UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811- 08821
Rydex Variable Trust
(Exact name of registrant as specified in charter)
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Amy J. Lee
Rydex Variable Trust
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-301-296-5100
Date of fiscal year end: December 31
Date of reporting period: January 1, 2020 - December 31, 2020
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The registrant’s semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
12.31.2020
Rydex Variable Trust Funds Annual Report
Alternatives Funds | ||
Guggenheim Long Short Equity Fund | ||
Guggenheim Global Managed Futures Strategy Fund | ||
Guggenheim Multi-Hedge Strategies Fund | ||
Rydex Commodities Fund | ||
Rydex Commodities Strategy Fund |
GuggenheimInvestments.com | RVALTS-ANN-2-1220x1221 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 6 |
LONG SHORT EQUITY FUND | 8 |
GLOBAL MANAGED FUTURES STRATEGY FUND | 27 |
MULTI-HEDGE STRATEGIES FUND | 36 |
COMMODITIES STRATEGY FUND | 61 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 68 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 84 |
OTHER INFORMATION | 85 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 87 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 92 |
LIQUIDITY RISK MANAGEMENT PROGRAM | 95 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2020 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for four alternative strategies funds (the “Funds”) that are part of the Rydex Variable Trust. This report covers performance of the Funds for the annual period ended December 31, 2020.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2021
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
The Long Short Equity Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund is subject to the risk that the Advisor’s use of a momentum-driven investment strategy may cause the Fund to underperform other types of mutual funds that use different investment strategies during periods when momentum investing is out of favor. ● It is possible that the stocks the Fund holds long will decline in value at the same time that the stocks or indices being shorted increase in value, thereby increasing potential losses to the Fund. ● The Fund’s loss on a short sale is potentially unlimited because there is no upper limit on the price a borrowed security could attain. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The use of derivatives, such as futures, options and swap agreements, may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund may invest in American Depositary Receipts (“ADRs”) therefore subjecting the value of the Fund’s portfolio to fluctuations in foreign exchange rates. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. See the prospectus for more information on these and additional risks.
2 | THE RYDEX FUNDS ANNUAL REPORT |
| December 31, 2020 |
The Global Managed Futures Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s investments in securities and derivatives, in general, are subject to market risks that may cause their prices, and therefore the Fund’s value, to fluctuate over time. An investment in the Fund may lose money. ● The Fund’s investments in derivatives may pose risks in addition to those associated with investing directly in securities or other investments, including illiquidity of the derivatives, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, lack of availability and counterparty risk. To the extent the Fund invests in derivatives to seek to hedge risk or limit leveraged exposure created by other investments, there is no guarantee that such hedging strategies will be effective at managing risk or limiting exposure to leveraged investments. ● The Funds use of leverage will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. ● The Fund’s use of short selling involves increased risk and costs. The Fund risks paying more for a security than it received from its sale. Theoretically, securities sold short have the risk of unlimited losses. ● The Fund’s investments in fixed income securities will change in value in response to interest rate changes and other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund‘s exposure to high yield, asset backed and mortgaged backed securities may subject the Fund to greater volatility. ● The Fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● The Fund’s exposure to the commodity markets may subject the fund to greater volatility as commodity-linked investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity such as droughts, floods, weather, embargos, tariffs and international economic, political and regulatory developments. ● The Fund may invest in securities of foreign companies directly, or indirectly through the use of other investment companies and financial instruments that are linked to the performance of foreign issuers. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets may fluctuate more than those of securities traded on U.S. markets. ● See the prospectus for more information on these and additional risks.
The Multi-Hedge Strategies Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures, options and swap agreements may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Fund’s use of short selling involves increased risks and costs. The Fund risks paying more for a security than it received from its sale. ● The Fund’s investments in high yield securities and unrated securities of similar credit quality (“junk bonds”) may be subject to greater levels of interest rate, credit and liquidity risk than funds that do not invest in such securities. ● The Fund’s fixed income investments will change in value in response to interest rate changes and other factors. ● The Fund’s exposure to the commodity and currency markets may subject the Fund to greater volatility as commodity- and currency-linked derivative investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry, commodity or currency—such as droughts, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. The fund may also incur transaction costs with the conversion between various currencies. ● The Fund’s exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● These risks may cause the Fund to experience higher losses and/or volatility than a fund that does not invest in derivatives, use leverage or short sales or have exposure to high yield/fixed income securities, foreign currencies and/or securities. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified Fund. ● See the prospectus for more information on these and additional risks.
The Commodities Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s exposure to the commodity markets may subject the fund to greater volatility as commodity-linked investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity—such as droughts, floods, weather, embargos, tariffs and international economic, political and regulatory developments. ● To the extent that the fund’s investments are concentrated in energy-related commodities, the fund is subject to the risk that this sector will underperform the market as a whole. ● The fund’s use of derivatives, such as futures, options, structured notes and swap agreements, may expose the fund to additional risks that it would not be subject to if it invested directly in the securities or investments underlying those derivatives. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Fund is subject to tracking error risks, which may cause the fund’s performance not to match that of or be lower than the Fund’s underlying benchmark. ● The Fund’s investments in other investment companies subjects the fund to those risks affecting the investment company, including the possibility that the value of the underlying securities held by the investment company could decrease. Moreover, the Fund will incur its pro rata share of the expenses of the underlying investment companies’ expenses. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. ● See the prospectus for more information on these and additional risks.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2020 |
In what could have been one of the worst years on record for equity investors due to the devastating human and economic cost of the COVID-19 pandemic combined with political unrest in the U.S., the 12-month period ended December 31, 2020, witnessed the Standard & Poor’s 500® (“S&P 500®”) Index reach a record high of 3,756.07 from 3,234.85 at the start of the year. This was despite plummeting to 2,237.40 on March 23, 2020 as the effects of the pandemic caused the U.S. economy to stall. This dramatic change in fortune for equity markets was due in large part by a swift, sweeping response to the economic shutdown in March 2020 by the U.S. Federal Reserve (the “Fed”), which has continued to signal its intention to use ultra-accommodative monetary policy to strive toward full employment and 2% inflation via unprecedented measures. The central bank’s commitment to keeping interest rates near zero and its bond-buying program to lessen the risk of corporate defaults resulted in bountiful debt issuance by corporate borrowers and a growing confidence among equity investors that the investment environment would remain benign for the foreseeable future.
As such, our economic outlook for the coming year is positive, owing to another round of COVID-19 relief and more planned by the new administration, plus the expectation for a successful vaccine distribution. The new package, titled the Coronavirus Response and Relief Supplemental Appropriations Act, delivers a $900 billion injection into the economy, bringing total COVID-related aid to over $3.5 trillion including the 2020 bill, or roughly 8.5% of 2020–2021 gross domestic product (“GDP”). On this measure, it is already 3.5x more than the stimulus delivered in the five years following the financial crisis.
The latest round of fiscal stimulus should cause a surge in personal income during the first quarter, and a significant percentage of the population should be vaccinated or immune from prior infection by mid-2021. It is likely that local governments will be able to begin to relax restrictions even before herd immunity is reached since hospitalizations should fall once the elderly are vaccinated. As we move through the year, consumer spending growth should start to accelerate, spurred on by elevated personal savings and strong gains in household net worth. Elsewhere, the housing market will continue to benefit from tight supply and low interest rates, and business investment should rebound as corporations look to put to work record levels of precautionary cash. As a result, we expect real GDP growth to be well above potential for the year.
If the unemployment rate continues to fall at its recent pace and inflation picks up with its usual six-quarter lag behind economic activity, the experience of prior cycles would suggest that the Fed could start its hiking cycle as early as late-2022. However, the change in the Fed’s playbook will keep it sidelined for years as it looks to make up for shortfalls related to its 2% inflation target and no longer worries about an overly tight labor market.
This means the Fed is likely to keep rates at zero for several years beyond the late-2023 liftoff currently priced into the bond market. Similarly, the odds are low of a tapering of the Fed’s bond purchases in 2021. While we believe the government response to the pandemic was necessary and appropriate, investors are already paying some price with more elevated valuations due in part to the Fed’s aggressive relaunch of quantitative easing. Under these circumstances, investors will likely continue to take on more risk as long as more fiscal support is underway and while the Fed remains willing to backstop credit markets to support financial conditions.
For the 12-month period ended December 31, 2020, the S&P 500® Index* returned 18.40%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 7.82%. The return of the MSCI Emerging Markets Index* was 15.84%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 7.51% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.11%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.67% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2020 |
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies, including, but not limited to, convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage and relative-value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry.
HFRX Equity Hedge Index is designed to be representative of the overall composition of the equity hedge segment of the hedge fund universe. In an equity hedge strategy both long and short positions primarily in equities are maintained. Equities which are believed to be undervalued are bought and equities which are believed to be overvalued are sold.
Morningstar Long/Short Equity Category Average is an average return of the funds in the Morningstar Long/Short Equity Category. The categories assist investors and investment professionals in making meaningful comparisons between funds, making it easier to build well-diversified portfolios, assess potential risk, and identify top-performing funds.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P Goldman Sachs Commodity Index (S&P GSCI®), a benchmark for investment performance in the commodity markets, measures investable commodity price movements and inflation in the world economy. The index is calculated primarily on a world production weighted basis and is comprised of the principal physical commodities that are the subject of active, liquid futures markets.
SG (Societe Generale) CTA Index is designed to track the largest 20 (by AUM) Commodity Trading Advisors, or CTAs, and be representative of the managed futures space. The CTA Index is equally weighted, and rebalanced and reconstituted annually.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
|
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2020 and ending December 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
6 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
|
| Expense | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Long Short Equity Fund | 1.71% | 11.02% | $ 1,000.00 | $ 1,110.20 | $ 9.10 |
Global Managed Futures Strategy Fund | 1.72% | 1.80% | 1,000.00 | 1,018.00 | 8.75 |
Multi-Hedge Strategies Fund | 1.58% | 3.08% | 1,000.00 | 1,030.80 | 8.09 |
Commodities Strategy Fund | 1.70% | 19.09% | 1,000.00 | 1,190.90 | 9.39 |
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Table 2. Based on hypothetical 5% return (before expenses) | |||||
Long Short Equity Fund | 1.71% | 5.00% | $ 1,000.00 | $ 1,016.59 | $ 8.69 |
Global Managed Futures Strategy Fund | 1.72% | 5.00% | 1,000.00 | 1,016.53 | 8.74 |
Multi-Hedge Strategies Fund | 1.58% | 5.00% | 1,000.00 | 1,017.24 | 8.03 |
Commodities Strategy Fund | 1.70% | 5.00% | 1,000.00 | 1,016.64 | 8.64 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest. This ratio represents net expenses, which includes dividends on short sales and prime broker interest expenses. Excluding these expenses, the operating expense ratio of the Multi-Hedge Strategies Fund would be 1.12%. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2020 to December 31, 2020. |
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
LONG SHORT EQUITY FUND
OBJECTIVE: Seeks long-term capital appreciation.
For the one-year period ended December 31, 2020, Guggenheim Long Short Equity Fund returned 4.93%. The two benchmarks used by the Fund in the period, the HFRX Equity Hedge Index and the S&P 500 Index, returned 4.60% and 18.40%, respectively, for the same one-year period.
Investment Approach
The Fund is managed as an opportunistic long/short strategy, looking to invest in areas of the market where stock prices look priced at a discount vis-à-vis their company fundamentals and risks, while shorting areas of the market that look overpriced or are not compensating for risks appropriately. The strategy philosophy is founded in part on the academic view that markets are primarily efficient—investors require higher compensation for characteristics that increase the riskiness of future cash flows (such as being very small, or having lots of economic sensitivity in the business). Academics have noted that companies exhibiting certain risk factors have on average outperformed safer firms as the ‘risk premium’ leads to better performance. However, unlike most academic research in this field, the Fund’s managers do not believe that those historic risk premia are constant. We believe that investors’ perceptions of what is risky can change a lot over time. They can harbor new fears about avoiding the latest economic crisis, or alternatively become over-excited about some new hot technology and completely forget about the risks involved.
The Fund’s strategy is to quantitatively compute what forward-looking compensation level is embedded in a large universe of stocks—and ascertain what broad risk factors are being overvalued or undervalued. The Fund’s portfolio is adaptive to changing market dynamics and aims to buy a highly diversified set of names with undervalued risk factors, and short a highly diversified set of stocks with overvalued characteristics.
The Fund will ordinarily hold simultaneous long and short positions in equity securities or securities markets that provide exposure up to a level equal to 200% of the Fund’s net assets for both the long and short positions. The Fund intends to maintain a hedged overall net exposure (the difference between the notional value of long positions and the notional value of short positions), typically varying between 0% and 80% net long, in order to maintain lower-than-market volatility and beta, and to seek to provide consistent return above an approximately 30% market weighted internal benchmark. The overall net exposure will change as market opportunities change and may, based on the Fund’s view of current market conditions, be outside this range.
Derivatives in the Fund are used to take short positions as well as long exposure above 100% of NAV (that is, to take leverage). The performance discussion below referencing short position performance would be entirely due to custom basket swap derivatives, and performance of long positions would be partially due to custom basket swap derivatives.
Performance Review
The Fund’s flat return for the year belies the incredible historic volatility endured in 2020. In what seems like an eon ago, the year started with strong returns in assets of all kinds as several political and macro uncertainties had begun to clear up. The U.S. Federal Reserve (the “Fed”) was cutting short-term rates in a “midcycle adjustment” policy. A “Phase 1” trade deal was signed with China that de-escalated the trade war, and the UK helped consolidate power for the Prime Minister, which clarified the Brexit path forward.
The Coronavirus Pandemic halted global economies in quick fashion during the first quarter, and as a result market returns cratered in the worst showing since the 2008 Global Financial Crisis. Industries most impacted by global stay-at-home orders were hit the hardest, including airlines, hotels, cruise lines, and brick-and-mortar apparel retailers. Within the energy sector, on top of a big drop in oil demand due to shutdowns, a price war broke out between Russia and Saudi Arabia when they could not agree on the extent of OPEC supply cuts. This led to a collapse in oil prices and even a short stint of negative pricing in the oil futures market. Banks also suffered as investors foresaw big write-offs on loan books due to companies and individuals that were most impacted.
Congress took unusually quick action, passing the CARES act, which provided direct payment to certain U.S. citizens, funding for extended unemployment, and small business relief to prevent layoffs. The Fed was also busy announcing an emergency rate cut with a zero lower bound, and massive quantitative easing and emergency lending facilities. These quick actions helped stabilize the markets and provided a backstop to liquidity and credit flow, massively shrinking the “risk premium” across all sorts of fixed income asset classes. That low risk premium spilled into the stock market as investors were ready to invest at ever-higher valuations driven by low rates, low credit spreads, the promise of further stimulus, and positive news on vaccines.
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(continued) | December 31, 2020 |
The Presidential and Congressional election results led to a manic bullish environment to end the year. Despite the Democratic party win, typically considered the more unfriendly party for businesses, this year’s removal of erratic and unorthodox leadership seemed to stoke a collective sigh of relief. Further, a strong emphasis on Covid control and heavy stimulus on the Democratic platform fed the rally in many of the remaining beaten down industries most impacted by the pandemic. When all was said and done, the broad market (S&P 500 index) surged 18.4%. And even the riskiest corner of the market, small cap value names, achieved a positive benchmark return.
At period end, the Fund held about 146% of assets in long securities, and 71% short, for a net-dollar exposure of 75%. The net exposure averaged 70% during the year (ranging between a low of 60% at the start of the calendar year and a high of 78% in the months right before the election). The realized net beta (sensitivity of daily Fund returns to the S&P 500 index) averaged around 0.48 during the year. The beta is lower than the net dollar exposure because the shorts exhibit higher beta versus the market than the more-defensive long positions.
Fund long positions (on a standalone unlevered basis) averaged a return of 6.8% for the year, while short positions returned 6.7% on a stand-alone basis. Although returns for long and short positions were about equal, the Fund ended with a positive return for the year since the total weight invested in longs was higher.
Compared to our internal benchmark of 30% S&P 500 and 70% cash—the Fund positions just outperformed by about 0.5%. Digging into the attribution for the year relative to that blended benchmark, the Fund’s net long bias added about 7.4% of attributable return. Sector positioning had a positive impact of about 7.4%, with key contributors being a net short in Real Estate as well as a large net long position in Healthcare. The Fund’s fundamental style tilts did poorly, detracting by about 5.5%. The Fund’s tilts towards value and away from high-growth companies both underperformed; however, a net long position in higher-profitable companies benefitted from the flight-to-quality trade and offset the drag from the value bias.
Stock selection–after controlling for the style and sector tilts described above–was detracted by 7.9%. The selection within REITs was the largest example. While our factor positioning correctly led to a net negative exposure to the sector with the ‘right’ fundamental style tilts, our short names did not all participate in the sector returns evenly. A number of ‘Covid-resistant’ real estate businesses dramatically outperformed during the period (data centers, warehouses, mobile home parks, biotech offices, etc). The selection effect in that sector alone wiped out about 5% of the otherwise positive factor attribution in the sector.
The portfolio managers are keeping a close eye on the ‘Covid risk’ inherent in certain narrow industries that most directly suffer or benefit from the pandemic. This is what we call a transient factor, a little more difficult for traditional quant techniques to identify due to the uniqueness of the risk factor and lack of historic precedent. Our goal is to at least understand the risks of both shutdowns and reopenings, and make sure the portfolio is not inadvertently or overly exposed to this unpredictable risk. This approach helped the Fund considerably at the outset of the pandemic crash. During the couple of weeks when markets were moving 5% plus in a day, a number of our shorts in the most vulnerable industries had massive down moves. As the extent of the shutdowns became clear and the Fed and Congress began to react, we quickly closed many of those profitable shorts to avoid the volatility risk, with concurrent sells on the long side of defensive name winners to maintain the low net exposure. That reaction–mainly driven from a risk management perspective–helped avoid losses during the strong reversal rally in April and avoid the fate of treating that price action as any other typical momentum.
Positioning
The Fund maintains its style bias towards cheaper valuation names, while maintaining a quality bias, including higher free cash flow names and stronger profitability bias. However, due to the quite-expensive valuations afforded high growth names, we remain net short growth.
From an industry perspective, the Fund remains net long several defensive sectors with relatively well-priced stocks, including Healthcare, Staples, and Utilities. After being short the Financials sector for a few years, the Fund has closed that out and now remains close to neutral in that sector. The largest net short exposures currently are Materials and Real Estate.
Looking forward, we are starting to see some positive indicators for our valuation disciplined approach. The Democratic presidential and Congressional victories will certainly lead to some stock market positives (bigger stimulus, more traditional international dealings) as well as some corporate negatives (higher corporate taxes, more regulations on certain industries). The interest rate markets have started pricing this in with higher yields and a steeper yield curve. Underneath the equity market surface, the recent political and medical developments have spurred a long-awaited recovery in ‘Value Stocks’. These are generally the companies that need a robust economic environment to deliver earnings increases. Meanwhile, strong secular growth companies within each industry have had solid fundamentals in recent years, but their prices have
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
already incorporated much of the longer-term growth. If long-term rates rise, the discounting of far-off profitability will hurt them more, as it helped that group as rates fell. The Fund’s style positioning would likely benefit from a steady return to economic growth, higher interest rates, and some of the extreme valuation disparities starting to converge.
