Enersis (ENI), Embraer (ERJ), and Empresa Nacional de Electricidad (EOC).
From a purely NAV (net asset value) return standpoint, UBPIX has been pummeled in the one-year period until March 24, 2016. It was dead last for the period among its peer group. 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
UBPIX is different from the other funds in this review. It’s a leveraged fund and aims at single-day returns that are two times the return of the BNY Mellon Latin America 35 ADR Index. So if the index rises by 2%, the fund should have returns close to 4%. The same applies for times when the index reports negative returns. Then the fund could fall nearly twice its value, adjusted for fees and expenses.
The nature of the fund isn’t suitable for moderate and conservative investors. But due to this very nature, it can be a boon for adventurous investors when Latin American stocks bounce back. It could return twice the percentage of its underlying index. For example, the fund’s documents show that it fell more than 86% in 2008 but then surged more than 227% the following year.
The fund’s volatility is the highest among its peers, which is no surprise given its leverage strategy. But the strong performance of Brazilian stocks is visible even in the one-year period until March 24. Although the fund’s information ratio was negative, its alpha placed it sixth among its peers, not last as was the case in 2015.
In 2016 YTD (year-to-date), UBPIX has posted positive risk-adjusted returns. Its information ratio and alpha have figured it at third place.
Current investors should keep a very close watch on this fund. Benefiting from the fund’s strategy is positive right now, but any downturn could hit investors twice as hard.
In the last article of our series, we’ll look at the overall picture that emerges from our analysis of these nine funds.