Rydex's New Fund Launch: Playing Offense, Playing Defense

I've been hearing rumblings about the new Rydex funds for some time, and it's good to see them finally hit the market.

Regardless of whether you think these new ETFs will gain much in the way of assets, ultimately, we should be happy they launched: Competition is good for investors.

I don't see ProShares cutting fees to match Rydex... history shows that they don't need to, especially in a market where liquidity is key... but at the same time, they won't just sit back forever and print money with their funds, either. A little competition is always good.

As for Rydex, I imagine they have two reasons for launching the funds. First, I'm sure they want to steal some assets from the growing leveraged ETF pie with those lower expense ratios.

Second, and perhaps more importantly, I bet they're playing a little defense here and protecting the franchise. I know that ProFunds has seen its leveraged mutual funds stop growing due to the success of the ETFs, and I'm guessing Rydex is feeling the effects on their mutual funds too. By putting out the ETFs, at least the Rydex sales reps have a tool to compete with ProShares when clients ask... and with the 70 bps fee, they'll have a way to sell them, too.

The question in my mind is whether Rydex will try to stake out new ground with new products once they get their feet wet with these initial ETFs, or if they'll just compete on price. ProShares has a lot of the market covered, but I'm guessing there are still areas to play in. And tapping into those markets could be a smart move for the company.

Written by Matthew Hougan

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