ProFunds Launches Rising Rates Opportunity ProFund
New mutual fund offers investors chance to profit when interest rates rise
Harris InteractiveSM survey shows 70% of investors don't know that rising interest rates can hurt bond investments
Bethesda, MD, May 6, 2002 — ProFunds has launched Rising Rates Opportunity ProFund, which is designed to rise in price when the most recently issued 30-year U.S. Treasury Bond falls.
A recent survey conducted by Harris InteractiveSM finds that most investors think that interest rates will go up over the next two years. However, the survey also finds that most investors don't understand how rising rates would affect bond investments.
"We think the time is right to offer investors Rising Rates Opportunity ProFund, an innovative mutual fund that has the potential to increase in value as interest rates rise," said Michael L. Sapir, Chairman and CEO of ProFund Advisors LLC, investment advisor to the Bethesda-based mutual fund family. "Rising Rates Opportunity ProFund provides the potential to profit in a rising interest rate environment or to hedge the bond portion of a portfolio."
About the survey
The survey1 commissioned by ProFund Advisors and conducted by Harris Interactive, found that while 65% of all investors polled believe that interest rates will go up over the next two years, 70% of them did not understand that the value of bond investments goes down when interest rates rise. Even among bond investors who took part in the survey, two-thirds (66%) did not understand the relationship between interest rates and bond prices.
Hypothetical performance during a rising interest rate environment
ProFunds' Portfolio Group looked at 1999, the latest full calendar year of rising interest rates, when long term rates rose from 5.10% to 6.48% and compared two hypothetical funds benchmarked to the long bond. A fund that achieved 100% of the long bond's total return lost 13.00%. A fund that achieved 125% of the inverse gained 31.39%.
ProFunds also launched U.S. Government Plus ProFund as well as two equity short funds. The names of the new funds and their respective benchmarks and objectives are as follows:
|Rising Rates Opportunity||30-year U.S. Treasury Bond (most recently issued)||125% the Inverse|
|U.S. Government Plus||30-year U.S. Treasury Bond (most recently issued)||125%|
|Short Small-Cap||Russell 2000® Index||Inverse|
|Short OTC||Nasdaq-100®||Index Inverse|
About the new long bond ProFunds
Rising Rates Opportunity ProFund is designed to benefit from a rising interest rate environment, when most bond prices are decreasing. It seeks 125%, before fees and expenses, of the inverse of the daily price movement of the most recently issued 30-year U.S. Treasury Bond.
U.S. Government Plus ProFund, which seeks 125%, before fees and expenses, of the daily price movement of most recently issued 30-year U.S. Treasury Bond, is designed to benefit from a falling interest rate environment.
About the new short equity ProFunds
The new short equity ProFunds are referred to as "short funds" because they seek to profit when their benchmark indexes go down. These funds are unleveraged, seeking the inverse of the daily performance, before fees and expenses, of their respective benchmark indexes. Short funds provide an opportunity for investors to earn a profit in a falling equity market or hedge against market declines.
Short Small-Cap ProFund seeks daily investment results that are the inverse, before fees and expenses, of the performance of the Russell 2000® Index, which comprises 2,000 of the smallest U.S. domiciled, publicly traded common stocks included in the Russell 3000® Index.
Short OTC ProFund seeks daily investment results that are the inverse, before fees and expenses, of the performance of the Nasdaq-100 Index, which contains 100 of the largest and most active non-financial issues listed on the Nasdaq Stock Market. Most have a technology or growth orientation.
ProFunds offers innovative indexed-based funds that are designed to overcome limitations of conventional index mutual funds. ProFunds does not restrict investors' abilities to react to financial or economic changes and exchange their investments from one ProFund to another, and imposes no transaction, entry or exit fees.
The ProFunds present certain risks to investors, some that are not usually associated with mutual funds. Information contained herein is subject to completion or amendment. There is no guarantee that any ProFund will achieve its investment objective. Some ProFunds routinely employ leveraged investment techniques that magnify gains and losses and result in greater volatility in value. The Short Small-Cap ProFund carries additional risks since smaller companies generally have a higher risk of failure. Investments in the U.S. Government Plus and Rising Rates Opportunity ProFunds are subject to market risks, including movements in prevailing interest rates. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
For more complete information including charges, expenses and ongoing fees, interested please call 888-PRO-FNDS to receive a prospectus. Read the prospectus carefully before investing or sending money. ProFunds are distributed by ProFunds Distributors, Inc.
Harris InteractiveSM, via its QuickQuerySM online omnibus, fielded this survey between April 11-15, 2002, interviewing 2,731 U.S. adults (18+). The margin of error is (+/-1.9) percentage points with a 95% level of confidence, and the data were propensity weighted to be representative of the total U.S. adult population.