Performance displayed represents past performance which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 1, 2002 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 2.0% |
Cisco Systems, Inc. | 1.2% |
Microsoft Corp. | 1.2% |
Verizon Communications, Inc. | 1.2% |
International Business Machines Corp. | 1.1% |
Johnson & Johnson | 1.1% |
Allstate Corp. | 1.1% |
Merck & Company, Inc. | 1.1% |
Berkshire Hathaway, Inc. — Class B | 1.1% |
Philip Morris International, Inc. | 1.1% |
Top Ten Total | 12.2% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Long Short Equity Fund | 4.93% | 2.19% | 2.89% |
HFRX Equity Hedge Index | 4.60% | 2.92% | 0.76% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
Morningstar Long/Short Equity Category Average | 3.62% | 3.57% | 3.97% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The HFRX Equity Hedge Index and the S&P 500 Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The Morningstar/Long Short Equity Category Average is the equal-weighted simple average daily return for all funds in the Morningstar Long/Short Equity Category. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 103.3% | ||||||||
Consumer, Non-cyclical - 31.2% | ||||||||
Johnson & Johnson1 | 1,659 | $ | 261,093 | |||||
Merck & Company, Inc.1 | 2,993 | 244,827 | ||||||
Philip Morris International, Inc.1 | 2,927 | 242,326 | ||||||
Amgen, Inc.1 | 1,040 | 239,117 | ||||||
Molson Coors Beverage Co. — Class B1 | 5,168 | 233,542 | ||||||
Procter & Gamble Co.1 | 1,648 | 229,303 | ||||||
General Mills, Inc.1 | 3,539 | 208,093 | ||||||
Colgate-Palmolive Co. | 2,407 | 205,822 | ||||||
UnitedHealth Group, Inc. | 577 | 202,342 | ||||||
Kraft Heinz Co. | 5,682 | 196,938 | ||||||
Kimberly-Clark Corp.1 | 1,428 | 192,537 | ||||||
McKesson Corp.1 | 1,076 | 187,138 | ||||||
Altria Group, Inc. | 4,181 | 171,421 | ||||||
DaVita, Inc.* | 1,429 | 167,765 | ||||||
Campbell Soup Co. | 3,342 | 161,586 | ||||||
Cardinal Health, Inc.1 | 2,992 | 160,252 | ||||||
J M Smucker Co. | 1,256 | 145,194 | ||||||
United Rentals, Inc.* | 621 | 144,016 | ||||||
Pfizer, Inc.1 | 3,684 | 135,608 | ||||||
United Therapeutics Corp.* | 865 | 131,298 | ||||||
Quanta Services, Inc. | 1,791 | 128,988 | ||||||
CVS Health Corp.1 | 1,811 | 123,691 | ||||||
Conagra Brands, Inc. | 3,247 | 117,736 | ||||||
Laboratory Corporation of America Holdings* | 572 | 116,431 | ||||||
Ingredion, Inc. | 1,429 | 112,419 | ||||||
Eli Lilly & Co.1 | 635 | 107,213 | ||||||
Tyson Foods, Inc. — Class A | 1,654 | 106,584 | ||||||
Post Holdings, Inc.* | 1,040 | 105,050 | ||||||
Jazz Pharmaceuticals plc*,1 | 636 | 104,972 | ||||||
Gilead Sciences, Inc.1 | 1,790 | 104,285 | ||||||
Anthem, Inc.1 | 316 | 101,464 | ||||||
Mondelez International, Inc. — Class A | 1,706 | 99,750 | ||||||
Humana, Inc. | 231 | 94,772 | ||||||
Cigna Corp. | 446 | 92,848 | ||||||
Rent-A-Center, Inc. | 2,368 | 90,671 | ||||||
John B Sanfilippo & Son, Inc. | 1,121 | 88,402 | ||||||
Bristol-Myers Squibb Co. | 1,416 | 87,835 | ||||||
Medtronic plc | 696 | 81,529 | ||||||
Constellation Brands, Inc. — Class A | 357 | 78,201 | ||||||
AbbVie, Inc. | 715 | 76,612 | ||||||
TreeHouse Foods, Inc.* | 1,796 | 76,312 | ||||||
Sprouts Farmers Market, Inc.* | 3,769 | 75,757 | ||||||
Alexion Pharmaceuticals, Inc.* | 482 | 75,308 | ||||||
Vector Group Ltd. | 5,827 | 67,885 | ||||||
Encompass Health Corp. | 806 | 66,648 | ||||||
Molina Healthcare, Inc.* | 312 | 66,356 | ||||||
Innoviva, Inc.* | 5,074 | 62,867 | ||||||
Hologic, Inc.* | 812 | 59,138 | ||||||
Kellogg Co. | 890 | 55,385 | ||||||
PayPal Holdings, Inc.* | 232 | 54,334 | ||||||
Alkermes plc* | 2,714 | 54,144 | ||||||
Ionis Pharmaceuticals, Inc.* | 954 | 53,939 | ||||||
Chemed Corp. | 101 | 53,794 | ||||||
Clorox Co. | 266 | 53,711 | ||||||
Hill-Rom Holdings, Inc. | 512 | 50,161 | ||||||
USANA Health Sciences, Inc.* | 628 | 48,419 | ||||||
Prestige Consumer Healthcare, Inc.* | 1,311 | 45,715 | ||||||
Thermo Fisher Scientific, Inc. | 91 | 42,386 | ||||||
Becton Dickinson and Co. | 140 | 35,031 | ||||||
Vertex Pharmaceuticals, Inc.* | 148 | 34,978 | ||||||
Abbott Laboratories | 310 | 33,942 | ||||||
PepsiCo, Inc.1 | 223 | 33,071 | ||||||
Coca-Cola Co. | 601 | 32,959 | ||||||
Danaher Corp. | 146 | 32,433 | ||||||
Regeneron Pharmaceuticals, Inc.* | 61 | 29,470 | ||||||
Total Consumer, Non-cyclical | 7,173,814 | |||||||
Technology - 15.1% | ||||||||
Apple, Inc.1 | 3,441 | 456,587 | ||||||
Microsoft Corp.1 | 1,250 | 278,025 | ||||||
International Business Machines Corp.1 | 2,078 | 261,579 | ||||||
Cerner Corp. | 2,828 | 221,942 | ||||||
SS&C Technologies Holdings, Inc. | 2,979 | 216,722 | ||||||
Intel Corp.1 | 3,977 | 198,134 | ||||||
Seagate Technology plc | 3,170 | 197,047 | ||||||
Texas Instruments, Inc.1 | 1,157 | 189,898 | ||||||
Oracle Corp.1 | 2,635 | 170,458 | ||||||
NetApp, Inc. | 2,554 | 169,177 | ||||||
HP, Inc. | 5,502 | 135,294 | ||||||
KLA Corp. | 467 | 120,911 | ||||||
CDK Global, Inc. | 2,030 | 105,215 | ||||||
Skyworks Solutions, Inc. | 596 | 91,116 | ||||||
Applied Materials, Inc. | 1,006 | 86,818 | ||||||
Dell Technologies, Inc. — Class C* | 1,097 | 80,399 | ||||||
Cirrus Logic, Inc.* | 911 | 74,884 | ||||||
Paychex, Inc. | 779 | 72,587 | ||||||
Microchip Technology, Inc. | 482 | 66,569 | ||||||
Kulicke & Soffa Industries, Inc. | 2,080 | 66,165 | ||||||
Broadcom, Inc. | 103 | 45,099 | ||||||
Adobe, Inc.* | 86 | 43,010 | ||||||
QUALCOMM, Inc. | 279 | 42,503 | ||||||
Accenture plc — Class A | 158 | 41,271 | ||||||
Fidelity National Information Services, Inc. | 216 | 30,556 | ||||||
Total Technology | 3,461,966 | |||||||
Industrial - 13.1% | ||||||||
Hubbell, Inc. | 1,107 | 173,567 | ||||||
TE Connectivity Ltd. | 1,425 | 172,525 | ||||||
AGCO Corp. | 1,523 | 157,006 | ||||||
Snap-on, Inc.1 | 863 | 147,694 | ||||||
Vishay Intertechnology, Inc. | 6,954 | 144,017 | ||||||
Masco Corp. | 2,235 | 122,769 | ||||||
Caterpillar, Inc.1 | 651 | 118,495 | ||||||
3M Co. | 655 | 114,487 | ||||||
Timken Co. | 1,453 | 112,404 | ||||||
Oshkosh Corp. | 1,267 | 109,050 | ||||||
Arrow Electronics, Inc.* | 1,112 | 108,198 | ||||||
General Dynamics Corp. | 697 | 103,728 | ||||||
Lockheed Martin Corp. | 287 | 101,879 | ||||||
Waters Corp.*,1 | 407 | 100,700 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
Garmin Ltd. | 817 | $ | 97,762 | |||||
Lincoln Electric Holdings, Inc. | 806 | 93,698 | ||||||
Keysight Technologies, Inc.* | 678 | 89,557 | ||||||
Regal Beloit Corp. | 698 | 85,721 | ||||||
Eaton Corporation plc | 626 | 75,208 | ||||||
Terex Corp. | 2,121 | 74,002 | ||||||
Owens Corning | 969 | 73,411 | ||||||
Acuity Brands, Inc. | 535 | 64,783 | ||||||
Energizer Holdings, Inc. | 1,453 | 61,288 | ||||||
PerkinElmer, Inc. | 425 | 60,987 | ||||||
National Instruments Corp. | 1,382 | 60,725 | ||||||
Pentair plc | 1,110 | 58,930 | ||||||
Trane Technologies plc | 362 | 52,548 | ||||||
Dover Corp. | 414 | 52,268 | ||||||
A O Smith Corp. | 946 | 51,860 | ||||||
Lennox International, Inc. | 153 | 41,917 | ||||||
Honeywell International, Inc. | 154 | 32,756 | ||||||
General Electric Co. | 3,030 | 32,724 | ||||||
Union Pacific Corp.1 | 152 | 31,649 | ||||||
United Parcel Service, Inc. — Class B | 185 | 31,154 | ||||||
Total Industrial | 3,009,467 | |||||||
Communications - 12.5% | ||||||||
Cisco Systems, Inc.1 | 6,342 | 283,804 | ||||||
Verizon Communications, Inc.1 | 4,629 | 271,954 | ||||||
Alphabet, Inc. — Class C* | 130 | 227,744 | ||||||
Amazon.com, Inc.*,1 | 69 | 224,728 | ||||||
Viavi Solutions, Inc.*,1 | 13,596 | 203,600 | ||||||
T-Mobile US, Inc.* | 1,468 | 197,960 | ||||||
AT&T, Inc.1 | 5,827 | 167,585 | ||||||
Juniper Networks, Inc.1 | 7,345 | 165,336 | ||||||
Sirius XM Holdings, Inc.2 | 24,328 | 154,969 | ||||||
Cogent Communications Holdings, Inc. | 2,104 | 125,967 | ||||||
Omnicom Group, Inc.1 | 1,889 | 117,817 | ||||||
Facebook, Inc. — Class A*,1 | 402 | 109,810 | ||||||
Motorola Solutions, Inc. | 634 | 107,818 | ||||||
VeriSign, Inc.* | 496 | 107,334 | ||||||
eBay, Inc. | 1,815 | 91,204 | ||||||
Ciena Corp.* | 1,662 | 87,837 | ||||||
Discovery, Inc. — Class A*,2 | 2,261 | 68,033 | ||||||
Walt Disney Co.* | 320 | 57,978 | ||||||
Comcast Corp. — Class A1 | 1,012 | 53,029 | ||||||
Netflix, Inc.* | 83 | 44,881 | ||||||
Total Communications | 2,869,388 | |||||||
Consumer, Cyclical - 10.6% | ||||||||
Gentex Corp.1 | 6,830 | 231,742 | ||||||
Best Buy Company, Inc.1 | 1,977 | 197,285 | ||||||
Gentherm, Inc.* | 2,901 | 189,203 | ||||||
Lowe’s Companies, Inc. | 1,005 | 161,312 | ||||||
Allison Transmission Holdings, Inc.1 | 3,711 | 160,056 | ||||||
Genuine Parts Co. | 1,588 | 159,483 | ||||||
Autoliv, Inc. | 1,627 | 149,847 | ||||||
AutoZone, Inc.* | 107 | 126,842 | ||||||
PACCAR, Inc. | 1,386 | 119,584 | ||||||
Lear Corp.1 | 677 | 107,663 | ||||||
AutoNation, Inc.* | 1,354 | 94,496 | ||||||
Cummins, Inc.1 | 393 | 89,250 | ||||||
PulteGroup, Inc. | 2,005 | 86,455 | ||||||
Lennar Corp. — Class A | 1,109 | 84,539 | ||||||
Brunswick Corp. | 1,054 | 80,357 | ||||||
Meritage Homes Corp.* | 784 | 64,931 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 710 | 59,917 | ||||||
Dolby Laboratories, Inc. — Class A | 539 | 52,353 | ||||||
Hanesbrands, Inc. | 3,530 | 51,467 | ||||||
Home Depot, Inc.1 | 175 | 46,483 | ||||||
Walmart, Inc. | 265 | 38,200 | ||||||
McDonald’s Corp. | 147 | 31,543 | ||||||
Costco Wholesale Corp. | 83 | 31,273 | ||||||
General Motors Co. | 688 | 28,649 | ||||||
Total Consumer, Cyclical | 2,442,930 | |||||||
Financial - 10.3% | ||||||||
Allstate Corp.1 | 2,357 | 259,105 | ||||||
Berkshire Hathaway, Inc. — Class B* | 1,047 | 242,768 | ||||||
MetLife, Inc.1 | 5,096 | 239,257 | ||||||
Highwoods Properties, Inc. REIT | 4,078 | 161,611 | ||||||
Equity Residential REIT1 | 2,386 | 141,442 | ||||||
Travelers Companies, Inc. | 970 | 136,159 | ||||||
JPMorgan Chase & Co.1 | 919 | 116,777 | ||||||
Piedmont Office Realty Trust, Inc. — Class A REIT | 7,168 | 116,337 | ||||||
Western Union Co. | 5,159 | 113,188 | ||||||
Bank of America Corp. | 3,584 | 108,631 | ||||||
Hartford Financial Services Group, Inc. | 1,970 | 96,491 | ||||||
Aflac, Inc. | 2,167 | 96,366 | ||||||
Ameriprise Financial, Inc. | 482 | 93,667 | ||||||
Synchrony Financial | 2,352 | 81,638 | ||||||
SEI Investments Co. | 1,157 | 66,493 | ||||||
M&T Bank Corp. | 454 | 57,794 | ||||||
Visa, Inc. — Class A1 | 263 | 57,526 | ||||||
Mastercard, Inc. — Class A | 141 | 50,329 | ||||||
Goldman Sachs Group, Inc. | 135 | 35,601 | ||||||
PNC Financial Services Group, Inc. | 230 | 34,270 | ||||||
Wells Fargo & Co. | 1,132 | 34,164 | ||||||
American Express Co. | 268 | 32,404 | ||||||
Total Financial | 2,372,018 | |||||||
Utilities - 10.2% | ||||||||
IDACORP, Inc. | 2,080 | 199,742 | ||||||
Evergy, Inc.1 | 3,490 | 193,730 | ||||||
Public Service Enterprise Group, Inc.1 | 3,310 | 192,973 | ||||||
Ameren Corp. | 2,340 | 182,661 | ||||||
Exelon Corp.1 | 4,160 | 175,635 | ||||||
Duke Energy Corp. | 1,863 | 170,576 | ||||||
PPL Corp.1 | 5,955 | 167,931 | ||||||
Southern Co.1 | 2,168 | 133,180 | ||||||
OGE Energy Corp. | 3,592 | 114,441 | ||||||
UGI Corp. | 3,053 | 106,733 | ||||||
NiSource, Inc. | 4,170 | 95,660 | ||||||
Consolidated Edison, Inc. | 1,291 | 93,301 | ||||||
ONE Gas, Inc. | 1,188 | 91,203 | ||||||
Southwest Gas Holdings, Inc. | 1,373 | 83,409 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
| Shares | Value | ||||||
CenterPoint Energy, Inc. | 3,819 | $ | 82,643 | |||||
National Fuel Gas Co.1 | 1,625 | 66,836 | ||||||
NorthWestern Corp. | 960 | 55,978 | ||||||
Avista Corp.1 | 1,287 | 51,660 | ||||||
Portland General Electric Co.1 | 1,105 | 47,261 | ||||||
NextEra Energy, Inc. | 527 | 40,658 | ||||||
Total Utilities | 2,346,211 | |||||||
Energy - 0.3% | ||||||||
Exxon Mobil Corp.1 | 785 | 32,358 | ||||||
Chevron Corp. | 337 | 28,459 | ||||||
Total Energy | 60,817 | |||||||
Total Common Stocks | ||||||||
(Cost $20,380,160) | 23,736,611 | |||||||
MONEY MARKET FUND† - 1.7% | ||||||||
Invesco Short-Term Investments Trust Treasury Obligations Portfolio — Institutional Class, 0.01%3 | 394,525 | 394,525 | ||||||
Total Money Market Fund | ||||||||
(Cost $394,525) | 394,525 | |||||||
SECURITIES LENDING COLLATERAL†,4 - 0.8% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%3 | 175,597 | 175,597 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $175,597) | 175,597 | |||||||
Total Investments - 105.8% | ||||||||
(Cost $20,950,282) | $ | 24,306,733 | ||||||
Other Assets & Liabilities, net - (5.8)% | (1,337,660 | ) | ||||||
Total Net Assets - 100.0% | $ | 22,969,073 |
Custom Basket Swap Agreements | |||||||||||||||
Counterparty | Reference Obligation | Financing Rate | Payment | Maturity | Notional | Value and | |||||||||
OTC Custom Basket Swap Agreements†† | |||||||||||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | 0.49% (Federal Funds Rate + 0.40%) | At Maturity | 03/27/24 | $ | 5,244,302 | $ | 661,628 | |||||||
Goldman Sachs International | GS Equity Custom Basket | 0.54% (Federal Funds Rate + 0.45%) | At Maturity | 05/06/24 | 5,236,391 | 655,229 | |||||||||
$ | 10,480,693 | $ | 1,316,857 | ||||||||||||
OTC Custom Basket Swap Agreements Sold Short†† | |||||||||||||||
Goldman Sachs International | GS Equity Custom Basket | (0.11%) (Federal Funds Rate - 0.20%) | At Maturity | 05/06/24 | $ | 8,403,334 | $ | (1,198,763 | ) | ||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | (0.21%) (Federal Funds Rate - 0.30%) | At Maturity | 03/27/24 | 8,403,344 | (1,202,169 | ) | ||||||||
$ | 16,806,678 | $ | (2,400,932 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
| Shares | Percentage |
| |||||||||
MS EQUITY LONG CUSTOM BASKET | ||||||||||||
Consumer, Non-cyclical | ||||||||||||
United Rentals, Inc. | 137 | 0.62 | % | $ | 13,933 | |||||||
McKesson Corp. | 238 | 0.79 | % | 13,853 | ||||||||
Rent-A-Center, Inc. | 524 | 0.38 | % | 10,685 | ||||||||
Eli Lilly & Co. | 140 | 0.45 | % | 8,717 | ||||||||
DaVita, Inc. | 316 | 0.71 | % | 8,480 | ||||||||
Procter & Gamble Co. | 364 | 0.97 | % | 8,450 | ||||||||
Johnson & Johnson | 367 | 1.10 | % | 7,957 | ||||||||
United Therapeutics Corp. | 191 | 0.55 | % | 7,694 | ||||||||
UnitedHealth Group, Inc. | 127 | 0.85 | % | 7,080 | ||||||||
Quanta Services, Inc. | 396 | 0.54 | % | 6,842 | ||||||||
Colgate-Palmolive Co. | 532 | 0.87 | % | 6,221 | ||||||||
Amgen, Inc. | 230 | 1.01 | % | 6,166 | ||||||||
Cardinal Health, Inc. | 662 | 0.68 | % | 5,725 | ||||||||
Alexion Pharmaceuticals, Inc. | 106 | 0.32 | % | 5,513 | ||||||||
Jazz Pharmaceuticals plc | 140 | 0.44 | % | 4,592 | ||||||||
Medtronic plc | 154 | 0.34 | % | 4,140 | ||||||||
Anthem, Inc. | 70 | 0.43 | % | 3,764 | ||||||||
Thermo Fisher Scientific, Inc. | 20 | 0.18 | % | 3,308 | ||||||||
Kraft Heinz Co. | 1,257 | 0.83 | % | 2,822 | ||||||||
J M Smucker Co. | 309 | 0.68 | % | 2,723 | ||||||||
Pfizer, Inc. | 815 | 0.57 | % | 2,645 | ||||||||
CVS Health Corp. | 400 | 0.52 | % | 2,544 | ||||||||
Molina Healthcare, Inc. | 69 | 0.28 | % | 2,505 | ||||||||
Constellation Brands, Inc. — Class A | 79 | 0.33 | % | 2,365 | ||||||||
Mondelez International, Inc. — Class A | 377 | 0.42 | % | 2,187 | ||||||||
PayPal Holdings, Inc. | 51 | 0.23 | % | 2,128 | ||||||||
Abbott Laboratories | 68 | 0.14 | % | 2,092 | ||||||||
Cigna Corp. | 98 | 0.39 | % | 1,918 | ||||||||
Philip Morris International, Inc. | 647 | 1.02 | % | 1,783 | ||||||||
Post Holdings, Inc. | 230 | 0.44 | % | 1,773 | ||||||||
Chemed Corp. | 22 | 0.22 | % | 1,389 | ||||||||
PepsiCo, Inc. | 49 | 0.14 | % | 1,294 | ||||||||
Molson Coors Beverage Co. — Class B | 1,143 | 0.98 | % | 1,257 | ||||||||
Kellogg Co. | 197 | 0.23 | % | 1,181 | ||||||||
Conagra Brands, Inc. | 718 | 0.50 | % | 941 | ||||||||
Alkermes plc | 600 | 0.23 | % | 773 | ||||||||
Hologic, Inc. | 179 | 0.25 | % | 662 | ||||||||
Becton Dickinson and Co. | 31 | 0.15 | % | 653 | ||||||||
Vertex Pharmaceuticals, Inc. | 32 | 0.14 | % | 628 | ||||||||
Laboratory Corporation of America Holdings | 126 | 0.49 | % | 539 | ||||||||
Coca-Cola Co. | 133 | 0.14 | % | 526 | ||||||||
Danaher Corp. | 32 | 0.14 | % | 496 | ||||||||
AbbVie, Inc. | 158 | 0.32 | % | 476 | ||||||||
Merck & Company, Inc. | 662 | 1.03 | % | 464 |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Tyson Foods, Inc. — Class A | 366 | 0.45 | % | $ | 434 | |||||||
Hill-Rom Holdings, Inc. | 113 | 0.21 | % | 430 | ||||||||
Bristol-Myers Squibb Co. | 313 | 0.37 | % | 352 | ||||||||
USANA Health Sciences, Inc. | 139 | 0.20 | % | 318 | ||||||||
Ionis Pharmaceuticals, Inc. | 211 | 0.23 | % | 302 | ||||||||
Encompass Health Corp. | 178 | 0.28 | % | 142 | ||||||||
Clorox Co. | 58 | 0.22 | % | 100 | ||||||||
Altria Group, Inc. | 925 | 0.72 | % | (26 | ) | |||||||
Prestige Consumer Healthcare, Inc. | 290 | 0.19 | % | (40 | ) | |||||||
Vector Group Ltd. | 1,289 | 0.29 | % | (80 | ) | |||||||
Humana, Inc. | 51 | 0.40 | % | (196 | ) | |||||||
Innoviva, Inc. | 1,123 | 0.27 | % | (319 | ) | |||||||
Sprouts Farmers Market, Inc. | 834 | 0.32 | % | (780 | ) | |||||||
Campbell Soup Co. | 739 | 0.68 | % | (784 | ) | |||||||
Regeneron Pharmaceuticals, Inc. | 13 | 0.12 | % | (1,189 | ) | |||||||
Kimberly-Clark Corp. | 316 | 0.81 | % | (1,232 | ) | |||||||
TreeHouse Foods, Inc. | 397 | 0.32 | % | (1,848 | ) | |||||||
General Mills, Inc. | 783 | 0.88 | % | (1,993 | ) | |||||||
Ingredion, Inc. | 316 | 0.47 | % | (2,607 | ) | |||||||
John B Sanfilippo & Son, Inc. | 248 | 0.37 | % | (2,956 | ) | |||||||
Gilead Sciences, Inc. | 396 | 0.44 | % | (6,132 | ) | |||||||
Total Consumer, Non-cyclical | 153,780 | |||||||||||
Financial | ||||||||||||
MetLife, Inc. | 1,127 | 1.01 | % | 7,343 | ||||||||
JPMorgan Chase & Co. | 203 | 0.49 | % | 6,063 | ||||||||
Allstate Corp. | 521 | 1.09 | % | 5,016 | ||||||||
Berkshire Hathaway, Inc. — Class B | 231 | 1.02 | % | 4,552 | ||||||||
Synchrony Financial | 520 | 0.34 | % | 4,300 | ||||||||
Hartford Financial Services Group, Inc. | 435 | 0.41 | % | 4,215 | ||||||||
Aflac, Inc. | 479 | 0.41 | % | 4,001 | ||||||||
Ameriprise Financial, Inc. | 106 | 0.39 | % | 3,608 | ||||||||
Travelers Companies, Inc. | 214 | 0.57 | % | 3,272 | ||||||||
Bank of America Corp. | 793 | 0.46 | % | 3,097 | ||||||||
Visa, Inc. — Class A | 58 | 0.24 | % | 2,381 | ||||||||
PNC Financial Services Group, Inc. | 51 | 0.14 | % | 2,234 | ||||||||
M&T Bank Corp. | 100 | 0.24 | % | 2,070 | ||||||||
Western Union Co. | 1,141 | 0.48 | % | 1,830 | ||||||||
Mastercard, Inc. — Class A | 31 | 0.21 | % | 1,539 | ||||||||
American Express Co. | 59 | 0.14 | % | 1,434 | ||||||||
Goldman Sachs Group, Inc. | 30 | 0.15 | % | 850 | ||||||||
SEI Investments Co. | 256 | 0.28 | % | 190 |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Wells Fargo & Co. | 250 | 0.14 | % | $ | (242 | ) | ||||||
Equity Residential | 528 | 0.60 | % | (1,079 | ) | |||||||
Highwoods Properties, Inc. | 902 | 0.68 | % | (1,349 | ) | |||||||
Piedmont Office Realty Trust, Inc. — Class A | 1,586 | 0.49 | % | (2,118 | ) | |||||||
Total Financial | 53,207 | |||||||||||
Consumer, Cyclical | ||||||||||||
Gentherm, Inc. | 642 | 0.80 | % | 18,472 | ||||||||
Autoliv, Inc. | 360 | 0.63 | % | 13,018 | ||||||||
Gentex Corp. | 1,511 | 0.98 | % | 11,406 | ||||||||
Lear Corp. | 149 | 0.45 | % | 9,616 | ||||||||
Cummins, Inc. | 87 | 0.38 | % | 6,828 | ||||||||
Hanesbrands, Inc. | 781 | 0.22 | % | 4,168 | ||||||||
Brunswick Corp. | 233 | 0.34 | % | 4,004 | ||||||||
Dolby Laboratories, Inc. — Class A | 119 | 0.22 | % | 3,718 | ||||||||
MSC Industrial Direct Company, Inc. — Class A | 157 | 0.25 | % | 3,043 | ||||||||
Home Depot, Inc. | 38 | 0.19 | % | 2,902 | ||||||||
Lowe’s Companies, Inc. | 222 | 0.68 | % | 2,426 | ||||||||
AutoNation, Inc. | 299 | 0.40 | % | 1,441 | ||||||||
PACCAR, Inc. | 306 | 0.50 | % | 1,375 | ||||||||
Walmart, Inc. | 58 | 0.16 | % | 1,352 | ||||||||
Genuine Parts Co. | 351 | 0.67 | % | 1,113 | ||||||||
Allison Transmission Holdings, Inc. | 821 | 0.68 | % | 1,097 | ||||||||
General Motors Co. | 152 | 0.12 | % | 1,054 | ||||||||
McDonald’s Corp. | 32 | 0.13 | % | 1,000 | ||||||||
AutoZone, Inc. | 23 | 0.52 | % | 897 | ||||||||
Costco Wholesale Corp. | 18 | 0.13 | % | 563 | ||||||||
Lennar Corp. — Class A | 245 | 0.36 | % | (236 | ) | |||||||
PulteGroup, Inc. | 443 | 0.36 | % | (494 | ) | |||||||
Meritage Homes Corp. | 173 | 0.27 | % | (1,350 | ) | |||||||
Best Buy Company, Inc. | 437 | 0.83 | % | (4,075 | ) | |||||||
Total Consumer, Cyclical | 83,338 | |||||||||||
Technology | ||||||||||||
Apple, Inc. | 761 | 1.93 | % | 52,430 | ||||||||
Microsoft Corp. | 276 | 1.17 | % | 29,159 | ||||||||
NetApp, Inc. | 565 | 0.71 | % | 13,707 | ||||||||
Texas Instruments, Inc. | 256 | 0.80 | % | 11,532 | ||||||||
SS&C Technologies Holdings, Inc. | 659 | 0.91 | % | 7,920 | ||||||||
Seagate Technology plc | 701 | 0.83 | % | 7,605 | ||||||||
HP, Inc. | 1,217 | 0.57 | % | 7,502 | ||||||||
Applied Materials, Inc. | 222 | 0.37 | % | 7,433 | ||||||||
KLA Corp. | 103 | 0.51 | % | 7,366 | ||||||||
CDK Global, Inc. | 449 | 0.44 | % | 7,360 | ||||||||
Oracle Corp. | 583 | 0.72 | % | 6,166 | ||||||||
Cerner Corp. | 625 | 0.94 | % | 5,080 | ||||||||
QUALCOMM, Inc. | 61 | 0.18 | % | 4,723 | ||||||||
Microchip Technology, Inc. | 106 | 0.28 | % | 4,092 | ||||||||
Cirrus Logic, Inc. | 201 | 0.32 | % | 3,610 | ||||||||
