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In this publication, we're going to be providing a review of Rydex Mutual Funds. At one time, Rydex was geared more towards the elite investor, since their minimum investment for any fund was $25,000 (it is now $100). It's also a relatively small player in the mutual fund space, with only a little over $25 billion in assets under management.
Rydex Family of Mutual Funds
Rydex Funds is a relative newcomer to the mutual fund scene. Started in 1993 by its founder Skip Viragh, his aim when starting Rydex was to create a family of mutual funds that performed well, regardless of market conditions. Rydex is also known for starting the first leveraged mutual fund: Rydex Nova Fund.
Today, Rydex offers investors leveraged equity funds, fixed income funds, as well as inverse equity funds. Rydex mutual funds are offered through large brokerage houses including Fidelity, Charles Schwab, T.D. Waterhouse, and E*Trade. Rydex offers more than 140 investment products tailored to a variety of market conditions including 18 sector funds. Rydex also offers retirement planning options such as Traditional IRAs, Roth IRAs, Rollover IRAs, SEP IRAs, as well as 403b plans.
In 2010, Rydex combined with Security Global Investors. The combined company is now known as Rydex/SGI.
Rydex Funds Fee Structures and Returns
Morningstar ratings indicate the expense ratios for mutual funds at Rydex/SGI are all Above Average. This includes their international stock funds (1.81%), taxable bond fund (1.39%), and their domestic stock fund (1.75%). Although Rydex claims they offer investors options to match any market condition, this does not translate into a balance of stock and bond funds. Their distribution of asset class indicates only 6.58% in bonds (taxable bond funds). In fact, nearly all assets sit in domestic stock funds or cash (92%) as of May 2011.
As previously mentioned, the minimum investment at Rydex is $2,500, and only 61% of the funds at Rydex are no-load mutual funds. As of the end of April 2011, the average return for the Rydex family of mutual funds over the last five years was 6.51%. This performance must be disappointing, given the founder's vision.
Top Rated Funds at Rydex/SGI
When looking at the top rated funds at Rydex/SGI, we do not find a pattern. Two of the mutual funds have a front-load. Two of the funds require a low $100 minimum, while two funds are also closed to new investors. With that brief introduction, listed below are the top rated mutual funds from Rydex/SGI:
- Rydex/SGI Alpha Opportunity A (SAOAX) - with $14.2 million in assets, this large blend mutual fund invests heavily in the industrials sector of the economy. Top holdings include FHLMC, Philip Morris International, Inc., and Shanda Interactive Entertainment, Ltd. The fund carries a 5.75% front load, and requires a minimum investment of $100. The fund is currently closed to new investors, and carries an expense ratio of 2.21%. The average return over the last five years was 6.75%. (May 2011)
- Rydex S&P MidCap 400 Pure Growth C (RYCKX) - with a little over $285 million in assets, this mid growth fund currently reports that nearly all (99.5%) of the assets are held in stocks. Top holdings include Rackspace Hosting, Inc., Riverbed Technology, Inc., and Deckers Outdoor Corporation. This mutual fund carries a modest 1.00% front load, and a hefty expense ratio of 2.28%. The average return over the last five years was 8.87%. (May 2011)
- Rydex Basic Materials Inv (RYBIX) - with $130 million in assets, this large blend mutual fund is marketed to the natural resources investor. As the name implies, the fund is heavily invested in the basic material sector of the economy. Top holdings include E.I. du Pont de Nemours & Company, Barrick Gold Corporation, and Vale S.A. ADR. The expense ratio for the fund is 1.39%, and the minimum investment is $2,500. This no-load mutual fund has also provided investors with an average return over the last five years of 10.28%. (May 2011)
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