Rydex expands availability of twice-a-day pricing

Jan 22, 2007 @ 12:01 am

By David Hoffman

PHILADELPHIA — Investors who buy select mutual funds from Rydex Investments through National Financial Services LLC now have access to twice-a-day pricing.

Rydex, which is based in Rockville, Md., is the only company to offer such pricing. It first introduced the capability to investors who bought its funds directly in 2000.

Now the functionality has been expanded to include New York-based National Financial, which provides brokerage services to nearly 350 broker-dealers representing 70,000 brokers. National Financial is a subsidiary of Fidelity Investments in Boston.

Industry experts said they aren’t sure that increased exposure will result in increased investor demand for twice-a-day pricing.

They pointed out that Fidelity dropped hourly pricing — which offers investors even more flexibility to trade — from its Fidelity Select sector funds in October.

“I would say Fidelity, if nothing else, is extraordinarily adept at reading its marketplace,” said Jim Lowell, editor of Fidelity Investor, a monthly newsletter based in Needham, Mass. “If they thought there was strong demand for it, I don’t think they would have monkeyed with it.”

Fidelity failed to return a telephone call seeking comment.

It isn’t expanding the availability of twice-a-day pricing to rake in assets, said Kevin McGovern, mutual fund business manager at the firm.

It is expanding the capability because it’s something advisers want as an “an insurance policy” against market volatility, he said.

Indeed, select funds on the National Financial platform now offer pricing at 10:45 a.m. and 4 p.m., instead of just 4 p.m.

“It enhances the ability of investors to manage risk,” Mr. McGovern said.

Some advisers said they like the ability to trade twice a day.

It is one of the reasons Rydex — which has carved out a niche for itself with market timers — has an edge over rival ProFund Advisors LLC in Bethesda, Md., said Paul Schatz, president of Heritage Capital LLC of Woodbridge, Conn.

“If you have the opportunity to trade two times a day, [versus] one, you have to go to Rydex,” he said.

Lack of demand

When Rydex came out with twice-a-day pricing in 2000, Mr. Schatz said, he was sure ProFund Advisors would follow suit and was surprised that it never did.

ProFund, however, has never followed Rydex because it hasn’t seen any evidence that there is strong demand for twice-a-day pricing, said Michael Sapir, chairman and chief executive of ProFund Advisors and its exchange traded fund sister company, ProShare Advisors LLC.

“We haven’t seen a lot of demand for twice-a-day pricing, but we have seen demand for intraday pricing of index vehicles,” he said. “As a result, we are introducing, and have introduced, our ETFs.”

Of course, Rydex has ETFs, as well.

That company, however, may have felt more pressure early on to roll out twice-a-day pricing to keep its funds from losing assets to ETFs, said Russel Kinnel, director of mutual fund research at Chicago-based Morningstar Inc.

Mr. McGovern, however, insists that that wasn’t the reason. It was purely a desire to serve the needs of the adviser, he said.

Indeed, there are some instances when buying a Rydex fund priced two times a day is as good as — if not better than — investing in an ETF, said John McClure, president and chief executive of ProfitScore Capital Management Inc. in Boise, Idaho.

It depends on how much you trade and what your transaction costs are, he said.

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