Kulicke & Soffa Industries, Inc. | 460 | 0.28 | % | 3,308 | ||||||||
Adobe, Inc. | 19 | 0.18 | % | 3,051 | ||||||||
Skyworks Solutions, Inc. | 132 | 0.38 | % | 1,811 | ||||||||
Broadcom, Inc. | 22 | 0.18 | % | 1,662 | ||||||||
Accenture plc — Class A | 35 | 0.17 | % | 942 | ||||||||
Dell Technologies, Inc. — Class C | 242 | 0.34 | % | 722 | ||||||||
Paychex, Inc. | 172 | 0.31 | % | (45 | ) | |||||||
International Business Machines Corp. | 460 | 1.10 | % | (213 | ) | |||||||
Fidelity National Information Services, Inc. | 48 | 0.13 | % | (356 | ) | |||||||
Intel Corp. | 880 | 0.84 | % | (4,925 | ) | |||||||
Total Technology | 181,642 | |||||||||||
Industrial | ||||||||||||
TE Connectivity Ltd. | 315 | 0.73 | % | 12,957 | ||||||||
AGCO Corp. | 337 | 0.66 | % | 10,860 | ||||||||
Snap-on, Inc. | 190 | 0.62 | % | 10,285 | ||||||||
Caterpillar, Inc. | 144 | 0.50 | % | 9,366 | ||||||||
Timken Co. | 321 | 0.47 | % | 9,273 | ||||||||
Regal Beloit Corp. | 154 | 0.36 | % | 8,207 | ||||||||
Vishay Intertechnology, Inc. | 1,539 | 0.61 | % | 7,574 | ||||||||
Owens Corning | 214 | 0.31 | % | 7,105 | ||||||||
Garmin Ltd. | 180 | 0.41 | % | 6,616 | ||||||||
Lincoln Electric Holdings, Inc. | 178 | 0.39 | % | 5,979 | ||||||||
Hubbell, Inc. | 245 | 0.73 | % | 5,312 | ||||||||
Waters Corp. | 90 | 0.42 | % | 4,305 | ||||||||
Terex Corp. | 469 | 0.31 | % | 3,748 | ||||||||
Arrow Electronics, Inc. | 246 | 0.46 | % | 3,615 | ||||||||
Eaton Corporation plc | 138 | 0.32 | % | 3,460 | ||||||||
Oshkosh Corp. | 280 | 0.46 | % | 3,047 | ||||||||
Acuity Brands, Inc. | 118 | 0.27 | % | 2,532 | ||||||||
National Instruments Corp. | 305 | 0.26 | % | 2,165 | ||||||||
Keysight Technologies, Inc. | 150 | 0.38 | % | 2,064 | ||||||||
Union Pacific Corp. | 33 | 0.13 | % | 1,954 | ||||||||
Trane Technologies plc | 80 | 0.22 | % | 1,938 | ||||||||
Pentair plc | 245 | 0.25 | % | 1,785 | ||||||||
Dover Corp. | 91 | 0.22 | % | 1,609 | ||||||||
3M Co. | 145 | 0.48 | % | 1,544 | ||||||||
PerkinElmer, Inc. | 94 | 0.26 | % | 1,539 | ||||||||
A O Smith Corp. | 209 | 0.22 | % | 1,296 | ||||||||
Energizer Holdings, Inc. | 321 | 0.26 | % | 843 | ||||||||
United Parcel Service, Inc. — Class B | 41 | 0.13 | % | 499 | ||||||||
Lennox International, Inc. | 33 | 0.17 | % | 253 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Honeywell International, Inc. | 34 | 0.14 | % | $ | 193 | |||||||
General Electric Co. | 670 | 0.14 | % | 183 | ||||||||
Masco Corp. | 494 | 0.52 | % | (623 | ) | |||||||
General Dynamics Corp. | 154 | 0.44 | % | (638 | ) | |||||||
Lockheed Martin Corp. | 63 | 0.43 | % | (1,963 | ) | |||||||
Total Industrial | 128,882 | |||||||||||
Utilities | ||||||||||||
Southern Co. | 479 | 0.56 | % | 2,994 | ||||||||
CenterPoint Energy, Inc. | 845 | 0.35 | % | 2,219 | ||||||||
Public Service Enterprise Group, Inc. | 732 | 0.81 | % | 2,118 | ||||||||
IDACORP, Inc. | 460 | 0.84 | % | 1,614 | ||||||||
Exelon Corp. | 920 | 0.74 | % | 854 | ||||||||
UGI Corp. | 675 | 0.45 | % | 852 | ||||||||
NorthWestern Corp. | 212 | 0.24 | % | 677 | ||||||||
Ameren Corp. | 517 | 0.77 | % | 321 | ||||||||
NextEra Energy, Inc. | 116 | 0.17 | % | 271 | ||||||||
OGE Energy Corp. | 794 | 0.48 | % | 145 | ||||||||
Avista Corp. | 284 | 0.22 | % | (794 | ) | |||||||
Consolidated Edison, Inc. | 285 | 0.39 | % | (1,284 | ) | |||||||
ONE Gas, Inc. | 262 | 0.38 | % | (1,448 | ) | |||||||
Portland General Electric Co. | 244 | 0.20 | % | (1,625 | ) | |||||||
NiSource, Inc. | 922 | 0.40 | % | (1,747 | ) | |||||||
Duke Energy Corp. | 412 | 0.72 | % | (1,816 | ) | |||||||
National Fuel Gas Co. | 359 | 0.28 | % | (2,503 | ) | |||||||
Evergy, Inc. | 772 | 0.82 | % | (2,670 | ) | |||||||
PPL Corp. | 1,317 | 0.71 | % | (2,974 | ) | |||||||
Southwest Gas Holdings, Inc. | 303 | 0.35 | % | (3,437 | ) | |||||||
Total Utilities | (8,233 | ) | ||||||||||
Energy | ||||||||||||
Chevron Corp. | 74 | 0.12 | % | (1,725 | ) | |||||||
Exxon Mobil Corp. | 173 | 0.14 | % | (4,091 | ) | |||||||
Total Energy | (5,816 | ) | ||||||||||
Communications | ||||||||||||
Amazon.com, Inc. | 15 | 0.93 | % | 20,608 | ||||||||
Alphabet, Inc. — Class C | 28 | 0.94 | % | 17,003 | ||||||||
Facebook, Inc. — Class A | 89 | 0.46 | % | 9,934 | ||||||||
Viavi Solutions, Inc. | 3,008 | 0.86 | % | 9,499 | ||||||||
T-Mobile US, Inc. | 325 | 0.84 | % | 7,979 | ||||||||
Walt Disney Co. | 70 | 0.24 | % | 3,639 | ||||||||
Comcast Corp. — Class A | 224 | 0.22 | % | 3,277 | ||||||||
Cisco Systems, Inc. | 1,403 | 1.20 | % | 2,802 | ||||||||
Ciena Corp. | 367 | 0.37 | % | 2,316 | ||||||||
Netflix, Inc. | 18 | 0.19 | % | 2,105 | ||||||||
Motorola Solutions, Inc. | 140 | 0.45 | % | 2,064 | ||||||||
VeriSign, Inc. | 109 | 0.45 | % | 1,664 | ||||||||
Discovery, Inc. — Class A | 500 | 0.29 | % | 1,463 | ||||||||
Cogent Communications Holdings, Inc. | 465 | 0.53 | % | 1,189 | ||||||||
Juniper Networks, Inc. | 1,625 | 0.70 | % | 62 | ||||||||
Sirius XM Holdings, Inc. | 5,383 | 0.65 | % | (280 | ) | |||||||
eBay, Inc. | 401 | 0.38 | % | (400 | ) | |||||||
Verizon Communications, Inc. | 1,024 | 1.15 | % | (1,118 | ) | |||||||
Omnicom Group, Inc. | 418 | 0.50 | % | (2,861 | ) | |||||||
AT&T, Inc. | 1,287 | 0.71 | % | (6,117 | ) | |||||||
Total Communications | 74,828 | |||||||||||
Total MS Equity Long Custom Basket | 661,628 | |||||||||||
MS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Realty Income Corp. | 2,178 | (1.62 | )% | 14,412 | ||||||||
UDR, Inc. | 1,418 | (0.65 | )% | 12,541 | ||||||||
Kilroy Realty Corp. | 1,455 | (0.99 | )% | 12,512 | ||||||||
Agree Realty Corp. | 2,063 | (1.63 | )% | 6,458 | ||||||||
Global Net Lease, Inc. | 2,626 | (0.54 | )% | 5,927 | ||||||||
JBG SMITH Properties | 2,158 | (0.80 | )% | 4,531 | ||||||||
Douglas Emmett, Inc. | 1,035 | (0.36 | )% | 4,280 | ||||||||
QTS Realty Trust, Inc. — Class A | 728 | (0.54 | )% | 2,017 | ||||||||
American Tower Corp. — Class A | 101 | (0.27 | )% | 1,388 | ||||||||
First Industrial Realty Trust, Inc. | 1,484 | (0.74 | )% | 483 | ||||||||
Americold Realty Trust | 1,266 | (0.56 | )% | 433 | ||||||||
Host Hotels & Resorts, Inc. | 2,335 | (0.41 | )% | 346 | ||||||||
Truist Financial Corp. | 464 | (0.26 | )% | 323 | ||||||||
Crown Castle International Corp. | 139 | (0.26 | )% | 166 | ||||||||
Camden Property Trust | 619 | (0.74 | )% | (98 | ) | |||||||
SBA Communications Corp. | 81 | (0.27 | )% | (1,123 | ) | |||||||
Fulton Financial Corp. | 2,466 | (0.37 | )% | (1,221 | ) | |||||||
Prologis, Inc. | 787 | (0.93 | )% | (1,223 | ) | |||||||
First Midwest Bancorp, Inc. | 2,808 | (0.53 | )% | (1,523 | ) | |||||||
Southside Bancshares, Inc. | 1,703 | (0.63 | )% | (1,965 | ) | |||||||
Duke Realty Corp. | 1,316 | (0.63 | )% | (2,244 | ) | |||||||
CyrusOne, Inc. | 819 | (0.71 | )% | (2,330 | ) | |||||||
Howard Hughes Corp. | 620 | (0.58 | )% | (2,469 | ) | |||||||
Healthpeak Properties, Inc. | 2,065 | (0.74 | )% | (2,518 | ) | |||||||
TFS Financial Corp. | 2,392 | (0.50 | )% | (3,321 | ) | |||||||
STAG Industrial, Inc. | 1,102 | (0.41 | )% | (5,718 | ) | |||||||
Medical Properties Trust, Inc. | 3,715 | (0.96 | )% | (5,778 | ) | |||||||
Rayonier, Inc. | 2,083 | (0.73 | )% | (5,846 | ) | |||||||
First Financial Bankshares, Inc. | 1,807 | (0.78 | )% | (5,976 | ) |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Healthcare Trust of America, Inc. — Class A | 2,353 | (0.77 | )% | $ | (6,319 | ) | ||||||
Intercontinental Exchange, Inc. | 560 | (0.77 | )% | (6,656 | ) | |||||||
Alleghany Corp. | 179 | (1.29 | )% | (6,713 | ) | |||||||
Loews Corp. | 1,163 | (0.62 | )% | (7,655 | ) | |||||||
Brookline Bancorp, Inc. | 5,397 | (0.77 | )% | (8,095 | ) | |||||||
Equinix, Inc. | 75 | (0.64 | )% | (8,145 | ) | |||||||
EastGroup Properties, Inc. | 501 | (0.82 | )% | (9,326 | ) | |||||||
Terreno Realty Corp. | 958 | (0.67 | )% | (10,558 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 459 | (0.97 | )% | (10,796 | ) | |||||||
Sun Communities, Inc. | 672 | (1.22 | )% | (20,421 | ) | |||||||
Rexford Industrial Realty, Inc. | 2,249 | (1.31 | )% | (26,361 | ) | |||||||
First Republic Bank | 758 | (1.33 | )% | (31,139 | ) | |||||||
Total Financial | (129,720 | ) | ||||||||||
Basic Materials | ||||||||||||
Huntsman Corp. | 2,918 | (0.88 | )% | 2,793 | ||||||||
Newmont Corp. | 607 | (0.43 | )% | 925 | ||||||||
Sherwin-Williams Co. | 47 | (0.41 | )% | 94 | ||||||||
Ecolab, Inc. | 132 | (0.34 | )% | (5,279 | ) | |||||||
Ashland Global Holdings, Inc. | 1,191 | (1.12 | )% | (6,228 | ) | |||||||
Axalta Coating Systems Ltd. | 2,032 | (0.69 | )% | (8,121 | ) | |||||||
DuPont de Nemours, Inc. | 1,670 | (1.41 | )% | (8,375 | ) | |||||||
PPG Industries, Inc. | 333 | (0.57 | )% | (10,214 | ) | |||||||
Air Products and Chemicals, Inc. | 589 | (1.92 | )% | (13,095 | ) | |||||||
Celanese Corp. — Class A | 663 | (1.03 | )% | (19,746 | ) | |||||||
Freeport-McMoRan, Inc. | 1,508 | (0.47 | )% | (23,513 | ) | |||||||
Balchem Corp. | 1,248 | (1.71 | )% | (26,666 | ) | |||||||
Linde plc | 616 | (1.93 | )% | (27,943 | ) | |||||||
RPM International, Inc. | 1,430 | (1.54 | )% | (33,231 | ) | |||||||
Albemarle Corp. | 634 | (1.11 | )% | (50,386 | ) | |||||||
Quaker Chemical Corp. | 446 | (1.34 | )% | (51,868 | ) | |||||||
United States Steel Corp. | 5,958 | (1.19 | )% | (56,441 | ) | |||||||
Total Basic Materials | (337,294 | ) | ||||||||||
Industrial | ||||||||||||
Raytheon Technologies Corp. | 999 | (0.86 | )% | 3,037 | ||||||||
US Ecology, Inc. | 969 | (0.42 | )% | 1,160 | ||||||||
AMETEK, Inc. | 289 | (0.42 | )% | (183 | ) | |||||||
TransDigm Group, Inc. | 86 | (0.63 | )% | (5,575 | ) | |||||||
Martin Marietta Materials, Inc. | 105 | (0.35 | )% | (7,619 | ) | |||||||
HEICO Corp. | 267 | (0.42 | )% | (8,635 | ) | |||||||
Eagle Materials, Inc. | 356 | (0.43 | )% | (9,541 | ) | |||||||
Ingersoll Rand, Inc. | 2,122 | (1.15 | )% | (12,166 | ) | |||||||
Crown Holdings, Inc. | 552 | (0.66 | )% | (15,370 | ) | |||||||
AptarGroup, Inc. | 1,361 | (2.22 | )% | (17,588 | ) | |||||||
Vulcan Materials Co. | 516 | (0.91 | )% | (17,751 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 1,187 | (0.88 | )% | (18,438 | ) | |||||||
Ball Corp. | 1,281 | (1.42 | )% | (21,071 | ) | |||||||
Tetra Tech, Inc. | 894 | (1.23 | )% | (25,328 | ) | |||||||
Total Industrial | (155,068 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
United Airlines Holdings, Inc. | 1,020 | (0.53 | )% | 887 | ||||||||
Alaska Air Group, Inc. | 1,436 | (0.89 | )% | 337 | ||||||||
JetBlue Airways Corp. | 3,818 | (0.66 | )% | (9,041 | ) | |||||||
Five Below, Inc. | 222 | (0.46 | )% | (10,176 | ) | |||||||
Delta Air Lines, Inc. | 2,088 | (1.00 | )% | (12,409 | ) | |||||||
Southwest Airlines Co. | 1,990 | (1.10 | )% | (12,545 | ) | |||||||
Hilton Worldwide Holdings, Inc. | 800 | (1.06 | )% | (13,520 | ) | |||||||
Live Nation Entertainment, Inc. | 664 | (0.58 | )% | (14,251 | ) | |||||||
TJX Companies, Inc. | 1,239 | (1.01 | )% | (15,949 | ) | |||||||
NIKE, Inc. — Class B | 726 | (1.22 | )% | (20,491 | ) | |||||||
Burlington Stores, Inc. | 376 | (1.17 | )% | (21,991 | ) | |||||||
Copart, Inc. | 759 | (1.15 | )% | (22,282 | ) | |||||||
Scotts Miracle-Gro Co. — Class A | 365 | (0.86 | )% | (26,904 | ) | |||||||
Starbucks Corp. | 1,278 | (1.63 | )% | (37,362 | ) | |||||||
Total Consumer, Cyclical | (215,697 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Nevro Corp. | 485 | (1.01 | )% | (1,237 | ) | |||||||
Moody’s Corp. | 220 | (0.76 | )% | (4,048 | ) | |||||||
Verisk Analytics, Inc. — Class A | 294 | (0.73 | )% | (5,397 | ) | |||||||
CoStar Group, Inc. | 82 | (0.90 | )% | (7,152 | ) | |||||||
WD-40 Co. | 180 | (0.57 | )% | (7,864 | ) | |||||||
Equifax, Inc. | 472 | (1.08 | )% | (13,579 | ) | |||||||
Avalara, Inc. | 174 | (0.34 | )% | (15,554 | ) | |||||||
Avery Dennison Corp. | 338 | (0.62 | )% | (15,598 | ) | |||||||
Total Consumer, Non-cyclical | (70,429 | ) | ||||||||||
Energy | ||||||||||||
Williams Companies, Inc. | 2,081 | (0.51 | )% | 941 | ||||||||
Cheniere Energy, Inc. | 818 | (0.58 | )% | (991 | ) | |||||||
Ovintiv, Inc. | 4,292 | (0.73 | )% | (4,210 | ) | |||||||
ChampionX Corp. | 3,752 | (0.68 | )% | (5,513 | ) | |||||||
NOV, Inc. | 2,499 | (0.41 | )% | (5,749 | ) | |||||||
Hess Corp. | 1,197 | (0.75 | )% | (8,269 | ) | |||||||
Phillips 66 | 1,668 | (1.39 | )% | (8,328 | ) | |||||||
Schlumberger N.V. | 4,755 | (1.24 | )% | (12,681 | ) | |||||||
Total Energy | (44,800 | ) | ||||||||||
Technology | ||||||||||||
Splunk, Inc. | 303 | (0.62 | )% | 4,382 | ||||||||
salesforce.com, Inc. | 87 | (0.23 | )% | (1,808 | ) | |||||||
Clarivate plc | 1,806 | (0.64 | )% | (5,293 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Appfolio, Inc. — Class A | 159 | (0.34 | )% | $ | (5,367 | ) | ||||||
Tyler Technologies, Inc. | 93 | (0.48 | )% | (6,258 | ) | |||||||
Pegasystems, Inc. | 517 | (0.82 | )% | (6,360 | ) | |||||||
ANSYS, Inc. | 198 | (0.86 | )% | (8,791 | ) | |||||||
Atlassian Corporation plc — Class A | 164 | (0.46 | )% | (9,142 | ) | |||||||
Rapid7, Inc. | 571 | (0.61 | )% | (10,040 | ) | |||||||
Coupa Software, Inc. | 92 | (0.37 | )% | (10,548 | ) | |||||||
Smartsheet, Inc. — Class A | 452 | (0.37 | )% | (11,354 | ) | |||||||
Workiva, Inc. | 314 | (0.34 | )% | (15,799 | ) | |||||||
Zscaler, Inc. | 165 | (0.39 | )% | (20,258 | ) | |||||||
HubSpot, Inc. | 100 | (0.47 | )% | (21,158 | ) | |||||||
Varonis Systems, Inc. | 536 | (1.04 | )% | (25,710 | ) | |||||||
Total Technology | (153,504 | ) | ||||||||||
Utilities | ||||||||||||
American States Water Co. | 453 | (0.43 | )% | 3,412 | ||||||||
California Water Service Group | 1,415 | (0.91 | )% | (3,283 | ) | |||||||
Total Utilities | 129 | |||||||||||
Communications | ||||||||||||
Anaplan, Inc. | 343 | (0.29 | )% | (10,162 | ) | |||||||
Okta, Inc. | 152 | (0.46 | )% | (13,960 | ) | |||||||
Zendesk, Inc. | 523 | (0.89 | )% | (20,938 | ) | |||||||
Liberty Broadband Corp. — Class C | 1,089 | (2.05 | )% | (22,226 | ) | |||||||
Q2 Holdings, Inc. | 598 | (0.90 | )% | (28,500 | ) | |||||||
Total Communications | (95,786 | ) | ||||||||||
Total MS Equity Short Custom Basket | (1,202,169 | ) | ||||||||||
GS EQUITY LONG CUSTOM BASKET | ||||||||||||
Consumer, Non-cyclical | ||||||||||||
United Rentals, Inc. | 137 | 0.62 | % | 13,941 | ||||||||
Rent-A-Center, Inc. | 524 | 0.39 | % | 10,721 | ||||||||
McKesson Corp. | 238 | 0.79 | % | 9,834 | ||||||||
Eli Lilly & Co. | 140 | 0.45 | % | 8,645 | ||||||||
DaVita, Inc. | 316 | 0.71 | % | 8,493 | ||||||||
Johnson & Johnson | 367 | 1.10 | % | 7,747 | ||||||||
United Therapeutics Corp. | 191 | 0.55 | % | 7,710 | ||||||||
Procter & Gamble Co. | 364 | 0.97 | % | 7,671 | ||||||||
Amgen, Inc. | 230 | 1.01 | % | 7,545 | ||||||||
UnitedHealth Group, Inc. | 127 | 0.85 | % | 7,057 | ||||||||
Quanta Services, Inc. | 396 | 0.54 | % | 6,810 | ||||||||
Cardinal Health, Inc. | 662 | 0.68 | % | 6,230 | ||||||||
Colgate-Palmolive Co. | 532 | 0.87 | % | 6,147 | ||||||||
Alexion Pharmaceuticals, Inc. | 106 | 0.32 | % | 5,504 | ||||||||
Jazz Pharmaceuticals plc | 140 | 0.44 | % | 5,209 | ||||||||
Anthem, Inc. | 70 | 0.43 | % | 3,792 | ||||||||
Philip Morris International, Inc. | 647 | 1.02 | % | 3,627 | ||||||||
Thermo Fisher Scientific, Inc. | 20 | 0.18 | % | 3,063 | ||||||||
Medtronic plc | 154 | 0.34 | % | 3,015 | ||||||||
Kraft Heinz Co. | 1,257 | 0.83 | % | 2,795 | ||||||||
J M Smucker Co. | 309 | 0.68 | % | 2,733 | ||||||||
Molina Healthcare, Inc. | 69 | 0.28 | % | 2,498 | ||||||||
CVS Health Corp. | 400 | 0.52 | % | 2,392 | ||||||||
Constellation Brands, Inc. — Class A | 79 | 0.33 | % | 2,379 | ||||||||
PayPal Holdings, Inc. | 51 | 0.23 | % | 2,134 | ||||||||
Mondelez International, Inc. — Class A | 377 | 0.42 | % | 2,046 | ||||||||
Cigna Corp. | 98 | 0.39 | % | 1,994 | ||||||||
Abbott Laboratories | 68 | 0.14 | % | 1,944 | ||||||||
Post Holdings, Inc. | 230 | 0.44 | % | 1,703 | ||||||||
Chemed Corp. | 22 | 0.22 | % | 1,348 | ||||||||
Molson Coors Beverage Co. — Class B | 1,143 | 0.99 | % | 1,221 | ||||||||
Kellogg Co. | 197 | 0.23 | % | 1,062 | ||||||||
Conagra Brands, Inc. | 718 | 0.50 | % | 942 | ||||||||
Alkermes plc | 600 | 0.23 | % | 780 | ||||||||
PepsiCo, Inc. | 49 | 0.14 | % | 768 | ||||||||
Hologic, Inc. | 179 | 0.25 | % | 738 | ||||||||
Becton Dickinson and Co. | 31 | 0.15 | % | 667 | ||||||||
Vertex Pharmaceuticals, Inc. | 32 | 0.14 | % | 631 | ||||||||
Laboratory Corporation of America Holdings | 126 | �� | 0.49 | % | 543 | |||||||
Danaher Corp. | 32 | 0.14 | % | 509 | ||||||||
AbbVie, Inc. | 158 | 0.32 | % | 492 | ||||||||
Coca-Cola Co. | 133 | 0.14 | % | 486 | ||||||||
Hill-Rom Holdings, Inc. | 113 | 0.21 | % | 447 | ||||||||
Merck & Company, Inc. | 662 | 1.03 | % | 419 | ||||||||
Bristol-Myers Squibb Co. | 313 | 0.37 | % | 397 | ||||||||
Tyson Foods, Inc. — Class A | 366 | 0.45 | % | 379 | ||||||||
Ionis Pharmaceuticals, Inc. | 211 | 0.23 | % | 317 | ||||||||
USANA Health Sciences, Inc. | 139 | 0.20 | % | 308 | ||||||||
Pfizer, Inc. | 815 | 0.57 | % | 287 | ||||||||
Encompass Health Corp. | 178 | 0.28 | % | 153 | ||||||||
Clorox Co. | 58 | 0.22 | % | 90 | ||||||||
Prestige Consumer Healthcare, Inc. | 290 | 0.19 | % | (52 | ) | |||||||
Altria Group, Inc. | 925 | 0.72 | % | (65 | ) | |||||||
Vector Group Ltd. | 1,289 | 0.29 | % | (85 | ) | |||||||
Humana, Inc. | 51 | 0.40 | % | (154 | ) | |||||||
Innoviva, Inc. | 1,123 | 0.27 | % | (510 | ) | |||||||
Campbell Soup Co. | 739 | 0.68 | % | (796 | ) | |||||||
Sprouts Farmers Market, Inc. | 834 | 0.32 | % | (822 | ) | |||||||
Ingredion, Inc. | 316 | 0.47 | % | (928 | ) | |||||||
Regeneron Pharmaceuticals, Inc. | 13 | 0.12 | % | (1,080 | ) | |||||||
Kimberly-Clark Corp. | 316 | 0.81 | % | (1,265 | ) |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
TreeHouse Foods, Inc. | 397 | 0.32 | % | $ | (1,863 | ) | ||||||
General Mills, Inc. | 783 | 0.88 | % | (2,028 | ) | |||||||
John B Sanfilippo & Son, Inc. | 248 | 0.37 | % | (2,911 | ) | |||||||
Gilead Sciences, Inc. | 396 | 0.44 | % | (6,131 | ) | |||||||
Total Consumer, Non-cyclical | 149,673 | |||||||||||
Industrial | ||||||||||||
TE Connectivity Ltd. | 315 | 0.74 | % | 12,948 | ||||||||
AGCO Corp. | 337 | 0.66 | % | 10,849 | ||||||||
Snap-on, Inc. | 190 | 0.62 | % | 10,195 | ||||||||
Caterpillar, Inc. | 144 | 0.50 | % | 9,299 | ||||||||
Timken Co. | 321 | 0.47 | % | 9,287 | ||||||||
Regal Beloit Corp. | 154 | 0.36 | % | 8,135 | ||||||||
Vishay Intertechnology, Inc. | 1,539 | 0.61 | % | 7,533 | ||||||||
Owens Corning | 214 | 0.31 | % | 7,125 | ||||||||
Garmin Ltd. | 180 | 0.41 | % | 6,574 | ||||||||
Lincoln Electric Holdings, Inc. | 178 | 0.40 | % | 5,914 | ||||||||
Hubbell, Inc. | 245 | 0.73 | % | 5,308 | ||||||||
Waters Corp. | 90 | 0.43 | % | 4,322 | ||||||||
Terex Corp. | 469 | 0.31 | % | 3,750 | ||||||||
Arrow Electronics, Inc. | 246 | 0.46 | % | 3,559 | ||||||||
Eaton Corporation plc | 138 | 0.32 | % | 3,461 | ||||||||
Acuity Brands, Inc. | 118 | 0.27 | % | 2,560 | ||||||||
Oshkosh Corp. | 280 | 0.46 | % | 2,454 | ||||||||
National Instruments Corp. | 305 | 0.26 | % | 2,180 | ||||||||
Keysight Technologies, Inc. | 150 | 0.38 | % | 2,064 | ||||||||
Trane Technologies plc | 80 | 0.22 | % | 1,967 | ||||||||
Union Pacific Corp. | 33 | 0.13 | % | 1,955 | ||||||||
Pentair plc | 245 | 0.25 | % | 1,789 | ||||||||
Dover Corp. | 91 | 0.22 | % | 1,629 | ||||||||
3M Co. | 145 | 0.48 | % | 1,556 | ||||||||
PerkinElmer, Inc. | 94 | 0.26 | % | 1,547 | ||||||||
A O Smith Corp. | 209 | 0.22 | % | 1,290 | ||||||||
Energizer Holdings, Inc. | 321 | 0.26 | % | 841 | ||||||||
United Parcel Service, Inc. — Class B | 41 | 0.13 | % | 506 | ||||||||
Lennox International, Inc. | 33 | 0.17 | % | 264 | ||||||||
General Electric Co. | 670 | 0.14 | % | 202 | ||||||||
Honeywell International, Inc. | 34 | 0.14 | % | 169 | ||||||||
Masco Corp. | 494 | 0.52 | % | (629 | ) | |||||||
General Dynamics Corp. | 154 | 0.44 | % | (639 | ) | |||||||
Lockheed Martin Corp. | 63 | 0.43 | % | (2,016 | ) | |||||||
Total Industrial | 127,948 | |||||||||||
Technology | ||||||||||||
Apple, Inc. | 761 | 1.94 | % | 51,641 | ||||||||
Microsoft Corp. | 276 | 1.17 | % | 24,928 | ||||||||
NetApp, Inc. | 565 | 0.71 | % | 13,727 | ||||||||
Texas Instruments, Inc. | 256 | 0.80 | % | 11,523 | ||||||||
SS&C Technologies Holdings, Inc. | 659 | 0.92 | % | 7,917 | ||||||||
Seagate Technology plc | 701 | 0.83 | % | 7,607 | ||||||||
HP, Inc. | 1,217 | 0.57 | % | 7,520 | ||||||||
Applied Materials, Inc. | 222 | 0.37 | % | 7,450 | ||||||||
CDK Global, Inc. | 449 | 0.44 | % | 7,349 | ||||||||
KLA Corp. | 103 | 0.51 | % | 7,338 | ||||||||
Oracle Corp. | 583 | 0.72 | % | 5,777 | ||||||||
Cerner Corp. | 625 | 0.94 | % | 5,062 | ||||||||
QUALCOMM, Inc. | 61 | 0.18 | % | 4,676 | ||||||||
Microchip Technology, Inc. | 106 | 0.28 | % | 4,095 | ||||||||
Cirrus Logic, Inc. | 201 | 0.32 | % | 3,647 | ||||||||
Kulicke & Soffa Industries, Inc. | 460 | 0.28 | % | 3,347 | ||||||||
Adobe, Inc. | 19 | 0.18 | % | 3,043 | ||||||||
Skyworks Solutions, Inc. | 132 | 0.39 | % | 1,828 | ||||||||
Broadcom, Inc. | 22 | 0.18 | % | 1,632 | ||||||||
Accenture plc — Class A | 35 | 0.17 | % | 873 | ||||||||
Dell Technologies, Inc. — Class C | 242 | 0.34 | % | 720 | ||||||||
Paychex, Inc. | 172 | 0.31 | % | (45 | ) | |||||||
International Business Machines Corp. | 460 | 1.11 | % | (347 | ) | |||||||
