Performance evaluation of the UltraLatin America ProFund
The UltraLatin America ProFund Class A (UBPIX) has been the best performing fund in 2016 among the seven funds chosen for this review.
We’ve graphed its performance against the iShares Latin America 40 ETF (ILF) to see how it compares to a passive fund. Let’s look at what’s contributed to its outperformance year-to-date.
Contribution to returns
A look at the graph above will show you that UBPIX is seemingly operating in a different stratosphere than ILF. This is because of what we outlined in the previous article: UBPIX is a leveraged fund. Since the leverage multiple is 2, it means that on a daily basis, the fund provides returns that are theoretically two times that of the underlying index, the BNY Mellon Latin America 35 ADR Index.
Considering ILF as a benchmark for Latin American equities, UBPIX has returned over two times the returns of the benchmark for most periods, thus falling in line with the 2x strategy.
The financials sector has by far been the biggest positive contributor to the fund’s returns in 2016 as of August’s end. The sponsored preference ADRs (American depositary receipt) of Itaú Unibanco Holding (ITUB) and Banco Bradesco (BBD) have been instrumental in the sector’s strong showing. Bancolombia (CIB), Grupo Financiero Santander Mexico (BSMX), and Banco de Chile (BCH) have also made meaningful contributions.
The energy sector has been the fund’s second-largest positive contributor. All stocks from the sector, including Ecopetrol (EC) and Ultrapar Participações (UGP), have contributed positively, but Petrobras (PBR) has been the clear leader.
The materials sector has been led by Vale (VALE), with CEMEX (CX) and Sociedad Quimica y Minera de Chile (SQM) earning honorable mentions. However, Fibria Celulose (FBR) has dragged on the sector. Meanwhile, CPFL Energia (CPL) and Companhia de Saneamento Basico do Estado de Sao Paulo (SBS) have helped the utilities sector to rise.
The industrials and consumer discretionary sectors have dragged on the fund. Though LATAM Airlines Group (LFL) has been of use to the sector, Embraer’s (ERJ) negative contribution has hammered the sector into negative territory. Grupo Televisa, (TV), the sole holding from the consumer discretionary sector, has contributed negatively to UBPIX’s returns.
Though UBPIX has outperformed all other funds in this review, investors should note that it’s quite different due to its leverage strategy. This fund is only for very aggressive investors who want to take directional bets on LatAm stocks, specifically in the ADRs of LatAm companies.
In the last article of this series, we’ll look at the overall picture that emerges from our analysis.