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Author's Note 2/7/08: There's more to this story than meets the eye. I've actually been in touch with the folks over at Proshares and they have been very helpful. I'm currently working on a follow up post that explains that, in fact, the fund is working as advertised but it's not what you'd expect.
I'm getting a bit perturbed with making the right calls and yet not profiting from them. On New Year's Eve I bought some of the Ultra Short FTSE/Xinhua China 25 fund (FXP) in an attempt to hedge my substantial investment in China through the Templeton Dragon Fund (TDF). Having accumulated quite a bit of capital gains in TDF I didn't want to trigger the taxes by selling it, not to mention that the discount was historically large.
FXP is supposed to track twice the inverse of the index by the same name but I've been getting the impression from watching my portfolio that this fund is not working as advertised. So I decided to check out the numbers. Here is what I found when I compared it to the index it's supposed to track:
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12/31/07 |
2/1/08
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% Change
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Index
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111.32 |
93.67
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-15.9% |
FXP
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76.87
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89.95
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17% |
If FXP was working as advertised it should have had a 31.8% return in this time period but obviously it didn't. Am I missing something? If not, then this fund is missing it's objective in a big way. I'm going to be doing some further research, including calling Proshares, the fund manager. In the meantime, let me clarify that I'm getting the index numbers from Yahoo here in case I'm picking the wrong data source. However, pulling some comparable data seems to confirm that I'm using the right data.
Assuming that my analysis is correct, this fund has a huge problem and it has cost me a lot of money.
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| Gary | 12/09/2008 |
Geez. Sounds similar to my problem only worse with graver consequences. Their branches are not set up for deposits and withdrawals. The IRA rollover process is complicated. Unfortunately, the IRS may not be helpful. It all depends upon who you deal with and how smart they are.
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| Barbara | 12/09/2008 |
| I discovered your website by googling Countrywide Bank + IRA problems. I found your issues with them in opening up an IRA mirrored my current issues with them in getting my IRA rolled over to another institution. They were completely inept in handling this even though I took care of it by going directly to their local office, not on the phone. The paperwork was totally fouled up and now I find myself in a dilemma as they handled it as a withdrawal taxable event and deducted 10% for the IRS instead of their doing my RMD and taking 10% tax based on only the RMD amount. I've since spent hours on the phone with them without their taking any responsibility. I'm going to the IRS to see what my options are -- but would advise everyone to avoid Countrywide at all costs. |
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| john | 03/15/2008 |
| Gentlemen, it is my experience that FXP is the inverse of FXI, not the ssec or hsi. |
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| Gary | 02/07/2008 |
| FXI does not track the Hang Seng index. It attempts to track the FTSE Xinhua/China 25 index. When you compare FXI to FXP you see the problem I am addressing. One would expect FXP to track 200% of the inverse but it doesn't. There's a good reason for this though that I will address in my next blog post. |
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| Darren | 02/05/2008 |
Please do more homework sir. I know someone on google mentioned it....it seeks to achieive 200% inverse of Hang Seng.
I recommend you check out this chart then give me your opinion. If it does not hyperlink; please cut and paste:
http://finance.yahoo.com/q/bc?t=3m&s=FXP&l=on&z=m&q=l&c=FXI
I think you will the negative correlation you are "seeking" with FXP and FXI. It is almost a perfect mirror image in my opinion. Since you are good with the returns. Your homework is to compare the previous 3 months for FXP vs. FXI and show me those returns. Thank you! Please let me know if that helps.
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