Fidelity National Information Services, Inc. | 48 | 0.13 | % | (361 | ) | |||||||
Intel Corp. | 880 | 0.84 | % | (3,513 | ) | |||||||
Total Technology | 177,434 | |||||||||||
Utilities | ||||||||||||
Southern Co. | 479 | 0.57 | % | 2,789 | ||||||||
CenterPoint Energy, Inc. | 845 | 0.35 | % | 2,225 | ||||||||
Public Service Enterprise Group, Inc. | 732 | 0.81 | % | 2,104 | ||||||||
IDACORP, Inc. | 460 | 0.84 | % | 1,603 | ||||||||
Exelon Corp. | 920 | 0.74 | % | 863 | ||||||||
UGI Corp. | 675 | 0.45 | % | 848 | ||||||||
NorthWestern Corp. | 212 | 0.24 | % | 686 | ||||||||
Ameren Corp. | 517 | 0.77 | % | 316 | ||||||||
NextEra Energy, Inc. | 116 | 0.17 | % | 264 | ||||||||
OGE Energy Corp. | 794 | 0.48 | % | 137 | ||||||||
Avista Corp. | 284 | 0.22 | % | (772 | ) | |||||||
Consolidated Edison, Inc. | 285 | 0.39 | % | (1,313 | ) | |||||||
ONE Gas, Inc. | 262 | 0.38 | % | (1,396 | ) | |||||||
Portland General Electric Co. | 244 | 0.20 | % | (1,636 | ) | |||||||
NiSource, Inc. | 922 | 0.40 | % | (1,766 | ) | |||||||
Duke Energy Corp. | 412 | 0.72 | % | (1,833 | ) | |||||||
PPL Corp. | 1,317 | 0.71 | % | (1,880 | ) | |||||||
National Fuel Gas Co. | 359 | 0.28 | % | (2,258 | ) | |||||||
Evergy, Inc. | 772 | 0.82 | % | (2,701 | ) | |||||||
Southwest Gas Holdings, Inc. | 303 | 0.35 | % | (3,405 | ) | |||||||
Total Utilities | (7,125 | ) | ||||||||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Communications | ||||||||||||
Amazon.com, Inc. | 15 | 0.94 | % | $ | 20,419 | |||||||
Alphabet, Inc. — Class C | 28 | 0.94 | % | 18,848 | ||||||||
Facebook, Inc. — Class A | 89 | 0.46 | % | 9,918 | ||||||||
Viavi Solutions, Inc. | 3,008 | 0.86 | % | 9,290 | ||||||||
T-Mobile US, Inc. | 325 | 0.84 | % | 8,004 | ||||||||
Walt Disney Co. | 70 | 0.24 | % | 3,663 | ||||||||
Comcast Corp. — Class A | 224 | 0.22 | % | 3,276 | ||||||||
Cisco Systems, Inc. | 1,403 | 1.20 | % | 2,781 | ||||||||
Ciena Corp. | 367 | 0.37 | % | 2,322 | ||||||||
Motorola Solutions, Inc. | 140 | 0.45 | % | 2,105 | ||||||||
Netflix, Inc. | 18 | 0.19 | % | 2,082 | ||||||||
Verizon Communications, Inc. | 1,024 | 1.15 | % | 1,894 | ||||||||
VeriSign, Inc. | 109 | 0.45 | % | 1,679 | ||||||||
Discovery, Inc. — Class A | 500 | 0.29 | % | 1,449 | ||||||||
Cogent Communications Holdings, Inc. | 465 | 0.53 | % | 1,308 | ||||||||
Juniper Networks, Inc. | 1,625 | 0.70 | % | 110 | ||||||||
Sirius XM Holdings, Inc. | 5,383 | 0.65 | % | (329 | ) | |||||||
eBay, Inc. | 401 | 0.38 | % | (460 | ) | |||||||
Omnicom Group, Inc. | 418 | 0.50 | % | (3,908 | ) | |||||||
AT&T, Inc. | 1,287 | 0.71 | % | (6,728 | ) | |||||||
Total Communications | 77,723 | |||||||||||
Consumer, Cyclical | ||||||||||||
Gentherm, Inc. | 642 | 0.81 | % | 18,836 | ||||||||
Autoliv, Inc. | 360 | 0.63 | % | 12,707 | ||||||||
Gentex Corp. | 1,511 | 0.98 | % | 11,449 | ||||||||
Lear Corp. | 149 | 0.45 | % | 9,607 | ||||||||
Cummins, Inc. | 87 | 0.38 | % | 6,837 | ||||||||
Hanesbrands, Inc. | 781 | 0.22 | % | 4,152 | ||||||||
Brunswick Corp. | 233 | 0.34 | % | 4,034 | ||||||||
Dolby Laboratories, Inc. — Class A | 119 | 0.22 | % | 3,721 | ||||||||
MSC Industrial Direct Company, Inc. — Class A | 157 | 0.25 | % | 3,030 | ||||||||
Home Depot, Inc. | 38 | 0.19 | % | 2,569 | ||||||||
Lowe’s Companies, Inc. | 222 | 0.68 | % | 2,452 | ||||||||
Allison Transmission Holdings, Inc. | 821 | 0.68 | % | 1,649 | ||||||||
AutoNation, Inc. | 299 | 0.40 | % | 1,407 | ||||||||
PACCAR, Inc. | 306 | 0.50 | % | 1,353 | ||||||||
Walmart, Inc. | 58 | 0.16 | % | 1,353 | ||||||||
Genuine Parts Co. | 351 | 0.67 | % | 1,146 | ||||||||
General Motors Co. | 152 | 0.12 | % | 1,037 | ||||||||
McDonald’s Corp. | 32 | 0.13 | % | 1,035 | ||||||||
AutoZone, Inc. | 23 | 0.52 | % | 937 | ||||||||
Costco Wholesale Corp. | 18 | 0.13 | % | 536 | ||||||||
Lennar Corp. — Class A | 245 | 0.36 | % | (242 | ) | |||||||
PulteGroup, Inc. | 443 | 0.36 | % | (485 | ) | |||||||
Meritage Homes Corp. | 173 | 0.27 | % | (1,439 | ) | |||||||
Best Buy Company, Inc. | 437 | 0.83 | % | (4,126 | ) | |||||||
Total Consumer, Cyclical | 83,555 | |||||||||||
Financial | ||||||||||||
MetLife, Inc. | 1,127 | 1.02 | % | 7,381 | ||||||||
JPMorgan Chase & Co. | 203 | 0.49 | % | 5,494 | ||||||||
Allstate Corp. | 521 | 1.09 | % | 5,033 | ||||||||
Berkshire Hathaway, Inc. — Class B | 231 | 1.02 | % | 4,505 | ||||||||
Synchrony Financial | 520 | 0.34 | % | 4,303 | ||||||||
Hartford Financial Services Group, Inc. | 435 | 0.41 | % | 4,216 | ||||||||
Aflac, Inc. | 479 | 0.41 | % | 3,970 | ||||||||
Ameriprise Financial, Inc. | 106 | 0.39 | % | 3,594 | ||||||||
Travelers Companies, Inc. | 214 | 0.57 | % | 3,243 | ||||||||
Bank of America Corp. | 793 | 0.46 | % | 3,138 | ||||||||
Visa, Inc. — Class A | 58 | 0.24 | % | 2,404 | ||||||||
PNC Financial Services Group, Inc. | 51 | 0.15 | % | 2,230 | ||||||||
M&T Bank Corp. | 100 | 0.24 | % | 2,130 | ||||||||
Western Union Co. | 1,141 | 0.48 | % | 1,814 | ||||||||
Mastercard, Inc. — Class A | 31 | 0.21 | % | 1,542 | ||||||||
American Express Co. | 59 | 0.14 | % | 1,408 | ||||||||
SEI Investments Co. | 256 | 0.28 | % | 177 | ||||||||
Wells Fargo & Co. | 250 | 0.14 | % | (222 | ) | |||||||
Equity Residential | 528 | 0.60 | % | (1,113 | ) | |||||||
Highwoods Properties, Inc. | 902 | 0.68 | % | (1,401 | ) | |||||||
Piedmont Office Realty Trust, Inc. — Class A | 1,586 | 0.49 | % | (2,010 | ) | |||||||
Total Financial | 51,836 | |||||||||||
Energy | ||||||||||||
Chevron Corp. | 74 | 0.13 | % | (1,712 | ) | |||||||
Exxon Mobil Corp. | 173 | 0.14 | % | (4,103 | ) | |||||||
Total Energy | (5,815 | ) | ||||||||||
Total GS Equity Long Custom Basket | 655,229 | |||||||||||
GS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Consumer, Cyclical | ||||||||||||
United Airlines Holdings, Inc. | 1,020 | (0.53 | )% | 836 | ||||||||
Alaska Air Group, Inc. | 1,436 | (0.89 | )% | 23 | ||||||||
JetBlue Airways Corp. | 3,818 | (0.66 | )% | (8,917 | ) | |||||||
Five Below, Inc. | 222 | (0.46 | )% | (10,164 | ) | |||||||
Delta Air Lines, Inc. | 2,088 | (1.00 | )% | (12,288 | ) | |||||||
Southwest Airlines Co. | 1,990 | (1.10 | )% | (12,555 | ) | |||||||
Hilton Worldwide Holdings, Inc. | 800 | (1.06 | )% | (13,436 | ) | |||||||
Live Nation Entertainment, Inc. | 664 | (0.58 | )% | (14,189 | ) | |||||||
TJX Companies, Inc. | 1,239 | (1.01 | )% | (15,893 | ) | |||||||
NIKE, Inc. — Class B | 726 | (1.22 | )% | (20,518 | ) | |||||||
Copart, Inc. | 759 | (1.15 | )% | (22,273 | ) |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Burlington Stores, Inc. | 376 | (1.17 | )% | $ | (22,305 | ) | ||||||
Scotts Miracle-Gro Co. — Class A | 365 | (0.86 | )% | (26,864 | ) | |||||||
Starbucks Corp. | 1,278 | (1.63 | )% | (37,414 | ) | |||||||
Total Consumer, Cyclical | (215,957 | ) | ||||||||||
Financial | ||||||||||||
Realty Income Corp. | 2,178 | (1.62 | )% | 14,895 | ||||||||
UDR, Inc. | 1,418 | (0.65 | )% | 12,703 | ||||||||
Kilroy Realty Corp. | 1,455 | (0.99 | )% | 12,399 | ||||||||
Global Net Lease, Inc. | 2,626 | (0.54 | )% | 5,916 | ||||||||
JBG SMITH Properties | 2,158 | (0.80 | )% | 4,531 | ||||||||
Douglas Emmett, Inc. | 1,035 | (0.36 | )% | 4,266 | ||||||||
American Tower Corp. — Class A | 101 | (0.27 | )% | 1,397 | ||||||||
Agree Realty Corp. | 2,063 | (1.63 | )% | 532 | ||||||||
First Industrial Realty Trust, Inc. | 1,484 | (0.74 | )% | 525 | ||||||||
Host Hotels & Resorts, Inc. | 2,335 | (0.41 | )% | 406 | ||||||||
Truist Financial Corp. | 464 | (0.26 | )% | 374 | ||||||||
Crown Castle International Corp. | 139 | (0.26 | )% | 119 | ||||||||
Camden Property Trust | 619 | (0.74 | )% | (96 | ) | |||||||
Prologis, Inc. | 787 | (0.93 | )% | (1,096 | ) | |||||||
SBA Communications Corp. | 81 | (0.27 | )% | (1,118 | ) | |||||||
Fulton Financial Corp. | 2,466 | (0.37 | )% | (1,347 | ) | |||||||
First Midwest Bancorp, Inc. | 2,808 | (0.53 | )% | (1,370 | ) | |||||||
Southside Bancshares, Inc. | 1,703 | (0.63 | )% | (2,132 | ) | |||||||
Duke Realty Corp. | 1,316 | (0.63 | )% | (2,165 | ) | |||||||
Howard Hughes Corp. | 620 | (0.58 | )% | (2,301 | ) | |||||||
CyrusOne, Inc. | 819 | (0.71 | )% | (2,463 | ) | |||||||
Healthpeak Properties, Inc. | 2,065 | (0.74 | )% | (2,517 | ) | |||||||
TFS Financial Corp. | 2,392 | (0.50 | )% | (3,353 | ) | |||||||
Americold Realty Trust | 1,266 | (0.56 | )% | (4,941 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 728 | (0.54 | )% | (5,496 | ) | |||||||
Rayonier, Inc. | 2,083 | (0.73 | )% | (5,766 | ) | |||||||
Medical Properties Trust, Inc. | 3,715 | (0.96 | )% | (5,796 | ) | |||||||
STAG Industrial, Inc. | 1,102 | (0.41 | )% | (5,823 | ) | |||||||
First Financial Bankshares, Inc. | 1,807 | (0.78 | )% | (5,967 | ) | |||||||
Alleghany Corp. | 179 | (1.29 | )% | (6,391 | ) | |||||||
Healthcare Trust of America, Inc. — Class A | 2,353 | (0.77 | )% | (6,396 | ) | |||||||
Intercontinental Exchange, Inc. | 560 | (0.77 | )% | (6,651 | ) | |||||||
Equinix, Inc. | 75 | (0.64 | )% | (7,084 | ) | |||||||
Loews Corp. | 1,163 | (0.62 | )% | (7,635 | ) | |||||||
Brookline Bancorp, Inc. | 5,397 | (0.77 | )% | (8,127 | ) | |||||||
EastGroup Properties, Inc. | 501 | (0.82 | )% | (8,912 | ) | |||||||
Terreno Realty Corp. | 958 | (0.67 | )% | (9,232 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 459 | (0.97 | )% | (10,715 | ) | |||||||
Sun Communities, Inc. | 672 | (1.22 | )% | (15,233 | ) | |||||||
Rexford Industrial Realty, Inc. | 2,249 | (1.31 | )% | (20,061 | ) | |||||||
First Republic Bank | 758 | (1.33 | )% | (30,942 | ) | |||||||
Total Financial | (133,063 | ) | ||||||||||
Technology | ||||||||||||
Splunk, Inc. | 303 | (0.62 | )% | 4,382 | ||||||||
salesforce.com, Inc. | 87 | (0.23 | )% | (1,882 | ) | |||||||
Clarivate plc | 1,806 | (0.64 | )% | (5,319 | ) | |||||||
Appfolio, Inc. — Class A | 159 | (0.34 | )% | (5,378 | ) | |||||||
Tyler Technologies, Inc. | 93 | (0.48 | )% | (6,235 | ) | |||||||
Pegasystems, Inc. | 517 | (0.82 | )% | (6,347 | ) | |||||||
ANSYS, Inc. | 198 | (0.86 | )% | (8,846 | ) | |||||||
Atlassian Corporation plc — Class A | 164 | (0.46 | )% | (9,255 | ) | |||||||
Rapid7, Inc. | 571 | (0.61 | )% | (9,768 | ) | |||||||
Coupa Software, Inc. | 92 | (0.37 | )% | (10,537 | ) | |||||||
Smartsheet, Inc. — Class A | 452 | (0.37 | )% | (11,351 | ) | |||||||
Workiva, Inc. | 314 | (0.34 | )% | (15,830 | ) | |||||||
Zscaler, Inc. | 165 | (0.39 | )% | (20,259 | ) | |||||||
HubSpot, Inc. | 100 | (0.47 | )% | (20,287 | ) | |||||||
Varonis Systems, Inc. | 536 | (1.04 | )% | (25,492 | ) | |||||||
Total Technology | (152,404 | ) | ||||||||||
Utilities | ||||||||||||
American States Water Co. | 453 | (0.44 | )% | 3,392 | ||||||||
California Water Service Group | 1,415 | (0.91 | )% | (3,234 | ) | |||||||
Total Utilities | 158 | |||||||||||
Energy | ||||||||||||
Williams Companies, Inc. | 2,081 | (0.51 | )% | 920 | ||||||||
Cheniere Energy, Inc. | 818 | (0.58 | )% | (901 | ) | |||||||
Ovintiv, Inc. | 4,292 | (0.73 | )% | (3,642 | ) | |||||||
ChampionX Corp. | 3,752 | (0.68 | )% | (4,932 | ) | |||||||
NOV, Inc. | 2,499 | (0.41 | )% | (5,769 | ) | |||||||
Hess Corp. | 1,197 | (0.75 | )% | (8,257 | ) | |||||||
Phillips 66 | 1,668 | (1.39 | )% | (8,432 | ) | |||||||
Schlumberger N.V. | 4,755 | (1.24 | )% | (12,340 | ) | |||||||
Total Energy | (43,353 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Nevro Corp. | 485 | (1.01 | )% | (785 | ) | |||||||
Moody’s Corp. | 220 | (0.76 | )% | (4,082 | ) | |||||||
Verisk Analytics, Inc. — Class A | 294 | (0.73 | )% | (5,392 | ) | |||||||
CoStar Group, Inc. | 82 | (0.90 | )% | (7,215 | ) | |||||||
WD-40 Co. | 180 | (0.57 | )% | (7,917 | ) | |||||||
Equifax, Inc. | 472 | (1.08 | )% | (13,654 | ) | |||||||
Avalara, Inc. | 174 | (0.34 | )% | (14,018 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LONG SHORT EQUITY FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Avery Dennison Corp. | 338 | (0.62 | )% | $ | (15,678 | ) | ||||||
Total Consumer, Non-cyclical | (68,741 | ) | ||||||||||
Basic Materials | ||||||||||||
Huntsman Corp. | 2,918 | (0.88 | )% | 2,861 | ||||||||
Newmont Corp. | 607 | (0.43 | )% | 953 | ||||||||
Sherwin-Williams Co. | 47 | (0.41 | )% | 90 | ||||||||
Ecolab, Inc. | 132 | (0.34 | )% | (5,408 | ) | |||||||
Ashland Global Holdings, Inc. | 1,191 | (1.12 | )% | (6,084 | ) | |||||||
Axalta Coating Systems Ltd. | 2,032 | (0.69 | )% | (8,013 | ) | |||||||
DuPont de Nemours, Inc. | 1,670 | (1.41 | )% | (8,350 | ) | |||||||
PPG Industries, Inc. | 333 | (0.57 | )% | (9,913 | ) | |||||||
Air Products and Chemicals, Inc. | 589 | (1.92 | )% | (13,103 | ) | |||||||
Celanese Corp. — Class A | 663 | (1.03 | )% | (19,790 | ) | |||||||
Balchem Corp. | 1,248 | (1.71 | )% | (22,714 | ) | |||||||
Freeport-McMoRan, Inc. | 1,508 | (0.47 | )% | (23,514 | ) | |||||||
Linde plc | 616 | (1.93 | )% | (27,821 | ) | |||||||
RPM International, Inc. | 1,430 | (1.54 | )% | (36,145 | ) | |||||||
Albemarle Corp. | 634 | (1.11 | )% | (50,494 | ) | |||||||
Quaker Chemical Corp. | 446 | (1.34 | )% | (52,110 | ) | |||||||
United States Steel Corp. | 5,958 | (1.19 | )% | (56,471 | ) | |||||||
Total Basic Materials | (336,026 | ) | ||||||||||
Industrial | ||||||||||||
Raytheon Technologies Corp. | 999 | (0.85 | )% | 3,138 | ||||||||
US Ecology, Inc. | 969 | (0.42 | )% | 1,140 | ||||||||
AMETEK, Inc. | 289 | (0.42 | )% | (177 | ) | |||||||
TransDigm Group, Inc. | 86 | (0.63 | )% | (5,609 | ) | |||||||
Martin Marietta Materials, Inc. | 105 | (0.35 | )% | (7,635 | ) | |||||||
HEICO Corp. | 267 | (0.42 | )% | (8,568 | ) | |||||||
Eagle Materials, Inc. | 356 | (0.43 | )% | (9,531 | ) | |||||||
Ingersoll Rand, Inc. | 2,122 | (1.15 | )% | (12,163 | ) | |||||||
Crown Holdings, Inc. | 552 | (0.66 | )% | (15,396 | ) | |||||||
AptarGroup, Inc. | 1,361 | (2.22 | )% | (17,499 | ) | |||||||
Vulcan Materials Co. | 516 | (0.91 | )% | (17,836 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 1,187 | (0.88 | )% | (18,482 | ) | |||||||
Ball Corp. | 1,281 | (1.42 | )% | (20,983 | ) | |||||||
Tetra Tech, Inc. | 894 | (1.23 | )% | (25,408 | ) | |||||||
Total Industrial | (155,009 | ) | ||||||||||
Communications | ||||||||||||
Anaplan, Inc. | 343 | (0.29 | )% | (10,187 | ) | |||||||
Okta, Inc. | 152 | (0.46 | )% | (13,853 | ) | |||||||
Zendesk, Inc. | 523 | (0.89 | )% | (20,826 | ) | |||||||
Liberty Broadband Corp. — Class C | 1,089 | (2.05 | )% | (22,150 | ) | |||||||
Q2 Holdings, Inc. | 598 | (0.90 | )% | (27,352 | ) | |||||||
Total Communications | (94,368 | ) | ||||||||||
Total GS Equity Short Custom Basket | (1,198,763 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is pledged as equity custom basket swap collateral at December 31, 2020. |
2 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
3 | Rate indicated is the 7-day yield as of December 31, 2020. |
4 | Securities lending collateral — See Note 7. |
GS — Goldman Sachs International | |
MS — Morgan Stanley Capital Services LLC | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
LONG SHORT EQUITY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 23,736,611 | $ | — | $ | — | $ | 23,736,611 | ||||||||
Money Market Fund | 394,525 | — | — | 394,525 | ||||||||||||
Securities Lending Collateral | 175,597 | — | — | 175,597 | ||||||||||||
Equity Custom Basket Swap Agreements** | — | 1,316,857 | — | 1,316,857 | ||||||||||||
Total Assets | $ | 24,306,733 | $ | 1,316,857 | $ | — | $ | 25,623,590 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Custom Basket Swap Agreements** | $ | — | $ | 2,400,932 | $ | — | $ | 2,400,932 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
LONG SHORT EQUITY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $167,230 of securities loaned (cost $20,950,282) | $ | 24,306,733 | ||
Cash | 689 | |||
Unrealized appreciation on OTC swap agreements | 1,316,857 | |||
Receivables: | ||||
Dividends | 36,749 | |||
Fund shares sold | 4,431 | |||
Securities lending income | 19 | |||
Total assets | 25,665,478 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 2,400,932 | |||
Payable for: | ||||
Return of securities lending collateral | 175,597 | |||
Swap settlement | 42,424 | |||
Management fees | 17,502 | |||
Investor service fees | 4,862 | |||
Transfer agent and administrative fees | 2,314 | |||
Portfolio accounting fees | 1,945 | |||
Fund shares redeemed | 1,196 | |||
Trustees’ fees* | 355 | |||
Miscellaneous | 49,278 | |||
Total liabilities | 2,696,405 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 22,969,073 | ||
Net assets consist of: | ||||
Paid in capital | $ | 24,621,747 | ||
Total distributable earnings (loss) | (1,652,674 | ) | ||
Net assets | $ | 22,969,073 | ||
Capital shares outstanding | 1,594,774 | |||
Net asset value per share | $ | 14.40 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends | $ | 557,069 | ||
Income from securities lending, net | 301 | |||
Total investment income | 557,370 | |||
Expenses: | ||||
Management fees | 216,674 | |||
Investor service fees | 60,187 | |||
Transfer agent and administrative fees | 44,129 | |||
Professional fees | 45,277 | |||
Portfolio accounting fees | 24,074 | |||
Trustees’ fees* | 6,038 | |||
Custodian fees | 4,219 | |||
Miscellaneous | 15,751 | |||
Total expenses | 416,349 | |||
Net investment income | 141,021 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,181,992 | |||
Swap agreements | (621,511 | ) | ||
Net realized gain | 560,481 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 398,000 | |||
Swap agreements | (362,699 | ) | ||
Net change in unrealized appreciation (depreciation) | 35,301 | |||
Net realized and unrealized gain | 595,782 | |||
Net increase in net assets resulting from operations | $ | 736,803 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
LONG SHORT EQUITY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 141,021 | $ | 186,446 | ||||
Net realized gain (loss) on investments | 560,481 | (2,649,687 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 35,301 | 4,103,676 | ||||||
Net increase in net assets resulting from operations | 736,803 | 1,640,435 | ||||||
Distributions to shareholders | (189,586 | ) | (168,099 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 4,344,222 | 9,806,958 | ||||||
Distributions reinvested | 189,586 | 168,099 | ||||||
Cost of shares redeemed | (12,795,374 | ) | (9,974,536 | ) | ||||
Net increase (decrease) from capital share transactions | (8,261,566 | ) | 521 | |||||
Net increase (decrease) in net assets | (7,714,349 | ) | 1,472,857 | |||||
Net assets: | ||||||||
Beginning of year | 30,683,422 | 29,210,565 | ||||||
End of year | $ | 22,969,073 | $ | 30,683,422 | ||||
Capital share activity: | ||||||||
Shares sold | 338,226 | 739,247 | ||||||
Shares issued from reinvestment of distributions | 14,096 | 12,735 | ||||||
Shares redeemed | (973,871 | ) | (749,957 | ) | ||||
Net increase (decrease) in shares | (621,549 | ) | 2,025 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
LONG SHORT EQUITY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 13.84 | $ | 13.19 | $ | 17.59 | $ | 15.37 | $ | 15.27 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .08 | .09 | .08 | (.05 | ) | .01 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .59 | .64 | (2.19 | ) | 2.33 | .09 | ||||||||||||||
Total from investment operations | .67 | .73 | (2.11 | ) | 2.28 | .10 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.11 | ) | (.08 | ) | — | (.06 | ) | — | ||||||||||||
Net realized gains | — | — | (2.29 | ) | — | — | ||||||||||||||
Total distributions | (.11 | ) | (.08 | ) | (2.29 | ) | (.06 | ) | — | |||||||||||
Net asset value, end of period | $ | 14.40 | $ | 13.84 | $ | 13.19 | $ | 17.59 | $ | 15.37 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 4.93 | % | 5.54 | % | (12.94 | %) | 14.85 | % | 0.65 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 22,969 | $ | 30,683 | $ | 29,211 | $ | 39,138 | $ | 31,887 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.59 | % | 0.65 | % | 0.52 | % | (0.32 | %) | 0.04 | % | ||||||||||
Total expensesc,d | 1.73 | % | 1.72 | % | 1.62 | % | 1.78 | % | 2.22 | % | ||||||||||
Portfolio turnover rate | 160 | % | 170 | % | 266 | % | 258 | % | 239 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Total expenses may include certain non-operating expenses. Excluding these non-operating expenses, the net expense ratios for the years ended December 31 would be: |
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
1.73% | 1.72% | 1.62% | 1.61% | 1.56% |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
GLOBAL MANAGED FUTURES STRATEGY FUND
OBJECTIVE: Seeks to generate positive total returns over time.
For the one-year period ended December 31, 2020, Guggenheim Global Managed Futures Strategy Fund returned 2.60%. The ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, the Fund’s benchmark, returned 0.67%.
The Fund is comprised of multiple proprietary strategies designed to systematically exploit or profit from market inefficiencies in futures markets around the globe.
The Fund takes advantage of Guggenheim’s fixed income expertise in managing the Fund’s cash positions primarily through the use of Guggenheim Strategy Funds and Guggenheim Ultra Short Duration Fund.
The Fund underperformed the SG CTA Index for the year, which returned 3.16%.
