Rydex Pure Style ETFs: Worth a Look

Includes: RFG, RFV, RPG, RPV, RZG, RZV
by: Jersey Trader

The Rydex ETFs have not gotten much publicity, possibly because they have not launched any new ETFs recently. However, they do have some very interesting and unique ETFs.

The Rydex ETFs that I found were the most interesting were their little known pure style ETFs (RPG, RPV, RFG, RFV, RZV, RZG). They are unique ETFs that are unlike any other ETFs that exist. There are six ETFs: a value ETF and a growth ETF each for large cap, mid cap, and small cap.

There are a few reasons why the S&P Pure Style indexes these ETFs track are different from other style indexes. For most style indexes, the stocks from the parent index are either in the value or growth index. However, with the pure style indexes not all the stocks of the parent index are in the pure style indexes. This avoids stocks that cannot be categorized as either value or growth and therefore making the index more ‘pure’. Another difference is that most style indexes are weighted by market cap. The pure style indexes, however, are weighted according to how well they scored for the style.

The difference in methodology causes a large difference in performance. For example, since the March low, the Rydex Small Cap Value ETF rose over 140%, far higher than around 50% gains of other small cap value ETFs. It also fell further than other comparable ETFs since the market peaked.

In my opinion, the Rydex Pure Style ETFs are better representations of how a style is performing than most other style ETFs. If it is your opinion that one style will outperform another style, than investing in these ETFs may give you a way to achieve higher returns than investing in other style ETFs. One problem is that these ETFs are hardly known so volume is low.

Disclosure: None.