Reverse Share Splits and Other Rydex Fund News

With all the talk about ETFs, you might think that traditional open-end mutual funds no longer existed.  Nothing could be further from the truth.  Yes, most of the innovation is now taking place in the ETF space, but mutual funds will be with us for a long time.

In my All Star Fund Trader publication, I focus on ETFs and tradable mutual funds.  Tradable mutual funds are typical those from fund families that have no restrictions on trading frequency, namely Direxion, ProFunds, and Rydex.  I also have a long history with Fidelity funds, especially their Select sector and industry funds.  These funds were originally targeted at active traders and even had hourly pricing.  In the last few years Fidelity has taken many steps to deter trading in their entire fund family, including the Select funds.  Since many of my subscribers continue to be fans of Fidelity funds, I continue to track them too.

Here, then, is the first of a multi-part series to bring you up to date on the news from these fund families.  We start today with Rydex Funds:

Rydex will have reverse share splits for six funds after the close today (Friday, April 17, 2009).  The splits  will be reflected in fund share pricing on Monday (April 20) for all share classes.  The bear market has taken its toll on fund share prices, so Rydex is taking this step to get the NAVs back to higher levels.  Three of the funds will undergo 1:10 reverse splits while the other three will have 1:5 reverse splits.

This action will not affect the overall value of your Rydex holdings.  You will simply be holding fewer shares of higher priced funds.  The affected funds are:

• Rydex Financial Services (1:10)
• Rydex Banking (1:10)
• Rydex Electronics (1:5)
• Rydex S&P 500 Pure Value Fund (1:5)
• Rydex Nasdaq-100 2x Strategy Fund (1:5)
• Rydex Russell 2000 2x Strategy Fund (1:10)

Rydex changed the name of nine funds on the first of April to better align the names with their investment objectives, strategies, or benchmarks.  The changes:

• Rydex Absolute Return Strategies Fund to Rydex Multi-Hedge Strategies Fund
• Rydex International Rotation Fund to Rydex International Opportunity Fund
• Rydex Sector Rotation Fund to Rydex All-Cap Opportunity Fund
• Rydex Large-Cap Growth Fund to Rydex S&P 500 Pure Growth Fund
• Rydex Large-Cap Value Fund to Rydex S&P 500 Pure Value Fund
• Rydex Mid-Cap Growth Fund to Rydex S&P MidCap 400 Pure Growth Fund
• Rydex Mid-Cap Value Fund to Rydex S&P MidCap 400 Pure Value Fund
• Rydex Small-Cap Growth Fund to Rydex S&P SmallCap 600 Pure Growth Fund
• Rydex Small-Cap Value Fund to Rydex S&P SmallCap 600 Pure Value Fund

The Rydex Multi-Cap Core Equity Fund converted to the Rydex Global 130/30 Strategy Fund on April 1, 2009.  The change in name and strategy was previously approved by shareholders.  The fund will seek to maintain a net long exposure of approximately 100% by investing 130% of its managed assets in securities (”long”) and sell short securities amounting to approximately 30% of its managed assets (”short”), but may vary from those targets.  The fund has a 1% redemption fee for shares held less than 30 days.

On or about May 29, 2009, Rydex Hedged Equity Fund will be merged into Rydex Multi-Hedge Strategies Fund (formerly known as Rydex Absolute Return Strategies Fund).  The two funds pursue similar investment objectives, possess similar fee structures, and are managed by the same portfolio management team.  The reorganization is designed not to be a taxable event for shareholders.

Tomorrow: Part II of this post will bring you news about Direxion Funds and Part III will cover Fidelity.