For the one-year period ended December 31, 2020, positions in Fixed Income, Volatility, Equity Indexes, and Commodities all contributed positively to the Fund’s return. Only Currencies detracted in 2020. Among the futures that contributed the most to performance were positions in Soybeans, NASDAQ 100, Gold, FTSE Taiwan, and U.S. Government 30-Year Bond.
The Fund held derivatives for a number of reasons, including liquidity, leverage, speculation, and hedging. Derivatives were liquid and allowed the Fund to gain leveraged access to markets in order to express investment views and to hedge exposures. Futures are an integral part of a managed futures strategy, and therefore derivatives performance was the primary driver of the Fund’s performance for the period.
Performance displayed represents past performance which is no guarantee of future results.
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: November 7, 2008 |
The Fund invests principally in derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Variable Insurance Strategy Fund III | 31.7% |
Guggenheim Strategy Fund III | 17.7% |
Guggenheim Strategy Fund II | 0.8% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 0.5% |
Total | 50.7% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Global Managed Futures Strategy Fund | 2.60% | (1.33%) | (1.51%) |
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index | 0.67% | 1.20% | 0.64% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
28 | THE RYDEX FUNDS ANNUAL REPORT |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2020 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 50.7% | ||||||||
Guggenheim Variable Insurance Strategy Fund III1 | 171,952 | $ | 4,305,677 | |||||
Guggenheim Strategy Fund III1 | 95,616 | 2,399,952 | ||||||
Guggenheim Strategy Fund II1 | 4,489 | 112,043 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 7,208 | 71,938 | ||||||
Total Mutual Funds | ||||||||
(Cost $6,833,567) | 6,889,610 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 9.0% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/212,3 | $ | 1,224,000 | 1,223,953 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,223,929) | 1,223,953 | |||||||
REPURCHASE AGREEMENTS††,4 - 39.1% | ||||||||
J.P. Morgan Securities LLC issued 12/31/20 at 0.06% due 01/04/21 | 2,950,459 | 2,950,459 | ||||||
Barclays Capital, Inc. issued 12/31/20 at 0.06% due 01/04/21 | 1,229,193 | 1,229,193 | ||||||
BofA Securities, Inc. issued 12/31/20 at 0.06% due 01/04/21 | 1,138,141 | 1,138,141 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $5,317,793) | 5,317,793 | |||||||
Total Investments - 98.8% | ||||||||
(Cost $13,375,289) | $ | 13,431,356 | ||||||
Other Assets & Liabilities, net - 1.2% | 161,329 | |||||||
Total Net Assets - 100.0% | $ | 13,592,685 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||||
Soybean Futures Contracts | 10 | Mar 2021 | $ | 655,000 | $ | 54,701 | ||||||||||
Wheat Futures Contracts | 25 | Jul 2021 | 787,500 | 43,375 | ||||||||||||
Sugar #11 Futures Contracts | 58 | Apr 2021 | 954,262 | 37,141 | ||||||||||||
Copper Futures Contracts | 4 | Mar 2021 | 352,400 | 28,975 | ||||||||||||
Live Cattle Futures Contracts | 26 | Jun 2021 | 1,192,620 | 26,885 | ||||||||||||
Gasoline RBOB Futures Contracts | 10 | Jan 2021 | 592,788 | 25,011 | ||||||||||||
Corn Futures Contracts | 9 | Mar 2021 | 218,588 | 23,885 | ||||||||||||
Soybean Oil Futures Contracts | 9 | Mar 2021 | 229,176 | 17,817 | ||||||||||||
Silver Futures Contracts | 1 | Mar 2021 | 132,775 | 10,752 | ||||||||||||
Cotton #2 Futures Contracts | 4 | Mar 2021 | 156,420 | 9,522 | ||||||||||||
Gold 100 oz. Futures Contracts | 2 | Feb 2021 | 380,740 | 7,254 | ||||||||||||
Soybean Meal Futures Contracts | 6 | Mar 2021 | 257,460 | 6,042 | ||||||||||||
Brent Crude Futures Contracts | 2 | Jan 2021 | 103,440 | 5,897 | ||||||||||||
Hard Red Winter Wheat Futures Contracts | 1 | Mar 2021 | 30,288 | 2,210 | ||||||||||||
Platinum Futures Contracts | 1 | Apr 2021 | 54,045 | 1,862 | ||||||||||||
Sugar #11 Futures Contracts | 12 | Jun 2021 | 190,579 | 1,575 | ||||||||||||
WTI Crude Futures Contracts | 3 | Jan 2021 | 145,350 | 1,427 | ||||||||||||
Cocoa Futures Contracts | 1 | Mar 2021 | 25,970 | 477 | ||||||||||||
LME Nickel Futures Contracts | 1 | Feb 2021 | 99,516 | (640 | ) | |||||||||||
LME Primary Aluminum Futures Contracts | 1 | Feb 2021 | 49,568 | (1,241 | ) | |||||||||||
LME Lead Futures Contracts | 3 | Feb 2021 | 149,183 | (8,870 | ) | |||||||||||
LME Zinc Futures Contracts | 4 | Feb 2021 | 274,176 | (10,911 | ) | |||||||||||
Natural Gas Futures Contracts | 20 | Feb 2021 | 506,200 | (26,851 | ) | |||||||||||
$ | 7,538,044 | $ | 256,295 | |||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
British Pound Futures Contracts | 24 | Mar 2021 | $ | 2,052,150 | $ | 47,842 | ||||||||||
Canadian Dollar Futures Contracts | 43 | Mar 2021 | 3,380,015 | 18,803 | ||||||||||||
Euro FX Futures Contracts | 13 | Mar 2021 | 1,988,350 | 13,958 | ||||||||||||
New Zealand Dollar Futures Contracts | 9 | Mar 2021 | 647,730 | 13,726 | ||||||||||||
Japanese Yen Futures Contracts | 16 | Mar 2021 | 1,938,500 | 13,346 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Futures Contracts (continued) | ||||||||||||||||
Description | Number of | Expiration Date | Notional | Value and | ||||||||||||
Currency Futures Contracts Purchased† (continued) | ||||||||||||||||
Australian Dollar Futures Contracts | 3 | Mar 2021 | $ | 231,420 | $ | 6,137 | ||||||||||
Mexican Peso Futures Contracts | 21 | Mar 2021 | 523,740 | 453 | ||||||||||||
$ | 10,761,905 | $ | 114,265 | |||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
FTSE Taiwan Index Futures Contracts | 11 | Jan 2021 | $ | 561,330 | $ | 17,607 | ||||||||||
NASDAQ-100 Index Mini Futures Contracts | 1 | Mar 2021 | 257,385 | 9,361 | ||||||||||||
Nikkei 225 (OSE) Index Futures Contracts | 1 | Mar 2021 | 266,868 | 7,767 | ||||||||||||
Amsterdam Index Futures Contracts†† | 2 | Jan 2021 | 307,175 | 6,690 | ||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 1 | Mar 2021 | 230,260 | 6,054 | ||||||||||||
Tokyo Stock Price Index Futures Contracts | 1 | Mar 2021 | 175,840 | 5,798 | ||||||||||||
Hang Seng Index Futures Contracts†† | 1 | Jan 2021 | 173,645 | 4,670 | ||||||||||||
MSCI Emerging Markets Index Futures Contracts | 2 | Mar 2021 | 128,790 | 4,107 | ||||||||||||
S&P 500 Index Mini Futures Contracts | 2 | Mar 2021 | 374,425 | 4,027 | ||||||||||||
Russell 2000 Index Mini Futures Contracts | 2 | Mar 2021 | 197,420 | 2,719 | ||||||||||||
MSCI EAFE Index Futures Contracts | 1 | Mar 2021 | 106,525 | 2,428 | ||||||||||||
FTSE/JSE TOP 40 Index Futures Contracts†† | 3 | Mar 2021 | 112,615 | 1,381 | ||||||||||||
SPI 200 Index Futures Contracts | 2 | Mar 2021 | 255,494 | 1,371 | ||||||||||||
OMX Stockholm 30 Index Futures Contracts†† | 2 | Jan 2021 | 45,817 | 953 | ||||||||||||
CAC 40 10 Euro Index Futures Contracts†† | 2 | Jan 2021 | 136,553 | 848 | ||||||||||||
S&P/TSX 60 IX Index Futures Contracts | 1 | Mar 2021 | 161,617 | (1,963 | ) | |||||||||||
CBOE Volatility Index Futures Contracts | 8 | Jan 2021 | 189,440 | (2,312 | ) | |||||||||||
$ | 3,681,199 | $ | 71,506 | |||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
Australian Government 10 Year Bond Futures Contracts | 28 | Mar 2021 | $ | 3,179,149 | $ | 12,346 | ||||||||||
U.S. Treasury 2 Year Note Futures Contracts | 52 | Mar 2021 | 11,489,969 | 10,882 | ||||||||||||
U.S. Treasury 5 Year Note Futures Contracts | 29 | Mar 2021 | 3,658,078 | 7,942 | ||||||||||||
U.S. Treasury 10 Year Note Futures Contracts | 30 | Mar 2021 | 4,140,469 | 4,670 | ||||||||||||
Australian Government 3 Year Bond Futures Contracts | 165 | Mar 2021 | 14,938,811 | 3,973 | ||||||||||||
Euro - Bobl Futures Contracts†† | 5 | Mar 2021 | 826,429 | 374 | ||||||||||||
$ | 38,232,905 | $ | 40,187 | |||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
CBOE Volatility Index Futures Contracts | 9 | Feb 2021 | $ | 230,040 | $ | 14,579 | ||||||||||
CBOE Volatility Index Futures Contracts | 4 | Mar 2021 | 103,160 | 52 | ||||||||||||
HSCEI Index Futures Contracts†† | 1 | Jan 2021 | 68,196 | (1,023 | ) | |||||||||||
Euro STOXX 50 Index Futures Contracts†† | 1 | Mar 2021 | 43,438 | (1,519 | ) | |||||||||||
FTSE 100 Index Futures Contracts†† | 3 | Mar 2021 | 266,379 | (3,099 | ) | |||||||||||
$ | 711,213 | $ | 8,990 | |||||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||||
Euro - Schatz Futures Contracts†† | 50 | Mar 2021 | $ | 6,859,726 | $ | 1,566 | ||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 1 | Mar 2021 | 213,063 | 431 | ||||||||||||
Canadian Government 10 Year Bond Futures Contracts†† | 6 | Mar 2021 | 703,244 | 44 | ||||||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 3 | Mar 2021 | 557,588 | (391 | ) | |||||||||||
Long Gilt Futures Contracts†† | 10 | Mar 2021 | 1,852,495 | (3,691 | ) | |||||||||||
Euro - OATS Futures Contracts†† | 10 | Mar 2021 | 2,053,397 | (3,796 | ) | |||||||||||
$ | 12,239,513 | $ | (5,837 | ) | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
Swiss Franc Futures Contracts | 27 | Mar 2021 | $ | 3,820,163 | $ | (7,940 | ) | |||||||||
Commodity Futures Contracts Sold Short† | ||||||||||||||||
Natural Gas Futures Contracts | 6 | Jan 2021 | $ | 152,400 | $ | 8,445 | ||||||||||
NY Harbor ULSD Futures Contracts | 1 | Jan 2021 | 62,353 | (166 | ) | |||||||||||
Lean Hogs Futures Contracts | 1 | Feb 2021 | 28,140 | (1,283 | ) | |||||||||||
Cattle Feeder Futures Contracts | 3 | Mar 2021 | 210,187 | (1,997 | ) | |||||||||||
Live Cattle Futures Contracts | 3 | Feb 2021 | 138,150 | (2,379 | ) |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Futures Contracts (concluded) | ||||||||||||||||
Description | Number of | Expiration Date | Notional |
| ||||||||||||
Commodity Futures Contracts Sold Short† (continued) | ||||||||||||||||
Gasoline RBOB Futures Contracts | 7 | Mar 2021 | $ | 449,438 | $ | (13,336 | ) | |||||||||
Coffee ‘C’ Futures Contracts | 3 | Mar 2021 | 143,213 | (13,422 | ) | |||||||||||
Low Sulphur Gas Oil Futures Contracts | 6 | Feb 2021 | 256,350 | (13,660 | ) | |||||||||||
Wheat Futures Contracts | 23 | Mar 2021 | 738,013 | (14,682 | ) | |||||||||||
Live Cattle Futures Contracts | 22 | Apr 2021 | 1,049,840 | (19,485 | ) | |||||||||||
Natural Gas Futures Contracts | 27 | Mar 2021 | 687,690 | (27,069 | ) | |||||||||||
Sugar #11 Futures Contracts | 43 | Feb 2021 | 746,480 | (34,172 | ) | |||||||||||
$ | 4,662,254 | $ | (133,206 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Consolidated Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Consolidated Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 6,889,610 | $ | — | $ | — | $ | 6,889,610 | ||||||||
U.S. Treasury Bills | — | 1,223,953 | — | 1,223,953 | ||||||||||||
Repurchase Agreements | — | 5,317,793 | — | 5,317,793 | ||||||||||||
Commodity Futures Contracts** | 313,253 | — | — | 313,253 | ||||||||||||
Currency Futures Contracts** | 114,265 | — | — | 114,265 | ||||||||||||
Equity Futures Contracts** | 75,870 | 14,542 | — | 90,412 | ||||||||||||
Interest Rate Futures Contracts** | 40,244 | 1,984 | — | 42,228 | ||||||||||||
Total Assets | $ | 7,433,242 | $ | 6,558,272 | $ | — | $ | 13,991,514 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Commodity Futures Contracts** | $ | 190,164 | $ | — | $ | — | $ | 190,164 | ||||||||
Equity Futures Contracts** | 4,275 | 5,641 | — | 9,916 | ||||||||||||
Currency Futures Contracts** | 7,940 | — | — | 7,940 | ||||||||||||
Interest Rate Futures Contracts** | — | 7,878 | — | 7,878 | ||||||||||||
Total Liabilities | $ | 202,379 | $ | 13,519 | $ | — | $ | 215,898 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,771,464 | $ | 11,392 | $ | (1,625,000 | ) | $ | (50,862 | ) | $ | 5,049 | $ | 112,043 | 4,489 | $ | 11,481 | |||||||||||||||
Guggenheim Strategy Fund III | 2,318,911 | 44,834 | — | — | 36,207 | 2,399,952 | 95,616 | 44,672 | ||||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 2,853,202 | 15,407 | (2,740,000 | ) | (58,582 | ) | 1,911 | 71,938 | 7,208 | 15,537 | ||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 5,151,929 | 94,314 | (1,000,000 | ) | 3,167 | 56,267 | 4,305,677 | 171,952 | 94,142 | |||||||||||||||||||||||
$ | 12,095,506 | $ | 165,947 | $ | (5,365,000 | ) | $ | (106,277 | ) | $ | 99,434 | $ | 6,889,610 | $ | 165,832 |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $1,223,929) | $ | 1,223,953 | ||
Investments in affiliated issuers, at value (cost $6,833,567) | 6,889,610 | |||
Repurchase agreements, at value (cost $5,317,793) | 5,317,793 | |||
Segregated cash with broker | 155,720 | |||
Receivables: | ||||
Variation margin on futures contracts | 46,653 | |||
Dividends | 10,241 | |||
Fund shares sold | 7,493 | |||
Interest | 9 | |||
Total assets | 13,651,472 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 210 | |||
Payable for: | ||||
Professional fees | 19,697 | |||
Securities purchased | 10,993 | |||
Management fees | 10,146 | |||
Printing fees | 8,353 | |||
Fund shares redeemed | 3,282 | |||
Investor service fees | 2,823 | |||
Transfer agent and administrative fees | 1,344 | |||
Portfolio accounting fees | 1,129 | |||
Trustees’ fees* | 205 | |||
Miscellaneous | 605 | |||
Total liabilities | 58,787 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 13,592,685 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,705,754 | ||
Total distributable earnings (loss) | (113,069 | ) | ||
Net assets | $ | 13,592,685 | ||
Capital shares outstanding | 832,974 | |||
Net asset value per share | $ | 16.32 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 165,832 | ||
Interest | 11,257 | |||
Total investment income | 177,089 | |||
Expenses: | ||||
Management fees | 145,925 | |||
Investor service fees | 37,799 | |||
Transfer agent and administrative fees | 26,679 | |||
Professional fees | 32,133 | |||
Portfolio accounting fees | 15,120 | |||
Trustees’ fees* | 3,353 | |||
Custodian fees | 2,348 | |||
Miscellaneous | 9,005 | |||
Total expenses | 272,362 | |||
Less: | ||||
Expenses waived by Adviser | (11,819 | ) | ||
Net expenses | 260,543 | |||
Net investment loss | (83,454 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (15 | ) | ||
Investments in affiliated issuers | (106,277 | ) | ||
Futures contracts | 13,401 | |||
Foreign currency transactions | (1,403 | ) | ||
Net realized loss | (94,294 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 60 | |||
Investments in affiliated issuers | 99,434 | |||
Futures contracts | 390,296 | |||
Foreign currency translations | (107 | ) | ||
Net change in unrealized appreciation (depreciation) | 489,683 | |||
Net realized and unrealized gain | 395,389 | |||
Net increase in net assets resulting from operations | $ | 311,935 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (83,454 | ) | $ | 116,193 | |||
Net realized gain (loss) on investments | (94,294 | ) | 1,163,577 | |||||
Net change in unrealized appreciation (depreciation) on investments | 489,683 | (265,187 | ) | |||||
Net increase in net assets resulting from operations | 311,935 | 1,014,583 | ||||||
Distributions to shareholders | (742,547 | ) | (124,141 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,382,174 | 6,039,386 | ||||||
Distributions reinvested | 742,547 | 124,141 | ||||||
Cost of shares redeemed | (6,383,348 | ) | (6,053,438 | ) | ||||
Net increase (decrease) from capital share transactions | (258,627 | ) | 110,089 | |||||
Net increase (decrease) in net assets | (689,239 | ) | 1,000,531 | |||||
Net assets: | ||||||||
Beginning of year | 14,281,924 | 13,281,393 | ||||||
End of year | $ | 13,592,685 | $ | 14,281,924 | ||||
Capital share activity: | ||||||||
Shares sold | 318,315 | 356,833 | ||||||
Shares issued from reinvestment of distributions | 46,007 | 7,506 | ||||||
Shares redeemed | (389,468 | ) | (363,126 | ) | ||||
Net increase (decrease) in shares | (25,146 | ) | 1,213 |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
GLOBAL MANAGED FUTURES STRATEGY FUND |
CONSOLIDATED FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 16.64 | $ | 15.50 | $ | 17.06 | $ | 15.93 | $ | 19.42 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.09 | ) | .14 | .20 | .10 | .06 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .51 | 1.15 | (1.76 | ) | 1.27 | (2.88 | ) | |||||||||||||
Total from investment operations | .42 | 1.29 | (1.56 | ) | 1.37 | (2.82 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.65 | ) | (.15 | ) | — | (.24 | ) | (.67 | ) | |||||||||||
Net realized gains | (.09 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.74 | ) | (.15 | ) | — | (.24 | ) | (.67 | ) | |||||||||||
Net asset value, end of period | $ | 16.32 | $ | 16.64 | $ | 15.50 | $ | 17.06 | $ | 15.93 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 2.60 | % | 8.35 | % | (9.14 | %) | 8.71 | % | (14.77 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 13,593 | $ | 14,282 | $ | 13,281 | $ | 14,791 | $ | 14,782 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.55 | %) | 0.82 | % | 1.21 | % | 0.59 | % | 0.32 | % | ||||||||||
Total expensesc | 1.80 | % | 1.81 | % | 1.72 | % | 1.69 | % | 1.69 | % | ||||||||||
Net expensesd | 1.72 | % | 1.74 | % | 1.66 | % | 1.64 | % | 1.62 | % | ||||||||||
Portfolio turnover rate | 2 | % | 13 | % | 8 | % | 1 | % | 39 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND
OBJECTIVE: Seeks to provide long-term capital appreciation with less risk than traditional equity funds.
The Fund seeks capital appreciation with low correlation to equity and fixed income markets, while doing so with low risk*–typically in the 5% to 8% range.
For the one-year period ended December 31, 2020, Guggenheim Multi-Hedge Strategies Fund produced a return of 7.39%. The Fund succeeded in maintaining low correlation with stock and bond indices, as its correlation with the S&P 500 and the Bloomberg Barclays U.S. Aggregate Bond Index came in at 56% and 0%, respectively. During the period the fund experienced 7.6% risk, as measured by annualized daily return standard deviation.
The Fund outperformed the HFRX Global Hedge Fund Index, which returned 6.81% for the year. The HFRX Global Hedge Fund Index had a correlation of 59% with the S&P 500 and a 16% correlation to the Bloomberg Barclays U.S. Aggregate Bond Index in 2020.
Four of the five hedge fund strategies used within the Fund contributed positively to Fund returns in 2020. Specifically, Equity Market Neutral, Global Macro, Merger Arbitrage, and Long/Short Equity strategies were positive contributors for the year.
The Fund held derivatives for a number of reasons, including liquidity, leverage, speculation, and hedging. Derivatives were liquid and allowed the Fund to gain leveraged access to markets in order to express investment views and to hedge exposures. During the year, derivatives were used within the Global Macro, Long/Short Equity, and Equity Market Neutral strategies and to a limited extent in the Merger Arbitrage strategy. Overall, the use of derivatives had a positive contribution to Fund performance for the year.
Guggenheim Ultra Short Duration Fund and Guggenheim Strategy Funds were utilized within the Fund to achieve higher yields than what would otherwise be achieved through overnight repurchase agreements or short-term investments.
Performance displayed represents past performance which is no guarantee of future results.
