ProFunds Issues Warning on Leveraged ETFs

In an open letter to investors on its website, ProFunds says that investors “should fully understand how they work before investing.”

While the company said it “firmly believes leveraged and inverse funds can be effective portfolio tools, if used properly and monitored regularly, to express a view of the overall market, a sector or an industry,” it reminded investors that they need to monitor shares in leveraged or inverse ETFs daily.

If necessary, they may need to rebalance their positions should the fund stray from the underlying benchmark index due to excessive market volatility, ProFunds said. The company also added warnings in filings with the Securities and Exchange Commission concerning its Ultra ProFunds and Inverse ProFunds.

The filings tell investors that leveraged funds “may not be suitable for all investors and should be used only by knowledgeable investors who understand the potential consequences of seeking daily leveraged investment results.”