Biotech Stocks: ProFunds Biotechnology UltraSector Fund (BIPSX)
Type: Mutual Fund
Assets Under Management: $653.8 million
If you’re an aggressive growth investor looking for diversification, your risk tolerance is high and you have a relatively long investment horizon, BIPSX might be a mutual fund to consider.
This mutual fund is a so-called trading-leveraged equity fund, meaning that in addition to investing in the stock of companies in the sector, it also uses a mix of derivatives such as options, futures and swaps to increase the daily performance of the underlying index. In this case, BIPSX aims to deliver daily returns that are 150% of the Dow Jones U.S. Biotechnology Index.
Four of the fund’s top five holdings are the same as IBB — it has AbbVie (ABBV) instead of REGN — but the top five account for more than 42% of BIPSX’s holdings.
Two of ProFunds’ top advisers — Charles Lowery and Michael Neches — took over managing the fund last October.
The Takeaway: While using leverage is a great way to further improve eye-popping returns in the biotech space, investors need to be aware of the potential pitfalls. Namely, sure, you could juice your returns … but you also can amplify your losses. Also, unlike stocks or ETFs, mutual funds can’t be traded during the day (though most longer-term investors needn’t worry about this). It’s also expensive, at 2.09% in fees, and requires a minimum investment of $15,000.
Still, if you’re fine with risk and want to really put the pedal down on the broader sector, BIPSX can get the job done.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.