* | Risk is measured by standard deviation, a statistic of the historical volatility of an investment, usually computed using the most recent 36-monthly returns and then annualized. More generally, it is a measure of the extent to which numbers are spread around their average. The higher the number, the more volatility is to be expected. |
36 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(continued) | December 31, 2020 |
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: November 29, 2005 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 12.8% |
Guggenheim Strategy Fund III | 6.1% |
Guggenheim Strategy Fund II | 5.3% |
Guggenheim Variable Insurance Strategy Fund III | 5.3% |
Tiffany & Co. | 3.4% |
Varian Medical Systems, Inc. | 2.5% |
Willis Towers Watson plc | 2.4% |
National General Holdings Corp. | 2.3% |
Eaton Vance Corp. | 2.0% |
Maxim Integrated Products, Inc. | 1.6% |
Top Ten Total | 43.7% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Multi-Hedge Strategies Fund | 7.39% | 2.01% | 2.38% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
HFRX Global Hedge Fund Index | 6.81% | 3.29% | 1.27% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The HFRX Global Hedge Fund Index and the S&P 500 Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
38 | THE RYDEX FUNDS ANNUAL REPORT |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 35.6% | ||||||||
Financial - 10.2% | ||||||||
Willis Towers Watson plc1 | 4,510 | $ | 950,167 | |||||
National General Holdings Corp.1 | 27,124 | 927,098 | ||||||
Eaton Vance Corp.1 | 11,848 | 804,834 | ||||||
Front Yard Residential Corp. REIT1 | 33,409 | 541,226 | ||||||
TCF Financial Corp. | 6,644 | 245,961 | ||||||
Waddell & Reed Financial, Inc. — Class A | 9,572 | 243,799 | ||||||
Dime Community Bancshares, Inc.1 | 14,950 | 235,762 | ||||||
Genworth Financial, Inc. — Class A* | 33,151 | 125,311 | ||||||
Total Financial | 4,074,158 | |||||||
Technology - 7.5% | ||||||||
Maxim Integrated Products, Inc.1 | 7,345 | 651,134 | ||||||
Virtusa Corp.*,1 | 9,961 | 509,306 | ||||||
Xilinx, Inc. | 3,488 | 494,494 | ||||||
Slack Technologies, Inc. — Class A* | 11,509 | 486,140 | ||||||
RealPage, Inc.* | 5,534 | 482,786 | ||||||
Inphi Corp.* | 1,789 | 287,081 | ||||||
MTS Systems Corp.* | 2,478 | 144,120 | ||||||
Total Technology | 3,055,061 | |||||||
Consumer, Cyclical - 7.3% | ||||||||
Tiffany & Co.1 | 10,434 | 1,371,549 | ||||||
Navistar International Corp.* | 13,935 | 612,583 | ||||||
BMC Stock Holdings, Inc.*,1 | 8,813 | 473,082 | ||||||
Foundation Building Materials, Inc.* | 12,819 | 246,253 | ||||||
Sportsman’s Warehouse Holdings, Inc.*,†† | 13,609 | 238,838 | ||||||
Total Consumer, Cyclical | 2,942,305 | |||||||
Consumer, Non-cyclical - 5.7% | ||||||||
Varian Medical Systems, Inc.*,1 | 5,637 | 986,531 | ||||||
IHS Markit Ltd. | 4,855 | 436,125 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,581 | 247,015 | ||||||
HMS Holdings Corp.* | 6,627 | 243,542 | ||||||
American Renal Associates Holdings, Inc.* | 21,041 | 240,920 | ||||||
Cellular Biomedicine Group, Inc.* | 9,769 | 179,554 | ||||||
Total Consumer, Non-cyclical | 2,333,687 | |||||||
Industrial - 2.4% | ||||||||
Fitbit, Inc. — Class A*,1 | 73,771 | 501,643 | ||||||
SEACOR Holdings, Inc.* | 5,856 | 242,731 | ||||||
Aerojet Rocketdyne Holdings, Inc.* | 4,096 | 216,473 | ||||||
Total Industrial | 960,847 | |||||||
Communications - 1.9% | ||||||||
Cincinnati Bell, Inc.*,1 | 33,133 | 506,380 | ||||||
Endurance International Group Holdings, Inc.* | 26,636 | 251,710 | ||||||
Total Communications | 758,090 | |||||||
Utilities - 0.6% | ||||||||
PNM Resources, Inc.1 | 5,003 | 242,796 | ||||||
Total Common Stocks | ||||||||
(Cost $13,736,919) | 14,366,944 | |||||||
RIGHTS† - 0.0% | ||||||||
Consumer, Non-cyclical - 0.0% | ||||||||
Bristol-Myers Squibb Co. | 5,855 | 4,041 | ||||||
Lantheus Holdings, Inc.*,††† | 41,807 | — | ||||||
Alexion Pharmaceuticals, Inc.*,††† | 32,749 | — | ||||||
Total Rights | ||||||||
(Cost $13,467) | 4,041 | |||||||
MUTUAL FUNDS† - 29.5% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 516,152 | 5,151,197 | ||||||
Guggenheim Strategy Fund III2 | 97,718 | 2,452,729 | ||||||
Guggenheim Strategy Fund II2 | 86,854 | 2,167,874 | ||||||
Guggenheim Variable Insurance Strategy Fund III2 | 85,274 | 2,135,271 | ||||||
Total Mutual Funds | ||||||||
(Cost $11,855,700) | 11,907,071 | |||||||
CLOSED-END FUNDS† - 9.5% | ||||||||
Apollo Senior Floating Rate Fund, Inc.3 | 8,179 | 117,790 | ||||||
Nuveen Short Duration Credit Opportunities Fund | 8,802 | 117,595 | ||||||
BrandywineGLOBAL Global Income Opportunities Fund, Inc. | 9,312 | 116,307 | ||||||
Western Asset Inflation-Linked Opportunities & Income Fund | 9,367 | 116,244 | ||||||
Royce Micro-Capital Trust, Inc. | 11,444 | 115,813 | ||||||
Western Asset Emerging Markets Debt Fund, Inc. | 8,276 | 115,037 | ||||||
PGIM Global High Yield Fund, Inc.3 | 7,899 | 114,773 | ||||||
Morgan Stanley Emerging Markets Debt Fund, Inc. | 12,350 | 114,361 | ||||||
BlackRock California Municipal Income Trust | 8,019 | 114,110 | ||||||
Nuveen Floating Rate Income Opportunity Fund | 13,140 | 113,792 | ||||||
Nuveen New Jersey Quality Municipal Income Fund | 7,832 | 112,546 | ||||||
Invesco Senior Income Trust | 27,936 | 111,185 | ||||||
Morgan Stanley Emerging Markets Domestic Debt Fund, Inc. | 17,552 | 110,402 | ||||||
BlackRock Resources & Commodities Strategy Trust | 13,293 | 98,501 | ||||||
CBRE Clarion Global Real Estate Income Fund | 14,009 | 96,382 | ||||||
LMP Capital and Income Fund, Inc.3 | 7,896 | 91,988 | ||||||
Nuveen Real Asset Income and Growth Fund | 6,246 | 84,071 | ||||||
Tortoise Power and Energy Infrastructure Fund, Inc. | 7,512 | 83,233 | ||||||
General American Investors Company, Inc. | 2,198 | 81,744 | ||||||
Lazard Global Total Return and Income Fund, Inc. | 4,260 | 75,871 | ||||||
Miller/Howard High Dividend Fund | 7,682 | 59,535 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
Gabelli Global Small and Mid Capital Value Trust | 4,180 | $ | 54,549 | |||||
Nuveen Real Estate Income Fund | 6,212 | 52,429 | ||||||
Franklin Universal Trust | 6,068 | 45,449 | ||||||
Neuberger Berman California Municipal Fund, Inc. | 2,961 | 40,270 | ||||||
Gabelli Healthcare & WellnessRx Trust | 3,236 | 38,670 | ||||||
Voya Infrastructure Industrials and Materials Fund | 3,744 | 38,563 | ||||||
Clough Global Equity Fund | 2,599 | 35,658 | ||||||
Neuberger Berman New York Municipal Fund, Inc. | 2,398 | 29,567 | ||||||
Nuveen Floating Rate Income Fund | 3,275 | 28,623 | ||||||
Nuveen Ohio Quality Municipal Income Fund | 1,564 | 24,484 | ||||||
European Equity Fund, Inc. | 1,801 | 18,730 | ||||||
New Germany Fund, Inc. | 889 | 16,918 | ||||||
Aberdeen Japan Equity Fund, Inc. | 1,751 | 16,547 | ||||||
Adams Diversified Equity Fund, Inc. | 909 | 15,717 | ||||||
Delaware Investments National Municipal Income Fund | 1,154 | 15,198 | ||||||
Nuveen Senior Income Fund | 1,830 | 9,498 | ||||||
Ellsworth Growth and Income Fund Ltd. | 600 | 8,322 | ||||||
Korea Fund, Inc. | 206 | 8,312 | ||||||
Bancroft Fund Ltd. | 273 | 8,228 | ||||||
Herzfeld Caribbean Basin Fund, Inc. | 1,600 | 8,176 | ||||||
Tekla Healthcare Investors | 339 | 8,078 | ||||||
AllianzGI Diversified Income & Convertible Fund | 247 | 8,072 | ||||||
New Ireland Fund, Inc. | 776 | 8,055 | ||||||
Franklin Limited Duration Income Trust | 851 | 8,016 | ||||||
Cohen & Steers Closed-End Opportunity Fund, Inc. | 643 | 7,986 | ||||||
Eaton Vance Tax-Advantaged Global Dividend Income Fund | 436 | 7,957 | ||||||
Templeton Emerging Markets Fund/United States | 425 | 7,956 | ||||||
Nuveen New York Select Tax-Free Income Portfolio | 560 | 7,941 | ||||||
Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund | 314 | 7,935 | ||||||
AllianzGI Convertible & Income Fund | 1,372 | 7,875 | ||||||
Tekla Healthcare Opportunities Fund | 385 | 7,846 | ||||||
Gabelli Convertible and Income Securities Fund, Inc. | 1,255 | 7,844 | ||||||
Nuveen Global High Income Fund | 504 | 7,837 | ||||||
AllianzGI Convertible & Income Fund II | 1,537 | 7,824 | ||||||
Tekla Life Sciences Investors | 395 | 7,801 | ||||||
Central and Eastern Europe Fund, Inc. | 324 | 7,799 | ||||||
Invesco Bond Fund | 358 | 7,797 | ||||||
Royce Value Trust, Inc. | 483 | 7,796 | ||||||
Gabelli Global Utility & Income Trust | 422 | 7,773 | ||||||
Calamos Convertible Opportunities and Income Fund | 574 | 7,772 | ||||||
Liberty All-Star Equity Fund3 | 1,125 | 7,763 | ||||||
Swiss Helvetia Fund, Inc. | 868 | 7,760 | ||||||
First Trust Dynamic Europe Equity Income Fund | 656 | 7,741 | ||||||
Aberdeen Global Dynamic Dividend Fund | 740 | 7,726 | ||||||
Virtus Total Return Fund, Inc. | 879 | 7,718 | ||||||
Ivy High Income Opportunities Fund | 581 | 7,716 | ||||||
Aberdeen Australia Equity Fund, Inc. | 1,464 | 7,715 | ||||||
Calamos Convertible and High Income Fund | 540 | 7,711 | ||||||
Nuveen Core Equity Alpha Fund | 548 | 7,710 | ||||||
First Trust Aberdeen Emerging Opportunity Fund | 538 | 7,704 | ||||||
AllianceBernstein Global High Income Fund, Inc. | 654 | 7,698 | ||||||
Calamos Dynamic Convertible & Income Fund | 273 | 7,690 | ||||||
Delaware Investments Dividend & Income Fund, Inc. | 831 | 7,687 | ||||||
MFS High Income Municipal Trust | 1,515 | 7,681 | ||||||
BlackRock MuniYield Quality Fund III, Inc. | 531 | 7,673 | ||||||
BlackRock Municipal Income Quality Trust | 505 | 7,661 | ||||||
BlackRock MuniHoldings Quality Fund II, Inc. | 561 | 7,658 | ||||||
Nuveen Municipal Credit Income Fund | 475 | 7,657 | ||||||
Virtus Global Multi-Sector Income Fund | 632 | 7,654 | ||||||
Western Asset Inflation - Linked Securities & Income Fund | 561 | 7,652 | ||||||
Nuveen Tax-Advantaged Dividend Growth Fund | 538 | 7,650 | ||||||
Nuveen Tax-Advantaged Total Return Strategy Fund | 812 | 7,649 | ||||||
BlackRock Multi-Sector Income Trust | 436 | 7,648 | ||||||
Aberdeen Total Dynamic Dividend Fund3 | 864 | 7,646 | ||||||
Wells Fargo Income Opportunities Fund | 937 | 7,646 | ||||||
Nuveen Pennsylvania Quality Municipal Income Fund | 528 | 7,640 | ||||||
Tri-Continental Corp. | 259 | 7,635 | ||||||
Invesco Trust for Investment Grade New York Municipals | 585 | 7,634 | ||||||
Invesco California Value Municipal Income Trust | 576 | 7,620 | ||||||
Gabelli Dividend & Income Trust | 355 | 7,618 | ||||||
BlackRock MuniYield Pennsylvania Quality Fund | 510 | 7,609 | ||||||
Nuveen Maryland Quality Municipal Income Fund | 539 | 7,605 | ||||||
Eaton Vance Floating-Rate Income Plus Fund | 489 | 7,604 | ||||||
Eaton Vance Municipal Bond Fund | 559 | 7,602 | ||||||
BlackRock MuniYield California Fund, Inc. | 514 | 7,602 | ||||||
BlackRock New York Municipal Income Trust | 521 | 7,601 | ||||||
Duff & Phelps Utility and Infrastructure Fund, Inc. | 623 | 7,601 | ||||||
BNY Mellon Strategic Municipal Bond Fund, Inc. | 965 | 7,595 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
Nuveen Georgia Quality Municipal Income Fund | 581 | $ | 7,594 | |||||
Wells Fargo Global Dividend Opportunity Fund | 1,565 | 7,590 | ||||||
BlackRock MuniHoldings California Quality Fund, Inc. | 506 | 7,590 | ||||||
AllianceBernstein National Municipal Income Fund, Inc. | 526 | 7,585 | ||||||
Source Capital, Inc. | 190 | 7,583 | ||||||
DWS Municipal Income Trust | 652 | 7,583 | ||||||
Western Asset Premier Bond Fund | 535 | 7,581 | ||||||
Federated Hermes Premier Municipal Income Fund | 512 | 7,578 | ||||||
BlackRock MuniYield Quality Fund II, Inc. | 542 | 7,577 | ||||||
Nuveen New York AMT-Free Quality Municipal Income Fund | 560 | 7,577 | ||||||
Invesco Quality Municipal Income Trust | 581 | 7,576 | ||||||
BlackRock New York Municipal Income Trust II | 522 | 7,569 | ||||||
BlackRock Muni Intermediate Duration Fund, Inc. | 509 | 7,569 | ||||||
Invesco Pennsylvania Value Municipal Income Trust | 593 | 7,567 | ||||||
BlackRock MuniHoldings Fund, Inc. | 467 | 7,565 | ||||||
Nuveen AMT-Free Quality Municipal Income Fund | 501 | 7,565 | ||||||
Wells Fargo Multi-Sector Income Fund | 623 | 7,563 | ||||||
Eaton Vance Senior Income Trust | 1,189 | 7,562 | ||||||
Nuveen Quality Municipal Income Fund | 492 | 7,562 | ||||||
BlackRock MuniYield New Jersey Fund, Inc. | 523 | 7,557 | ||||||
BlackRock Municipal 2030 Target Term Trust | 294 | 7,550 | ||||||
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund | 902 | 7,550 | ||||||
Eaton Vance New York Municipal Income Trust | 540 | 7,549 | ||||||
MFS Investment Grade Municipal Trust | 770 | 7,546 | ||||||
PIMCO New York Municipal Income Fund II | 694 | 7,544 | ||||||
Invesco Trust for Investment Grade Municipals | 571 | 7,543 | ||||||
Eaton Vance New York Municipal Bond Fund | 614 | 7,540 | ||||||
BlackRock MuniVest Fund, Inc. | 820 | 7,536 | ||||||
Sprott Focus Trust, Inc. | 1,092 | 7,535 | ||||||
BlackRock MuniYield Michigan Quality Fund, Inc. | 517 | 7,533 | ||||||
Western Asset Municipal High Income Fund, Inc. | 1,003 | 7,532 | ||||||
BNY Mellon Municipal Income, Inc. | 849 | 7,531 | ||||||
MFS High Yield Municipal Trust | 1,711 | 7,528 | ||||||
Western Asset Managed Municipals Fund, Inc. | 586 | 7,524 | ||||||
Aberdeen Global Premier Properties Fund | 1,430 | 7,522 | ||||||
BlackRock MuniHoldings New York Quality Fund, Inc. | 533 | 7,521 | ||||||
Western Asset Municipal Partners Fund, Inc. | 503 | 7,520 | ||||||
BlackRock MuniHoldings New Jersey Quality Fund, Inc. | 520 | 7,519 | ||||||
PGIM High Yield Bond Fund, Inc. | 501 | 7,515 | ||||||
Pioneer Municipal High Income Advantage Trust | 645 | 7,514 | ||||||
Nuveen New York Quality Municipal Income Fund | 531 | 7,514 | ||||||
Invesco Municipal Opportunity Trust | 586 | 7,513 | ||||||
BlackRock MuniYield New York Quality Fund, Inc. | 565 | 7,509 | ||||||
Eaton Vance California Municipal Income Trust | 548 | 7,505 | ||||||
Nuveen California AMT-Free Quality Municipal Income Fund | 476 | 7,502 | ||||||
Delaware Investments Colorado Municipal Income Fund, Inc. | 527 | 7,499 | ||||||
Western Asset Intermediate Muni Fund, Inc. | 815 | 7,498 | ||||||
Eaton Vance California Municipal Bond Fund | 638 | 7,497 | ||||||
Invesco Value Municipal Income Trust | 479 | 7,496 | ||||||
Voya International High Dividend Equity Income Fund | 1,636 | 7,493 | ||||||
Invesco Advantage Municipal Income Trust II | 660 | 7,491 | ||||||
First Trust High Income Long/Short Fund | 507 | 7,488 | ||||||
MFS Multimarket Income Trust | 1,224 | 7,479 | ||||||
BlackRock MuniYield Fund, Inc. | 521 | 7,476 | ||||||
Invesco High Income Trust II | 550 | 7,474 | ||||||
BlackRock Debt Strategies Fund, Inc. | 715 | 7,472 | ||||||
Nuveen Michigan Quality Municipal Income Fund | 506 | 7,469 | ||||||
DWS Strategic Municipal Income Trust | 655 | 7,467 | ||||||
Eaton Vance Municipal Income Trust | 558 | 7,466 | ||||||
Pioneer Municipal High Income Trust | 600 | 7,464 | ||||||
Invesco Municipal Trust | 582 | 7,461 | ||||||
John Hancock Investors Trust | 432 | 7,461 | ||||||
Nuveen AMT-Free Municipal Value Fund | 454 | 7,459 | ||||||
Nuveen California Quality Municipal Income Fund | 492 | 7,459 | ||||||
Insight Select Income Fund | 349 | 7,455 | ||||||
MFS Municipal Income Trust | 1,115 | 7,448 | ||||||
Eaton Vance Tax-Managed Buy-Write Fund | 752 | 7,445 | ||||||
Voya Asia Pacific High Dividend Equity Income Fund | 862 | 7,439 | ||||||
Nuveen Credit Strategies Income Fund | 1,175 | 7,438 | ||||||
First Trust Senior Floating Rate Income Fund II | 640 | 7,437 | ||||||
BlackRock Floating Rate Income Strategies Fund, Inc. | 614 | 7,436 | ||||||
BlackRock MuniHoldings Investment Quality Fund | 528 | 7,434 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
| Shares | Value | ||||||
John Hancock Tax-Advantaged Global Shareholder Yield Fund | 1,344 | $ | 7,432 | |||||
BlackRock Municipal Income Investment Trust | 556 | 7,428 | ||||||
Voya Emerging Markets High Income Dividend Equity Fund | 1,021 | 7,412 | ||||||
John Hancock Tax-Advantaged Dividend Income Fund | 352 | 7,406 | ||||||
BlackRock Limited Duration Income Trust | 465 | 7,403 | ||||||
BlackRock New York Municipal Income Quality Trust | 543 | 7,401 | ||||||
Delaware Investments Minnesota Municipal Income Fund II, Inc. | 564 | 7,400 | ||||||
Eaton Vance Floating-Rate Income Trust3 | 562 | 7,396 | ||||||
Voya Prime Rate Trust | 1,654 | 7,393 | ||||||
Credit Suisse Asset Management Income Fund, Inc. | 2,347 | 7,393 | ||||||
BlackRock MuniHoldings Quality Fund, Inc. | 559 | 7,390 | ||||||
Nuveen New York Municipal Value Fund 2 | 498 | 7,385 | ||||||
Eaton Vance Senior Floating-Rate Trust | 580 | 7,383 | ||||||
BNY Mellon High Yield Strategies Fund | 2,456 | 7,368 | ||||||
Nuveen California Municipal Value Fund 2 | 477 | 7,351 | ||||||
BlackRock Floating Rate Income Trust | 622 | 7,333 | ||||||
BlackRock Credit Allocation Income Trust | 498 | 7,326 | ||||||
DTF Tax-Free Income, Inc. | 491 | 7,316 | ||||||
Nuveen New Jersey Municipal Value Fund | 521 | 7,302 | ||||||
Credit Suisse High Yield Bond Fund | 3,201 | 7,298 | ||||||
Western Asset High Income Opportunity Fund, Inc. | 1,467 | 7,262 | ||||||
Nuveen Pennsylvania Municipal Value Fund | 157 | 2,240 | ||||||
Neuberger Berman High Yield Strategies Fund, Inc. | 171 | 1,999 | ||||||
Total Closed-End Funds | ||||||||
(Cost $3,387,559) | 3,824,634 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 14.3% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 04/08/214,5 | $ | 3,135,000 | 3,134,386 | |||||
0.08% due 01/28/215,6 | 2,616,000 | 2,615,900 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $5,750,172) | 5,750,286 | |||||||
REPURCHASE AGREEMENTS††,7 - 9.6% | ||||||||
J.P. Morgan Securities LLC | 2,140,192 | 2,140,192 | ||||||
Barclays Capital, Inc. | 891,627 | 891,627 | ||||||
BofA Securities, Inc. issued 12/31/20 at 0.06% due 01/04/21 | 825,581 | 825,581 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,857,400) | 3,857,400 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,8 - 0.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%9 | 132,673 | 132,673 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $132,673) | 132,673 | |||||||
Total Investments - 98.8% | ||||||||
(Cost $38,733,890) | $ | 39,843,049 | ||||||
COMMON STOCKS SOLD SHORT† - (11.7)% | ||||||||
Industrial - (1.2)% | ||||||||
Builders FirstSource, Inc.* | 11,567 | (472,049 | ) | |||||
Consumer, Non-cyclical - (1.5)% | ||||||||
AstraZeneca plc ADR | 3,359 | (167,916 | ) | |||||
S&P Global, Inc. | 1,378 | (452,990 | ) | |||||
Total Consumer, Non-cyclical | (620,906 | ) | ||||||
Technology - (4.0)% | ||||||||
Marvell Technology Group Ltd. | 4,156 | (197,576 | ) | |||||
salesforce.com, Inc.* | 893 | (198,719 | ) | |||||
Advanced Micro Devices, Inc.* | 6,011 | (551,269 | ) | |||||
Analog Devices, Inc. | 4,627 | (683,547 | ) | |||||
Total Technology | (1,631,111 | ) | ||||||
Financial - (5.0)% | ||||||||
Bridge Bancorp, Inc. | 9,688 | (234,256 | ) | |||||
Huntington Bancshares, Inc. | 19,951 | (251,981 | ) | |||||
Morgan Stanley | 6,911 | (473,611 | ) | |||||
Aon plc — Class A | 4,871 | (1,029,096 | ) | |||||
Total Financial | (1,988,944 | ) | ||||||
Total Common Stocks Sold Short | ||||||||
(Proceeds $4,114,394) | (4,713,010 | ) | ||||||
EXCHANGE-TRADED FUNDS SOLD SHORT† - (10.2)% | ||||||||
iShares Mortgage Real Estate ETF | 49 | (1,561 | ) | |||||
iShares Latin America 40 ETF | 70 | (2,055 | ) | |||||
iShares Agency Bond ETF | 18 | (2,152 | ) | |||||
iShares MSCI All Country Asia ex Japan ETF | 26 | (2,330 | ) | |||||
iShares Core High Dividend ETF | 38 | (3,332 | ) | |||||
SPDR S&P Biotech ETF | 53 | (7,461 | ) | |||||
SPDR Gold Shares — Class D* | 47 | (8,383 | ) | |||||
Utilities Select Sector SPDR Fund | 171 | (10,722 | ) | |||||
iShares Preferred & Income Securities ETF | 294 | (11,322 | ) | |||||
iShares MSCI Emerging Markets ETF | 228 | (11,781 | ) | |||||
VanEck Vectors Gold Miners ETF | 533 | (19,199 | ) | |||||
iShares 7-10 Year Treasury Bond ETF | 197 | (23,630 | ) | |||||
Health Care Select Sector SPDR Fund | 347 | (39,364 | ) |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Value | |||||||
iShares Russell 1000 Growth ETF | 173 | $ | (41,717 | ) | ||||
Energy Select Sector SPDR Fund | 1,116 | (42,296 | ) | |||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 350 | (48,345 | ) | |||||
iShares TIPS Bond ETF | 386 | (49,273 | ) | |||||
SPDR Bloomberg Barclays Convertible Securities ETF | 737 | (61,016 | ) | |||||
iShares Core U.S. Aggregate Bond ETF | 974 | (115,117 | ) | |||||
VanEck Vectors High Yield Muni ETF | 2,185 | (134,465 | ) | |||||
iShares U.S. Real Estate ETF | 1,595 | (136,612 | ) | |||||
iShares Russell 1000 Value ETF | 1,399 | (191,285 | ) | |||||
iShares Russell 2000 Index ETF | 1,231 | (241,350 | ) | |||||
SPDR S&P 500 ETF Trust | 669 | (250,126 | ) | |||||
iShares JP Morgan USD Emerging Markets Bond ETF | 2,407 | (278,995 | ) | |||||
iShares iBoxx High Yield Corporate Bond ETF | 3,216 | (280,757 | ) | |||||
