Holy Smokes! These Funds Got Barbecued
Five funds that forgot to rally.
The stock market's spring rally has floated many boats. But a few continue to take on water. Let's take a look at a few with the nastiest losses for the year to date.
ProFunds UltraShort Latin America (UFPIX),negative63%
Leverage and shorts are lots of fun until someone gets hurt. ProFunds' Web site says that "Inverse and UltraSector funds may help you battle a weak market," but this shows that they can also help you battle a strong market. This Fund Analyst Pan aims to provide 200% of the inverse of the returns of the Bank of New York Latin America 35 ADR Index before fees and expenses. I can't decide what's worse: The losses that funds like this suffer when the index they track rallies as it has this year or the losses when the index falls and you expect a gain but don't get it thanks to the magic of leverage. Last year when Latin American stocks lost about half their value, this fund lost 24%. For more on the workings of leverage, see Paul Justice's article.
Markman Core Growth (MTRPX),negative42%
Ouch! How does a large-growth fund lose 42% when the typical fund is up 6%? It's hard to know for sure given this fund's 1,300% turnover, but I did spy Direxion Daily Large Cap Bear 3X shares among its top 20 holdings, so leverage strikes again. The fund's remarkably bad bets this year have sunk its long-term performance: It's lost an average of 8% annually for the past five years and 7% for the trailing 10 years. You may recall that Markman lost two bets with Vanguard founder Jack Bogle in which Markman bet that his funds would beat Vanguard 500 (VFINX). Markman lost the first one the previous decade and quickly lost the second when terrible performance led him to roll the funds in the bet into another newer fund without as long and bad a track record. I called the firm's 800 number to confirm its returns, but the person who answered the phone said that she didn't know. That's another first for this fund.
Russel Kinnel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.