iShares MSCI EAFE ETF | 5,122 | (373,701 | ) | |||||
iShares Floating Rate Bond ETF | 7,838 | (397,543 | ) | |||||
Invesco Senior Loan ETF | 20,928 | (466,276 | ) | |||||
iShares National Muni Bond ETF | 7,401 | (867,397 | ) | |||||
Total Exchange-Traded Funds Sold Short | ||||||||
(Proceeds $3,942,721) | (4,119,563 | ) | ||||||
Total Securities Sold Short - (21.9)% | ||||||||
(Proceeds $8,057,115) | $ | (8,832,573 | ) | |||||
Other Assets & Liabilities, net - 23.1% | 9,302,304 | |||||||
Total Net Assets - 100.0% | $ | 40,312,780 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||||
Wheat Futures Contracts | 80 | Jul 2021 | $ | 2,520,000 | $ | 138,876 | ||||||||||
Sugar #11 Futures Contracts | 178 | Apr 2021 | 2,928,598 | 118,607 | ||||||||||||
Live Cattle Futures Contracts | 83 | Jun 2021 | 3,807,210 | 80,366 | ||||||||||||
Corn Futures Contracts | 27 | Mar 2021 | 655,762 | 79,102 | ||||||||||||
Soybean Futures Contracts | 11 | Mar 2021 | 720,500 | 66,954 | ||||||||||||
Gasoline RBOB Futures Contracts | 25 | Jan 2021 | 1,481,970 | 62,890 | ||||||||||||
Soybean Oil Futures Contracts | 19 | Mar 2021 | 483,816 | 42,351 | ||||||||||||
Cotton #2 Futures Contracts | 6 | Mar 2021 | 234,630 | 20,471 | ||||||||||||
Copper Futures Contracts | 2 | Mar 2021 | 176,200 | 19,144 | ||||||||||||
Brent Crude Futures Contracts | 6 | Jan 2021 | 310,320 | 17,690 | ||||||||||||
Soybean Meal Futures Contracts | 16 | Mar 2021 | 686,560 | 16,112 | ||||||||||||
Silver Futures Contracts | 1 | Mar 2021 | 132,775 | 10,772 | ||||||||||||
Sugar #11 Futures Contracts | 38 | Jun 2021 | 603,501 | 4,988 | ||||||||||||
Gold 100 oz. Futures Contracts | 1 | Feb 2021 | 190,370 | 3,557 | ||||||||||||
WTI Crude Futures Contracts | 5 | Jan 2021 | 242,250 | 2,379 | ||||||||||||
LME Nickel Futures Contracts | 2 | Feb 2021 | 199,032 | (1,281 | ) | |||||||||||
Cocoa Futures Contracts | 3 | Mar 2021 | 77,910 | (4,659 | ) | |||||||||||
LME Primary Aluminum Futures Contracts | 6 | Feb 2021 | 297,410 | (7,446 | ) | |||||||||||
LME Zinc Futures Contracts | 3 | Feb 2021 | 205,632 | (8,183 | ) | |||||||||||
LME Lead Futures Contracts | 6 | Feb 2021 | 298,365 | (17,741 | ) | |||||||||||
Natural Gas Futures Contracts | 64 | Feb 2021 | 1,619,840 | (62,573 | ) | |||||||||||
$ | 17,872,651 | $ | 582,376 | |||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
British Pound Futures Contracts | 79 | Mar 2021 | $ | 6,754,994 | $ | 158,377 | ||||||||||
Canadian Dollar Futures Contracts | 120 | Mar 2021 | 9,432,600 | 52,354 | ||||||||||||
New Zealand Dollar Futures Contracts | 29 | Mar 2021 | 2,087,130 | 44,102 | ||||||||||||
Japanese Yen Futures Contracts | 39 | Mar 2021 | 4,725,094 | 29,849 | ||||||||||||
Euro FX Futures Contracts | 16 | Mar 2021 | 2,447,200 | 15,000 | ||||||||||||
$ | 25,447,018 | $ | 299,682 | |||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
Australian Government 10 Year Bond Futures Contracts | 68 | Mar 2021 | $ | 7,720,790 | $ | 29,872 | ||||||||||
Euro - BTP Italian Government Bond Futures Contracts†† | 17 | Mar 2021 | 3,159,665 | 23,667 | ||||||||||||
U.S. Treasury 10 Year Note Futures Contracts | 73 | Mar 2021 | 10,075,141 | 10,711 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Futures Contracts (concluded) | ||||||||||||||||
Description | Number of | Expiration Date | Notional | Value and | ||||||||||||
Interest Rate Futures Contracts Purchased† (Continued) | ||||||||||||||||
Euro - 30 year Bond Futures Contracts†† | 5 | Mar 2021 | $ | 1,379,032 | $ | 9,470 | ||||||||||
$ | 22,334,628 | $ | 73,720 | |||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Tokyo Stock Price Index Futures Contracts | 2 | Mar 2021 | $ | 351,679 | $ | 8,114 | ||||||||||
Nikkei 225 (OSE) Index Futures Contracts | 1 | Mar 2021 | 266,868 | 7,657 | ||||||||||||
Amsterdam Index Futures Contracts†† | 1 | Jan 2021 | 153,588 | 3,345 | ||||||||||||
CAC 40 10 Euro Index Futures Contracts†† | 1 | Jan 2021 | 68,276 | 1,033 | ||||||||||||
CBOE Volatility Index Futures Contracts | 4 | Jun 2021 | 103,800 | 995 | ||||||||||||
SPI 200 Index Futures Contracts | 1 | Mar 2021 | 127,747 | 686 | ||||||||||||
Russell 2000 Index Mini Futures Contracts | 1 | Mar 2021 | 98,710 | 3 | ||||||||||||
S&P 500 Index Mini Futures Contracts | 1 | Mar 2021 | 187,213 | (152 | ) | |||||||||||
NASDAQ-100 Index Mini Futures Contracts | 1 | Mar 2021 | 257,385 | (197 | ) | |||||||||||
OMX Stockholm 30 Index Futures Contracts†† | 7 | Jan 2021 | 160,361 | (517 | ) | |||||||||||
S&P/TSX 60 IX Index Futures Contracts | 1 | Mar 2021 | 161,617 | (1,963 | ) | |||||||||||
CBOE Volatility Index Futures Contracts | 78 | Jan 2021 | 1,847,040 | (2,055 | ) | |||||||||||
$ | 3,784,284 | $ | 16,949 | |||||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||||
Long Gilt Futures Contracts†† | 18 | Mar 2021 | $ | 3,334,491 | $ | 2,165 | ||||||||||
U.S. Treasury Long Bond Futures Contracts | 2 | Mar 2021 | 345,875 | 480 | ||||||||||||
Canadian Government 10 Year Bond Futures Contracts†† | 26 | Mar 2021 | 3,047,389 | 191 | ||||||||||||
Euro - Bund Futures Contracts†† | 3 | Mar 2021 | 651,980 | (823 | ) | |||||||||||
Euro - OATS Futures Contracts†† | 7 | Mar 2021 | 1,437,378 | (1,654 | ) | |||||||||||
$ | 8,817,113 | $ | 359 | |||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
CBOE Volatility Index Futures Contracts | 80 | Feb 2021 | $ | 2,044,800 | $ | 21,757 | ||||||||||
CBOE Volatility Index Futures Contracts | 38 | Mar 2021 | 980,020 | (2,290 | ) | |||||||||||
FTSE 100 Index Futures Contracts†† | 9 | Mar 2021 | 799,138 | (14,915 | ) | |||||||||||
Euro STOXX 50 Index Futures Contracts†† | 17 | Mar 2021 | 738,447 | (25,829 | ) | |||||||||||
DAX Index Futures Contracts†† | 2 | Mar 2021 | 838,672 | (29,920 | ) | |||||||||||
$ | 5,401,077 | $ | (51,197 | ) | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
Swiss Franc Futures Contracts | 110 | Mar 2021 | $ | 15,563,625 | $ | (47,072 | ) | |||||||||
Australian Dollar Futures Contracts | 36 | Mar 2021 | 2,777,040 | (78,481 | ) | |||||||||||
$ | 18,340,665 | $ | (125,553 | ) | ||||||||||||
Commodity Futures Contracts Sold Short† | ||||||||||||||||
Natural Gas Futures Contracts | 13 | Jan 2021 | $ | 330,200 | $ | 18,297 | ||||||||||
NY Harbor ULSD Futures Contracts | 4 | Jan 2021 | 249,413 | (665 | ) | |||||||||||
Live Cattle Futures Contracts | 1 | Feb 2021 | 46,050 | (793 | ) | |||||||||||
Lean Hogs Futures Contracts | 1 | Feb 2021 | 28,140 | (1,951 | ) | |||||||||||
Cattle Feeder Futures Contracts | 10 | Mar 2021 | 700,625 | (6,656 | ) | |||||||||||
Low Sulphur Gas Oil Futures Contracts | 5 | Feb 2021 | 213,625 | (11,383 | ) | |||||||||||
Hard Red Winter Wheat Futures Contracts | 6 | Mar 2021 | 181,725 | (13,318 | ) | |||||||||||
Coffee ‘C’ Futures Contracts | 8 | Mar 2021 | 381,900 | (38,275 | ) | |||||||||||
Gasoline RBOB Futures Contracts | 21 | Mar 2021 | 1,348,313 | (40,096 | ) | |||||||||||
Wheat Futures Contracts | 71 | Mar 2021 | 2,278,213 | (40,151 | ) | |||||||||||
Live Cattle Futures Contracts | 68 | Apr 2021 | 3,244,960 | (51,199 | ) | |||||||||||
Natural Gas Futures Contracts | 83 | Mar 2021 | 2,114,010 | (83,212 | ) | |||||||||||
Sugar #11 Futures Contracts | 144 | Feb 2021 | 2,499,840 | (138,235 | ) | |||||||||||
$ | 13,617,014 | $ | (407,637 | ) |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Custom Basket Swap Agreements | |||||||||||||||
Counterparty | Reference Obligation | Financing Rate | Payment | Maturity | Notional | Value and | |||||||||
OTC Custom Basket Swap Agreements†† | |||||||||||||||
Morgan Stanley Capital Services LLC | MS Long/Short Equity Custom Basket | 0.49% (Federal Funds Rate + 0.40%) | At Maturity | 08/31/23 | $ | 8,221,003 | $ | 786,091 | |||||||
Goldman Sachs International | GS Long/Short Equity Custom Basket | 0.54% (Federal Funds Rate + 0.45%) | At Maturity | 05/06/24 | 8,221,004 | 762,900 | |||||||||
Morgan Stanley Capital Services LLC | MS Equity Market Neutral Custom Basket | 0.49% (Federal Funds Rate + 0.40%) | At Maturity | 08/31/23 | 3,655,133 | 360,245 | |||||||||
Goldman Sachs International | GS Equity Market Neutral Custom Basket | 0.54% (Federal Funds Rate + 0.45%) | At Maturity | 05/06/24 | 3,654,435 | 307,562 | |||||||||
$ | 23,751,575 | $ | 2,216,798 | ||||||||||||
OTC Custom Basket Swap Agreements Sold Short†† | |||||||||||||||
Goldman Sachs International | GS Equity Market Neutral Custom Basket | (0.11%) (Federal Funds Rate - 0.20%) | At Maturity | 05/06/24 | $ | 3,445,989 | $ | (199,601 | ) | ||||||
Morgan Stanley Capital Services LLC | MS Equity Market Neutral Custom Basket | (0.21%) (Federal Funds Rate - 0.30%) | At Maturity | 08/31/23 | 3,445,640 | (200,330 | ) | ||||||||
Morgan Stanley Capital Services LLC | MS Long/Short Equity Custom Basket | (0.21%) (Federal Funds Rate - 0.30%) | At Maturity | 08/31/23 | 5,255,219 | (671,797 | ) | ||||||||
Goldman Sachs International | GS Long/Short Equity Custom Basket | (0.11%) (Federal Funds Rate - 0.20%) | At Maturity | 05/06/24 | 5,255,203 | (672,293 | ) | ||||||||
$ | 17,402,051 | $ | (1,744,021 | ) |
| Shares | Percentage | Value and | |||||||||
MS LONG/SHORT EQUITY LONG CUSTOM BASKET | ||||||||||||
Communications | ||||||||||||
Viavi Solutions, Inc. | 5,502 | 1.00 | % | $ | 15,756 | |||||||
T-Mobile US, Inc. | 577 | 0.94 | % | 11,866 | ||||||||
Cisco Systems, Inc. | 2,388 | 1.30 | % | 7,214 | ||||||||
Alphabet, Inc. — Class C | 11 | 0.23 | % | 6,921 | ||||||||
Ciena Corp. | 689 | 0.44 | % | 4,689 | ||||||||
Verizon Communications, Inc. | 1,667 | 1.19 | % | 4,129 | ||||||||
VeriSign, Inc. | 187 | 0.49 | % | 3,040 | ||||||||
Discovery, Inc. — Class A | 958 | 0.35 | % | 2,803 | ||||||||
Motorola Solutions, Inc. | 250 | 0.52 | % | 2,714 | ||||||||
Cogent Communications Holdings, Inc. | 885 | 0.64 | % | 2,264 | ||||||||
Omnicom Group, Inc. | 780 | 0.59 | % | 215 | ||||||||
Juniper Networks, Inc. | 2,989 | 0.82 | % | 207 | ||||||||
eBay, Inc. | 714 | 0.44 | % | (657 | ) | |||||||
Sirius XM Holdings, Inc. | 10,083 | 0.78 | % | (958 | ) | |||||||
AT&T, Inc. | 1,210 | 0.42 | % | (1,016 | ) | |||||||
Total Communications | 59,187 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
United Rentals, Inc. | 260 | 0.72 | % | 19,670 | ||||||||
McKesson Corp. | 424 | 0.90 | % | 18,372 | ||||||||
United Therapeutics Corp. | 362 | 0.67 | % | 16,220 |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation | ||||||||||
Rent-A-Center, Inc. | 989 | 0.46 | % | 15,610 | ||||||||
DaVita, Inc. | 602 | 0.86 | % | 13,148 | ||||||||
Eli Lilly & Co. | 200 | 0.41 | % | 12,452 | ||||||||
Jazz Pharmaceuticals plc | 266 | 0.53 | % | 10,194 | ||||||||
Quanta Services, Inc. | 702 | 0.61 | % | 10,078 | ||||||||
Johnson & Johnson | 513 | 0.98 | % | 9,519 | ||||||||
Alexion Pharmaceuticals, Inc. | 170 | 0.32 | % | 8,277 | ||||||||
Colgate-Palmolive Co. | 954 | 0.99 | % | 8,210 | ||||||||
Philip Morris International, Inc. | 1,127 | 1.13 | % | 7,851 | ||||||||
UnitedHealth Group, Inc. | 178 | 0.76 | % | 7,075 | ||||||||
Amgen, Inc. | 397 | 1.11 | % | 6,232 | ||||||||
Procter & Gamble Co. | 512 | 0.87 | % | 6,119 | ||||||||
Cardinal Health, Inc. | 1,259 | 0.82 | % | 5,685 | ||||||||
Kraft Heinz Co. | 2,294 | 0.97 | % | 5,160 | ||||||||
Kimberly-Clark Corp. | 555 | 0.91 | % | 5,155 | ||||||||
Anthem, Inc. | 112 | 0.44 | % | 4,376 | ||||||||
Molina Healthcare, Inc. | 123 | 0.32 | % | 4,218 | ||||||||
J M Smucker Co. | 411 | 0.58 | % | 4,188 | ||||||||
Cigna Corp. | 155 | 0.39 | % | 4,133 | ||||||||
Medtronic plc | 175 | 0.25 | % | 3,779 | ||||||||
Constellation Brands, Inc. — Class A | 132 | 0.35 | % | 3,545 | ||||||||
Post Holdings, Inc. | 416 | 0.51 | % | 3,102 | ||||||||
Chemed Corp. | 42 | 0.27 | % | 2,651 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Mondelez International, Inc. — Class A | 594 | 0.42 | % | $ | 2,480 | |||||||
Pfizer, Inc. | 1,123 | 0.50 | % | 2,029 | ||||||||
Kellogg Co. | 321 | 0.24 | % | 1,925 | ||||||||
Alkermes plc | 1,118 | 0.27 | % | 1,577 | ||||||||
Conagra Brands, Inc. | 1,300 | 0.57 | % | 1,516 | ||||||||
Hologic, Inc. | 293 | 0.26 | % | 1,264 | ||||||||
Merck & Company, Inc. | 1,086 | 1.08 | % | 1,081 | ||||||||
Laboratory Corporation of America Holdings | 219 | 0.54 | % | 937 | ||||||||
Ionis Pharmaceuticals, Inc. | 401 | 0.28 | % | 910 | ||||||||
Tyson Foods, Inc. — Class A | 670 | 0.53 | % | 909 | ||||||||
Hill-Rom Holdings, Inc. | 222 | 0.26 | % | 787 | ||||||||
AbbVie, Inc. | 194 | 0.25 | % | 584 | ||||||||
USANA Health Sciences, Inc. | 264 | 0.25 | % | 440 | ||||||||
Encompass Health Corp. | 334 | 0.34 | % | 266 | ||||||||
Molson Coors Beverage Co. — Class B | 2,162 | 1.19 | % | 242 | ||||||||
Clorox Co. | 101 | 0.25 | % | 174 | ||||||||
Bristol-Myers Squibb Co. | 436 | 0.33 | % | (4 | ) | |||||||
Altria Group, Inc. | 1,636 | 0.82 | % | (33 | ) | |||||||
CVS Health Corp. | 625 | 0.52 | % | (121 | ) | |||||||
Vector Group Ltd. | 2,314 | 0.33 | % | (143 | ) | |||||||
Prestige Consumer Healthcare, Inc. | 551 | 0.23 | % | (310 | ) | |||||||
Humana, Inc. | 89 | 0.44 | % | (343 | ) | |||||||
General Mills, Inc. | 1,423 | 1.02 | % | (491 | ) | |||||||
Campbell Soup Co. | 1,345 | 0.79 | % | (1,125 | ) | |||||||
TreeHouse Foods, Inc. | 746 | 0.39 | % | (1,258 | ) | |||||||
Sprouts Farmers Market, Inc. | 1,633 | 0.40 | % | (1,528 | ) | |||||||
Innoviva, Inc. | 2,036 | 0.31 | % | (1,989 | ) | |||||||
John B Sanfilippo & Son, Inc. | 464 | 0.45 | % | (3,719 | ) | |||||||
Ingredion, Inc. | 615 | 0.59 | % | (4,321 | ) | |||||||
Gilead Sciences, Inc. | 667 | 0.47 | % | (6,293 | ) | |||||||
Total Consumer, Non-cyclical | 210,462 | |||||||||||
Industrial | ||||||||||||
Snap-on, Inc. | 368 | 0.77 | % | 18,321 | ||||||||
TE Connectivity Ltd. | 544 | 0.80 | % | 17,775 | ||||||||
AGCO Corp. | 627 | 0.79 | % | 16,930 | ||||||||
Caterpillar, Inc. | 235 | 0.52 | % | 15,204 | ||||||||
Timken Co. | 571 | 0.54 | % | 13,388 | ||||||||
Vishay Intertechnology, Inc. | 2,877 | 0.72 | % | 12,232 | ||||||||
Regal Beloit Corp. | 283 | 0.42 | % | 11,486 | ||||||||
Terex Corp. | 852 | 0.36 | % | 10,953 | ||||||||
Lincoln Electric Holdings, Inc. | 332 | 0.47 | % | 10,566 | ||||||||
Hubbell, Inc. | 470 | 0.90 | % | 9,572 | ||||||||
Owens Corning | 388 | 0.36 | % | 9,357 | ||||||||
Garmin Ltd. | 322 | 0.47 | % | 9,208 | ||||||||
Waters Corp. | 165 | 0.50 | % | 8,057 | ||||||||
Oshkosh Corp. | 522 | 0.55 | % | 5,090 | ||||||||
Arrow Electronics, Inc. | 452 | 0.53 | % | 5,082 | ||||||||
Eaton Corporation plc | 218 | 0.32 | % | 4,798 | ||||||||
Acuity Brands, Inc. | 224 | 0.33 | % | 4,046 | ||||||||
National Instruments Corp. | 541 | 0.29 | % | 3,814 | ||||||||
Keysight Technologies, Inc. | 263 | 0.42 | % | 3,620 | ||||||||
Trane Technologies plc | 135 | 0.24 | % | 2,989 | ||||||||
PerkinElmer, Inc. | 158 | 0.28 | % | 2,586 | ||||||||
Dover Corp. | 163 | 0.25 | % | 2,582 | ||||||||
Pentair plc | 433 | 0.28 | % | 2,407 | ||||||||
A O Smith Corp. | 372 | 0.25 | % | 1,381 | ||||||||
Energizer Holdings, Inc. | 624 | 0.32 | % | 1,370 | ||||||||
Lennox International, Inc. | 65 | 0.22 | % | 170 | ||||||||
3M Co. | 233 | 0.50 | % | (311 | ) | |||||||
General Dynamics Corp. | 272 | 0.49 | % | (1,127 | ) | |||||||
Masco Corp. | 936 | 0.63 | % | (1,389 | ) | |||||||
Lockheed Martin Corp. | 103 | 0.44 | % | (2,680 | ) | |||||||
Total Industrial | 197,477 | |||||||||||
Consumer, Cyclical | ||||||||||||
Gentherm, Inc. | 1,180 | 0.94 | % | 29,005 | ||||||||
Autoliv, Inc. | 654 | 0.73 | % | 20,098 | ||||||||
Gentex Corp. | 2,825 | 1.17 | % | 19,624 | ||||||||
Lear Corp. | 275 | 0.53 | % | 13,684 | ||||||||
Cummins, Inc. | 148 | 0.41 | % | 11,615 | ||||||||
Dolby Laboratories, Inc. — Class A | 223 | 0.26 | % | 6,970 | ||||||||
Hanesbrands, Inc. | 1,434 | 0.25 | % | 6,017 | ||||||||
MSC Industrial Direct Company, Inc. — Class A | 297 | 0.30 | % | 5,642 | ||||||||
Brunswick Corp. | 450 | 0.42 | % | 5,526 | ||||||||
Allison Transmission Holdings, Inc. | 1,549 | 0.81 | % | 2,743 | ||||||||
AutoNation, Inc. | 534 | 0.45 | % | 2,574 | ||||||||
Lowe’s Companies, Inc. | 341 | 0.67 | % | 1,722 | ||||||||
AutoZone, Inc. | 39 | 0.56 | % | 1,521 | ||||||||
Genuine Parts Co. | 640 | 0.78 | % | 1,459 | ||||||||
PACCAR, Inc. | 548 | 0.58 | % | 851 | ||||||||
Lennar Corp. — Class A | 449 | 0.42 | % | (433 | ) | |||||||
PulteGroup, Inc. | 806 | 0.42 | % | (978 | ) | |||||||
Meritage Homes Corp. | 305 | 0.31 | % | (2,381 | ) | |||||||
Best Buy Company, Inc. | 797 | 0.97 | % | (8,576 | ) | |||||||
Total Consumer, Cyclical | 116,683 | |||||||||||
Technology | ||||||||||||
NetApp, Inc. | 1,074 | 0.87 | % | 25,374 | ||||||||
Texas Instruments, Inc. | 424 | 0.85 | % | 14,673 | ||||||||
KLA Corp. | 181 | 0.57 | % | 12,812 |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
SS&C Technologies Holdings, Inc. | 1,253 | 1.11 | % | $ | 12,577 | |||||||
CDK Global, Inc. | 960 | 0.61 | % | 12,363 | ||||||||
Seagate Technology plc | 1,325 | 1.00 | % | 11,950 | ||||||||
HP, Inc. | 2,226 | 0.67 | % | 11,487 | ||||||||
Oracle Corp. | 959 | 0.75 | % | 10,061 | ||||||||
Applied Materials, Inc. | 344 | 0.36 | % | 8,930 | ||||||||
Cerner Corp. | 1,170 | 1.12 | % | 8,568 | ||||||||
Microchip Technology, Inc. | 179 | 0.30 | % | 6,910 | ||||||||
Cirrus Logic, Inc. | 392 | 0.39 | % | 5,586 | ||||||||
Apple, Inc. | 309 | 0.50 | % | 5,463 | ||||||||
Kulicke & Soffa Industries, Inc. | 818 | 0.32 | % | 4,821 | ||||||||
Skyworks Solutions, Inc. | 231 | 0.43 | % | 3,169 | ||||||||
Dell Technologies, Inc. — Class C | 460 | 0.41 | % | 1,372 | ||||||||
International Business Machines Corp. | 817 | 1.25 | % | (21 | ) | |||||||
Paychex, Inc. | 288 | 0.33 | % | (76 | ) | |||||||
Intel Corp. | 1,391 | 0.84 | % | (4,870 | ) | |||||||
Total Technology | 151,149 | |||||||||||
Financial | ||||||||||||
MetLife, Inc. | 2,094 | 1.20 | % | 13,455 | ||||||||
Allstate Corp. | 968 | 1.29 | % | 9,175 | ||||||||
Travelers Companies, Inc. | 390 | 0.67 | % | 7,332 | ||||||||
Hartford Financial Services Group, Inc. | 783 | 0.47 | % | 7,191 | ||||||||
Synchrony Financial | 907 | 0.38 | % | 6,411 | ||||||||
Ameriprise Financial, Inc. | 184 | 0.43 | % | 5,312 | ||||||||
Aflac, Inc. | 783 | 0.42 | % | 4,980 | ||||||||
JPMorgan Chase & Co. | 165 | 0.26 | % | 4,903 | ||||||||
M&T Bank Corp. | 164 | 0.25 | % | 3,077 | ||||||||
Bank of America Corp. | 708 | 0.26 | % | 1,962 | ||||||||
Berkshire Hathaway, Inc. — Class B | 287 | 0.81 | % | 1,946 | ||||||||
Western Union Co. | 2,086 | 0.56 | % | 1,765 | ||||||||
SEI Investments Co. | 448 | 0.31 | % | 333 | ||||||||
Piedmont Office Realty Trust, Inc. — Class A | 2,904 | 0.57 | % | (491 | ) | |||||||
Equity Residential | 962 | 0.69 | % | (1,568 | ) | |||||||
Highwoods Properties, Inc. | 1,713 | 0.83 | % | (1,702 | ) | |||||||
Total Financial | 64,081 | |||||||||||
Utilities | ||||||||||||
Exelon Corp. | 1,699 | 0.87 | % | 3,518 | ||||||||
Public Service Enterprise Group, Inc. | 1,359 | 0.96 | % | 3,397 | ||||||||
Southern Co. | 836 | 0.62 | % | 3,203 | ||||||||
IDACORP, Inc. | 873 | 1.02 | % | 3,096 | ||||||||
CenterPoint Energy, Inc. | 1,490 | 0.39 | % | 2,433 | ||||||||
NorthWestern Corp. | 402 | 0.29 | % | 1,144 | ||||||||
UGI Corp. | 1,241 | 0.53 | % | 264 | ||||||||
Ameren Corp. | 949 | 0.90 | % | 195 | ||||||||
Avista Corp. | 546 | 0.27 | % | (808 | ) | |||||||
OGE Energy Corp. | 1,442 | 0.56 | % | (816 | ) | |||||||
Portland General Electric Co. | 465 | 0.24 | % | (1,031 | ) | |||||||
PPL Corp. | 2,483 | 0.85 | % | (2,052 | ) | |||||||
ONE Gas, Inc. | 466 | 0.44 | % | (2,202 | ) | |||||||
Consolidated Edison, Inc. | 518 | 0.46 | % | (2,371 | ) | |||||||
NiSource, Inc. | 1,650 | 0.46 | % | (3,028 | ) | |||||||
Duke Energy Corp. | 715 | 0.80 | % | (3,152 | ) | |||||||
Evergy, Inc. | 1,454 | 0.98 | % | (3,467 | ) | |||||||
National Fuel Gas Co. | 675 | 0.34 | % | (5,536 | ) | |||||||
Southwest Gas Holdings, Inc. | 539 | 0.40 | % | (5,735 | ) | |||||||
Total Utilities | (12,948 | ) | ||||||||||
Total MS Long/Short Equity Long Custom Basket | $ | 786,091 | ||||||||||
MS LONG/SHORT EQUITY SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Kilroy Realty Corp. | 867 | (0.95 | )% | $ | 5,751 | |||||||
UDR, Inc. | 880 | (0.64 | )% | 5,164 | ||||||||
Realty Income Corp. | 1,294 | (1.53 | )% | 4,435 | ||||||||
Douglas Emmett, Inc. | 604 | (0.34 | )% | 2,497 | ||||||||
Global Net Lease, Inc. | 1,623 | (0.53 | )% | 1,668 | ||||||||
JBG SMITH Properties | 1,325 | (0.79 | )% | 1,568 | ||||||||
QTS Realty Trust, Inc. — Class A | 447 | (0.53 | )% | 929 | ||||||||
Truist Financial Corp. | 420 | (0.38 | )% | 293 | ||||||||
First Industrial Realty Trust, Inc. | 892 | (0.72 | )% | 291 | ||||||||
American Tower Corp. — Class A | 74 | (0.32 | )% | 265 | ||||||||
Americold Realty Trust | 774 | (0.55 | )% | 264 | ||||||||
Host Hotels & Resorts, Inc. | 1,347 | (0.37 | )% | 199 | ||||||||
Camden Property Trust | 372 | (0.71 | )% | (59 | ) | |||||||
Crown Castle International Corp. | 101 | (0.31 | )% | (73 | ) | |||||||
Prologis, Inc. | 532 | (1.01 | )% | (581 | ) | |||||||
Agree Realty Corp. | 1,217 | (1.54 | )% | (960 | ) | |||||||
CyrusOne, Inc. | 476 | (0.66 | )% | (1,059 | ) | |||||||
Fulton Financial Corp. | 1,540 | (0.37 | )% | (1,251 | ) | |||||||
Healthpeak Properties, Inc. | 1,282 | (0.74 | )% | (1,331 | ) | |||||||
Duke Realty Corp. | 828 | (0.63 | )% | (1,412 | ) | |||||||
Howard Hughes Corp. | 356 | (0.53 | )% | (1,418 | ) | |||||||
Southside Bancshares, Inc. | 1,054 | (0.62 | )% | (1,496 | ) | |||||||
TFS Financial Corp. | 1,518 | (0.51 | )% | (1,914 | ) | |||||||
First Midwest Bancorp, Inc. | 1,815 | (0.55 | )% | (1,933 | ) | |||||||
SBA Communications Corp. | 59 | (0.32 | )% | (1,936 | ) | |||||||
STAG Industrial, Inc. | 677 | (0.40 | )% | (2,933 | ) | |||||||
Rayonier, Inc. | 1,255 | (0.70 | )% | (3,093 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Healthcare Trust of America, Inc. — Class A | 1,419 | (0.74 | )% | $ | (3,204 | ) | ||||||
First Financial Bankshares, Inc. | 1,105 | (0.76 | )% | (3,750 | ) | |||||||
Equinix, Inc. | 55 | (0.75 | )% | (3,837 | ) | |||||||
EastGroup Properties, Inc. | 292 | (0.77 | )% | (3,995 | ) | |||||||
Loews Corp. | 716 | (0.61 | )% | (4,373 | ) | |||||||
Intercontinental Exchange, Inc. | 373 | (0.82 | )% | (4,434 | ) | |||||||
Brookline Bancorp, Inc. | 3,276 | (0.75 | )% | (4,511 | ) | |||||||
Alleghany Corp. | 109 | (1.25 | )% | (5,084 | ) | |||||||
Medical Properties Trust, Inc. | 2,319 | (0.96 | )% | (5,561 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 282 | (0.96 | )% | (6,167 | ) | |||||||
Sun Communities, Inc. | 391 | (1.13 | )% | (7,791 | ) | |||||||
Terreno Realty Corp. | 586 | (0.65 | )% | (9,159 | ) | |||||||
Rexford Industrial Realty, Inc. | 1,316 | (1.23 | )% | (13,202 | ) | |||||||
First Republic Bank | 481 | (1.34 | )% | (16,796 | ) | |||||||
Total Financial | (89,989 | ) | ||||||||||
Technology | ||||||||||||
Splunk, Inc. | 195 | (0.63 | )% | 3,428 | ||||||||
NVIDIA Corp. | 39 | (0.39 | )% | (1,644 | ) | |||||||
salesforce.com, Inc. | 127 | (0.54 | )% | (2,398 | ) | |||||||
Appfolio, Inc. — Class A | 93 | (0.32 | )% | (3,135 | ) | |||||||
Clarivate plc | 1,112 | (0.63 | )% | (3,259 | ) | |||||||
Pegasystems, Inc. | 314 | (0.80 | )% | (3,415 | ) | |||||||
Tyler Technologies, Inc. | 62 | (0.51 | )% | (4,026 | ) | |||||||
Atlassian Corporation plc — Class A | 96 | (0.43 | )% | (4,656 | ) | |||||||
Coupa Software, Inc. | 54 | (0.35 | )% | (5,054 | ) | |||||||
ANSYS, Inc. | 130 | (0.90 | )% | (5,772 | ) | |||||||
Smartsheet, Inc. — Class A | 264 | (0.35 | )% | (6,153 | ) | |||||||
Rapid7, Inc. | 361 | (0.62 | )% | (6,347 | ) | |||||||
Workiva, Inc. | 183 | (0.32 | )% | (8,601 | ) | |||||||
HubSpot, Inc. | 69 | (0.52 | )% | (10,932 | ) | |||||||
Zscaler, Inc. | 97 | (0.37 | )% | (11,173 | ) | |||||||
Varonis Systems, Inc. | 331 | (1.03 | )% | (15,690 | ) | |||||||
Total Technology | (88,827 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Nevro Corp. | 296 | (0.97 | )% | (755 | ) | |||||||
Moody’s Corp. | 149 | (0.82 | )% | (2,742 | ) | |||||||
Verisk Analytics, Inc. — Class A | 184 | (0.73 | )% | (3,843 | ) | |||||||
CoStar Group, Inc. | 50 | (0.88 | )% | (4,017 | ) | |||||||
WD-40 Co. | 105 | (0.53 | )% | (5,074 | ) | |||||||
Avery Dennison Corp. | 203 | (0.60 | )% | (7,448 | ) | |||||||
Avalara, Inc. | 102 | (0.32 | )% | (7,975 | ) | |||||||
Equifax, Inc. | 291 | (1.07 | )% | (9,341 | ) | |||||||
Total Consumer, Non-cyclical | (41,195 | ) | ||||||||||
Industrial | ||||||||||||
Raytheon Technologies Corp. | 723 | (0.98 | )% | 2,198 | ||||||||
US Ecology, Inc. | 589 | (0.41 | )% | 497 | ||||||||
Boeing Co. | 62 | (0.25 | )% | 351 | ||||||||
AMETEK, Inc. | 207 | (0.48 | )% | (131 | ) | |||||||
TransDigm Group, Inc. | 56 | (0.66 | )% | (4,267 | ) | |||||||
HEICO Corp. | 156 | (0.39 | )% | (4,566 | ) | |||||||
Eagle Materials, Inc. | 205 | (0.40 | )% | (5,333 | ) | |||||||
Martin Marietta Materials, Inc. | 75 | (0.41 | )% | (5,518 | ) | |||||||
Ingersoll Rand, Inc. | 1,343 | (1.16 | )% | (5,805 | ) | |||||||
Crown Holdings, Inc. | 322 | (0.61 | )% | (7,364 | ) | |||||||
Vulcan Materials Co. | 305 | (0.86 | )% | (8,529 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 694 | (0.82 | )% | (9,314 | ) | |||||||
AptarGroup, Inc. | 795 | (2.07 | )% | (9,786 | ) | |||||||
Ball Corp. | 783 | (1.39 | )% | (10,766 | ) | |||||||
Tetra Tech, Inc. | 544 | (1.20 | )% | (12,366 | ) | |||||||
Total Industrial | (80,699 | ) | ||||||||||
Utilities | ||||||||||||
American States Water Co. | 264 | (0.40 | )% | 1,394 | ||||||||
California Water Service Group | 825 | (0.85 | )% | (3,211 | ) | |||||||
Total Utilities | (1,817 | ) | ||||||||||
Energy | ||||||||||||
Williams Companies, Inc. | 1,318 | (0.50 | )% | 916 | ||||||||
Cheniere Energy, Inc. | 522 | (0.60 | )% | (632 | ) | |||||||
Ovintiv, Inc. | 2,505 | (0.68 | )% | (2,457 | ) | |||||||
NOV, Inc. | 1,458 | (0.38 | )% | (3,290 | ) | |||||||
ChampionX Corp. | 2,433 | (0.71 | )% | (3,575 | ) | |||||||
Hess Corp. | 775 | (0.78 | )% | (5,328 | ) | |||||||
Phillips 66 | 1,001 | (1.33 | )% | (6,248 | ) | |||||||
Schlumberger N.V. | 3,059 | (1.27 | )% | (6,608 | ) | |||||||
Total Energy | (27,222 | ) | ||||||||||
Basic Materials | ||||||||||||
Huntsman Corp. | 1,857 | (0.89 | )% | 1,779 | ||||||||
Newmont Corp. | 413 | (0.47 | )% | 258 | ||||||||
Sherwin-Williams Co. | 36 | (0.50 | )% | 75 | ||||||||
Ecolab, Inc. | 92 | (0.38 | )% | (2,795 | ) | |||||||
Ashland Global Holdings, Inc. | 709 | (1.07 | )% | (3,304 | ) | |||||||
Axalta Coating Systems Ltd. | 1,225 | (0.67 | )% | (3,801 | ) | |||||||
PPG Industries, Inc. | 213 | (0.58 | )% | (4,997 | ) | |||||||
DuPont de Nemours, Inc. | 1,022 | (1.38 | )% | (5,126 | ) | |||||||
Air Products and Chemicals, Inc. | 358 | (1.86 | )% | (5,433 | ) | |||||||
Balchem Corp. | 727 | (1.59 | )% | (6,482 | ) | |||||||
Celanese Corp. — Class A | 397 | (0.98 | )% | (8,725 | ) | |||||||
Freeport-McMoRan, Inc. | 880 | (0.44 | )% | (13,483 | ) |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
RPM International, Inc. | 873 | (1.51 | )% | $ | (13,967 | ) | ||||||
Linde plc | 395 | (1.98 | )% | (14,395 | ) | |||||||
Quaker Chemical Corp. | 268 | (1.29 | )% | (29,224 | ) | |||||||
Albemarle Corp. | 393 | (1.10 | )% | (30,333 | ) | |||||||
United States Steel Corp. | 3,705 | (1.18 | )% | (33,008 | ) | |||||||
Total Basic Materials | (172,961 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
United Airlines Holdings, Inc. | 623 | (0.51 | )% | 543 | ||||||||
Alaska Air Group, Inc. | 874 | (0.86 | )% | 205 | ||||||||
JetBlue Airways Corp. | 2,314 | (0.64 | )% | (3,864 | ) | |||||||
Delta Air Lines, Inc. | 1,276 | (0.98 | )% | (6,014 | ) | |||||||
Five Below, Inc. | 152 | (0.51 | )% | (6,095 | ) | |||||||
Southwest Airlines Co. | 1,247 | (1.11 | )% | (6,546 | ) | |||||||
Hilton Worldwide Holdings, Inc. | 505 | (1.07 | )% | (7,983 | ) | |||||||
Live Nation Entertainment, Inc. | 414 | (0.58 | )% | (8,849 | ) | |||||||
TJX Companies, Inc. | 826 | (1.07 | )% | (9,299 | ) | |||||||
Copart, Inc. | 479 | (1.16 | )% | (12,194 | ) | |||||||
NIKE, Inc. — Class B | 524 | (1.41 | )% | (12,992 | ) | |||||||
Scotts Miracle-Gro Co. — Class A | 210 | (0.80 | )% | (13,276 | ) | |||||||
Burlington Stores, Inc. | 235 | (1.17 | )% | (14,114 | ) | |||||||
Starbucks Corp. | 825 | (1.68 | )% | (20,576 | ) | |||||||
Total Consumer, Cyclical | (121,054 | ) | ||||||||||
Communications | ||||||||||||
Anaplan, Inc. | 200 | (0.27 | )% | (6,056 | ) | |||||||
Okta, Inc. | 89 | (0.43 | )% | (6,683 | ) | |||||||
Liberty Broadband Corp. — Class C | 636 | (1.92 | )% | (9,721 | ) | |||||||
Zendesk, Inc. | 327 | (0.89 | )% | (10,904 | ) | |||||||
Q2 Holdings, Inc. | 367 | (0.88 | )% | (14,669 | ) | |||||||
Total Communications | (48,033 | ) | ||||||||||
Total MS Long/Short Equity Short Custom Basket | $ | (671,797 | ) | |||||||||
GS LONG/SHORT EQUITY LONG CUSTOM BASKET | ||||||||||||
Consumer, Non-cyclical | ||||||||||||
United Rentals, Inc. | 260 | 0.72 | % | $ | 19,687 | |||||||
United Therapeutics Corp. | 362 | 0.66 | % | 16,120 | ||||||||
Rent-A-Center, Inc. | 989 | 0.46 | % | 15,629 | ||||||||
McKesson Corp. | 424 | 0.90 | % | 14,060 | ||||||||
DaVita, Inc. | 602 | 0.86 | % | 13,149 | ||||||||
Eli Lilly & Co. | 200 | 0.41 | % | 12,325 | ||||||||
Jazz Pharmaceuticals plc | 266 | 0.53 | % | 10,315 | ||||||||
Quanta Services, Inc. | 702 | 0.61 | % | 10,056 | ||||||||
Johnson & Johnson | 513 | 0.98 | % | 9,052 | ||||||||
Cardinal Health, Inc. | 1,259 | 0.82 | % | 8,305 | ||||||||
Alexion Pharmaceuticals, Inc. | 170 | 0.32 | % | 8,284 | ||||||||
Colgate-Palmolive Co. | 954 | 0.99 | % | 8,117 | ||||||||
Amgen, Inc. | 397 | 1.11 | % | 7,344 | ||||||||
UnitedHealth Group, Inc. | 178 | 0.76 | % | 7,104 | ||||||||
Philip Morris International, Inc. | 1,127 | 1.13 | % | 6,232 | ||||||||
Procter & Gamble Co. | 512 | 0.87 | % | 6,171 | ||||||||
Kraft Heinz Co. | 2,294 | 0.97 | % | 5,120 | ||||||||
Anthem, Inc. | 112 | 0.44 | % | 4,403 | ||||||||
Cigna Corp. | 155 | 0.39 | % | 4,247 | ||||||||
Molina Healthcare, Inc. | 123 | 0.32 | % | 4,149 | ||||||||
Constellation Brands, Inc. — Class A | 132 | 0.35 | % | 3,567 | ||||||||
J M Smucker Co. | 411 | 0.58 | % | 3,523 | ||||||||
Post Holdings, Inc. | 416 | 0.51 | % | 3,007 | ||||||||
Medtronic plc | 175 | 0.25 | % | 3,005 | ||||||||
Chemed Corp. | 42 | 0.27 | % | 2,573 | ||||||||
Mondelez International, Inc. — Class A | 594 | 0.42 | % | 2,421 | ||||||||
Kellogg Co. | 321 | 0.24 | % | 1,730 | ||||||||
Alkermes plc | 1,118 | 0.27 | % | 1,596 | ||||||||
Conagra Brands, Inc. | 1,300 | 0.57 | % | 1,512 | ||||||||
Hologic, Inc. | 293 | 0.26 | % | 1,350 | ||||||||
Merck & Company, Inc. | 1,086 | 1.08 | % | 1,107 | ||||||||
Laboratory Corporation of America Holdings | 219 | 0.54 | % | 944 | ||||||||
Ionis Pharmaceuticals, Inc. | 401 | 0.28 | % | 937 | ||||||||
Molson Coors Beverage Co. — Class B | 2,162 | 1.19 | % | 862 | ||||||||
Tyson Foods, Inc. — Class A | 670 | 0.53 | % | 793 | ||||||||
Hill-Rom Holdings, Inc. | 222 | 0.26 | % | 737 | ||||||||
AbbVie, Inc. | 194 | 0.25 | % | 605 | ||||||||
USANA Health Sciences, Inc. | 264 | 0.25 | % | 428 | ||||||||
Encompass Health Corp. | 334 | 0.34 | % | 287 | ||||||||
Clorox Co. | 101 | 0.25 | % | 156 | ||||||||
Bristol-Myers Squibb Co. | 436 | 0.33 | % | 37 | ||||||||
Altria Group, Inc. | 1,636 | 0.82 | % | (79 | ) | |||||||
CVS Health Corp. | 625 | 0.52 | % | (120 | ) | |||||||
Vector Group Ltd. | 2,314 | 0.33 | % | (153 | ) | |||||||
Humana, Inc. | 89 | 0.44 | % | (270 | ) | |||||||
Prestige Consumer Healthcare, Inc. | 551 | 0.23 | % | (327 | ) | |||||||
Pfizer, Inc. | 1,123 | 0.50 | % | (410 | ) | |||||||
Innoviva, Inc. | 2,036 | 0.31 | % | (780 | ) | |||||||
Campbell Soup Co. | 1,345 | 0.79 | % | (1,162 | ) | |||||||
General Mills, Inc. | 1,423 | 1.02 | % | (1,181 | ) | |||||||
TreeHouse Foods, Inc. | 746 | 0.39 | % | (1,232 | ) | |||||||
Kimberly-Clark Corp. | 555 | 0.91 | % | (1,346 | ) | |||||||
Sprouts Farmers Market, Inc. | 1,633 | 0.40 | % | (1,609 | ) | |||||||
Ingredion, Inc. | 615 | 0.59 | % | (2,100 | ) | |||||||
John B Sanfilippo & Son, Inc. | 464 | 0.45 | % | (3,675 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Gilead Sciences, Inc. | 667 | 0.47 | % | $ | (6,528 | ) | ||||||
Total Consumer, Non-cyclical | 200,074 | |||||||||||
Financial | ||||||||||||
MetLife, Inc. | 2,094 | 1.20 | % | 13,544 | ||||||||
Allstate Corp. | 968 | 1.29 | % | 9,217 | ||||||||
Travelers Companies, Inc. | 390 | 0.67 | % | 7,254 | ||||||||
Hartford Financial Services Group, Inc. | 783 | 0.47 | % | 7,186 | ||||||||
Synchrony Financial | 907 | 0.38 | % | 6,416 | ||||||||
Ameriprise Financial, Inc. | 184 | 0.43 | % | 5,317 | ||||||||
Aflac, Inc. | 783 | 0.42 | % | 4,918 | ||||||||
JPMorgan Chase & Co. | 165 | 0.26 | % | 4,831 | ||||||||
M&T Bank Corp. | 164 | 0.25 | % | 3,148 | ||||||||
Berkshire Hathaway, Inc. — Class B | 287 | 0.81 | % | 1,936 | ||||||||
Bank of America Corp. | 708 | 0.26 | % | 1,895 | ||||||||
Western Union Co. | 2,086 | 0.56 | % | 1,701 | ||||||||
SEI Investments Co. | 448 | 0.31 | % | 305 | ||||||||
Piedmont Office Realty Trust, Inc. — Class A | 2,904 | 0.57 | % | (376 | ) | |||||||
Equity Residential | 962 | 0.69 | % | (1,626 | ) | |||||||
Highwoods Properties, Inc. | 1,713 | 0.83 | % | (1,771 | ) | |||||||
Total Financial | 63,895 | |||||||||||
Technology | ||||||||||||
NetApp, Inc. | 1,074 | 0.87 | % | 25,387 | ||||||||
Texas Instruments, Inc. | 424 | 0.85 | % | 14,623 | ||||||||
KLA Corp. | 181 | 0.57 | % | 12,760 | ||||||||
SS&C Technologies Holdings, Inc. | 1,253 | 1.11 | % | 12,585 | ||||||||
CDK Global, Inc. | 960 | 0.61 | % | 12,348 | ||||||||
Seagate Technology plc | 1,325 | 1.00 | % | 11,928 | ||||||||
HP, Inc. | 2,226 | 0.67 | % | 11,501 | ||||||||
Applied Materials, Inc. | 344 | 0.36 | % | 8,961 | ||||||||
Cerner Corp. | 1,170 | 1.12 | % | 8,586 | ||||||||
Oracle Corp. | 959 | 0.75 | % | 8,536 | ||||||||
Microchip Technology, Inc. | 179 | 0.30 | % | 6,916 | ||||||||
Cirrus Logic, Inc. | 392 | 0.39 | % | 5,610 | ||||||||
Apple, Inc. | 309 | 0.50 | % | 5,452 | ||||||||
Kulicke & Soffa Industries, Inc. | 818 | 0.32 | % | 4,878 | ||||||||
Skyworks Solutions, Inc. | 231 | 0.43 | % | 3,199 | ||||||||
Dell Technologies, Inc. — Class C | 460 | 0.41 | % | 1,369 | ||||||||
Paychex, Inc. | 288 | 0.33 | % | (76 | ) | |||||||
International Business Machines Corp. | 817 | 1.25 | % | (210 | ) | |||||||
Intel Corp. | 1,391 | 0.84 | % | (4,845 | ) | |||||||
Total Technology | 149,508 | |||||||||||
Industrial | ||||||||||||
Snap-on, Inc. | 368 | 0.77 | % | 18,171 | ||||||||
TE Connectivity Ltd. | 544 | 0.80 | % | 17,787 | ||||||||
AGCO Corp. | 627 | 0.79 | % | 16,892 | ||||||||
Caterpillar, Inc. | 235 | 0.52 | % | 15,070 | ||||||||
Timken Co. | 571 | 0.54 | % | 13,419 | ||||||||
Vishay Intertechnology, Inc. | 2,877 | 0.72 | % | 12,155 | ||||||||
Regal Beloit Corp. | 283 | 0.42 | % | 11,391 | ||||||||
Terex Corp. | 852 | 0.36 | % | 10,961 | ||||||||
Lincoln Electric Holdings, Inc. | 332 | 0.47 | % | 10,502 | ||||||||
Hubbell, Inc. | 470 | 0.90 | % | 9,575 | ||||||||
Owens Corning | 388 | 0.36 | % | 9,381 | ||||||||
Garmin Ltd. | 322 | 0.47 | % | 9,182 | ||||||||
Waters Corp. | 165 | 0.50 | % | 7,945 | ||||||||
Arrow Electronics, Inc. | 452 | 0.53 | % | 5,028 | ||||||||
Eaton Corporation plc | 218 | 0.32 | % | 4,790 | ||||||||
Acuity Brands, Inc. | 224 | 0.33 | % | 4,097 | ||||||||
National Instruments Corp. | 541 | 0.29 | % | 3,784 | ||||||||
Oshkosh Corp. | 522 | 0.55 | % | 3,695 | ||||||||
Keysight Technologies, Inc. | 263 | 0.42 | % | 3,618 | ||||||||
Trane Technologies plc | 135 | 0.24 | % | 3,032 | ||||||||
Dover Corp. | 163 | 0.25 | % | 2,615 | ||||||||
PerkinElmer, Inc. | 158 | 0.28 | % | 2,601 | ||||||||
Pentair plc | 433 | 0.28 | % | 2,409 | ||||||||
A O Smith Corp. | 372 | 0.25 | % | 1,364 | ||||||||
Energizer Holdings, Inc. | 624 | 0.32 | % | 1,342 | ||||||||
Lennox International, Inc. | 65 | 0.22 | % | 188 | ||||||||
3M Co. | 233 | 0.50 | % | (305 | ) | |||||||
General Dynamics Corp. | 272 | 0.49 | % | (1,129 | ) | |||||||
Masco Corp. | 936 | 0.63 | % | (1,399 | ) | |||||||
Lockheed Martin Corp. | 103 | 0.44 | % | (2,707 | ) | |||||||
Total Industrial | 195,454 | |||||||||||
Utilities | ||||||||||||
Public Service Enterprise Group, Inc. | 1,359 | 0.96 | % | 3,405 | ||||||||
IDACORP, Inc. | 873 | 1.02 | % | 3,133 | ||||||||
Southern Co. | 836 | 0.62 | % | 2,957 | ||||||||
Exelon Corp. | 1,699 | 0.87 | % | 2,819 | ||||||||
CenterPoint Energy, Inc. | 1,490 | 0.39 | % | 2,420 | ||||||||
NorthWestern Corp. | 402 | 0.29 | % | 1,160 | ||||||||
UGI Corp. | 1,241 | 0.53 | % | 247 | ||||||||
Ameren Corp. | 949 | 0.90 | % | 192 | ||||||||
Avista Corp. | 546 | 0.27 | % | (767 | ) | |||||||
OGE Energy Corp. | 1,442 | 0.56 | % | (844 | ) | |||||||
PPL Corp. | 2,483 | 0.85 | % | (1,505 | ) | |||||||
ONE Gas, Inc. | 466 | 0.44 | % | (2,119 | ) | |||||||
Consolidated Edison, Inc. | 518 | 0.46 | % | (2,415 | ) | |||||||
Portland General Electric Co. | 465 | 0.24 | % | (3,012 | ) | |||||||
NiSource, Inc. | 1,650 | 0.46 | % | (3,021 | ) | |||||||
Duke Energy Corp. | 715 | 0.80 | % | (3,180 | ) |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Evergy, Inc. | 1,454 | 0.98 | % | $ | (3,477 | ) | ||||||
National Fuel Gas Co. | 675 | 0.34 | % | (4,714 | ) | |||||||
Southwest Gas Holdings, Inc. | 539 | 0.40 | % | (5,693 | ) | |||||||
Total Utilities | (14,414 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Gentherm, Inc. | 1,180 | 0.94 | % | 29,051 | ||||||||
Autoliv, Inc. | 654 | 0.73 | % | 20,192 | ||||||||
Gentex Corp. | 2,825 | 1.17 | % | 19,629 | ||||||||
Lear Corp. | 275 | 0.53 | % | 13,601 | ||||||||
Cummins, Inc. | 148 | 0.41 | % | 11,630 | ||||||||
Dolby Laboratories, Inc. — Class A | 223 | 0.26 | % | 6,976 | ||||||||
Hanesbrands, Inc. | 1,434 | 0.25 | % | 5,977 | ||||||||
MSC Industrial Direct Company, Inc. — Class A | 297 | 0.30 | % | 5,646 | ||||||||
Brunswick Corp. | 450 | 0.42 | % | 5,538 | ||||||||
Allison Transmission Holdings, Inc. | 1,549 | 0.81 | % | 3,272 | ||||||||
AutoNation, Inc. | 534 | 0.45 | % | 2,512 | ||||||||
Lowe’s Companies, Inc. | 341 | 0.67 | % | 1,736 | ||||||||
AutoZone, Inc. | 39 | 0.56 | % | 1,588 | ||||||||
Genuine Parts Co. | 640 | 0.78 | % | 1,503 | ||||||||
PACCAR, Inc. | 548 | 0.58 | % | 813 | ||||||||
Lennar Corp. — Class A | 449 | 0.42 | % | (443 | ) | |||||||
PulteGroup, Inc. | 806 | 0.42 | % | (1,028 | ) | |||||||
Meritage Homes Corp. | 305 | 0.31 | % | (2,536 | ) | |||||||
Best Buy Company, Inc. | 797 | 0.97 | % | (8,660 | ) | |||||||
Total Consumer, Cyclical | 116,997 | |||||||||||
Communications | ||||||||||||
Viavi Solutions, Inc. | 5,502 | 1.00 | % | 15,410 | ||||||||
T-Mobile US, Inc. | 577 | 0.95 | % | 11,864 | ||||||||
Cisco Systems, Inc. | 2,388 | 1.30 | % | 7,211 | ||||||||
Alphabet, Inc. — Class C | 11 | 0.23 | % | 6,909 | ||||||||
Ciena Corp. | 689 | 0.44 | % | 4,699 | ||||||||
VeriSign, Inc. | 187 | 0.49 | % | 3,057 | ||||||||
Motorola Solutions, Inc. | 250 | 0.52 | % | 2,786 | ||||||||
Discovery, Inc. — Class A | 958 | 0.35 | % | 2,777 | ||||||||
Cogent Communications Holdings, Inc. | 885 | 0.64 | % | 2,490 | ||||||||
Verizon Communications, Inc. | 1,667 | 1.19 | % | 1,368 | ||||||||
Juniper Networks, Inc. | 2,989 | 0.82 | % | 280 | ||||||||
eBay, Inc. | 714 | 0.44 | % | (775 | ) | |||||||
Sirius XM Holdings, Inc. | 10,083 | 0.78 | % | (1,039 | ) | |||||||
Omnicom Group, Inc. | 780 | 0.59 | % | (1,597 | ) | |||||||
AT&T, Inc. | 1,210 | 0.42 | % | (4,054 | ) | |||||||
Total Communications | 51,386 | |||||||||||
Total GS Long/Short Equity Long Custom Basket | $ | 762,900 | ||||||||||
GS LONG/SHORT EQUITY SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
UDR, Inc. | 880 | (0.64 | )% | $ | 6,107 | |||||||
Kilroy Realty Corp. | 867 | (0.95 | )% | 5,687 | ||||||||
Realty Income Corp. | 1,294 | (1.53 | )% | 4,012 | ||||||||
Douglas Emmett, Inc. | 604 | (0.34 | )% | 2,489 | ||||||||
Global Net Lease, Inc. | 1,623 | (0.53 | )% | 1,637 | ||||||||
JBG SMITH Properties | 1,325 | (0.79 | )% | 1,592 | ||||||||
Truist Financial Corp. | 420 | (0.38 | )% | 338 | ||||||||
First Industrial Realty Trust, Inc. | 892 | (0.72 | )% | 316 | ||||||||
American Tower Corp. — Class A | 74 | (0.32 | )% | 275 | ||||||||
Host Hotels & Resorts, Inc. | 1,347 | (0.37 | )% | 234 | ||||||||
Camden Property Trust | 372 | (0.71 | )% | (58 | ) | |||||||
Crown Castle International Corp. | 101 | (0.31 | )% | (100 | ) | |||||||
Prologis, Inc. | 532 | (1.01 | )% | (513 | ) | |||||||
Agree Realty Corp. | 1,217 | (1.54 | )% | (993 | ) | |||||||
CyrusOne, Inc. | 476 | (0.66 | )% | (1,124 | ) | |||||||
Howard Hughes Corp. | 356 | (0.53 | )% | (1,321 | ) | |||||||
Fulton Financial Corp. | 1,540 | (0.37 | )% | (1,330 | ) | |||||||
Duke Realty Corp. | 828 | (0.63 | )% | (1,362 | ) | |||||||
Healthpeak Properties, Inc. | 1,282 | (0.74 | )% | (1,365 | ) | |||||||
Southside Bancshares, Inc. | 1,054 | (0.62 | )% | (1,616 | ) | |||||||
SBA Communications Corp. | 59 | (0.32 | )% | (1,717 | ) | |||||||
First Midwest Bancorp, Inc. | 1,815 | (0.55 | )% | (1,887 | ) | |||||||
TFS Financial Corp. | 1,518 | (0.51 | )% | (1,947 | ) | |||||||
QTS Realty Trust, Inc. — Class A | 447 | (0.53 | )% | (2,351 | ) | |||||||
Americold Realty Trust | 774 | (0.55 | )% | (2,787 | ) | |||||||
STAG Industrial, Inc. | 677 | (0.40 | )% | (3,007 | ) | |||||||
Rayonier, Inc. | 1,255 | (0.70 | )% | (3,045 | ) | |||||||
Equinix, Inc. | 55 | (0.75 | )% | (3,202 | ) | |||||||
Healthcare Trust of America, Inc. — Class A | 1,419 | (0.74 | )% | (3,283 | ) | |||||||
EastGroup Properties, Inc. | 292 | (0.77 | )% | (3,436 | ) | |||||||
First Financial Bankshares, Inc. | 1,105 | (0.76 | )% | (3,769 | ) | |||||||
Intercontinental Exchange, Inc. | 373 | (0.82 | )% | (4,430 | ) | |||||||
Loews Corp. | 716 | (0.61 | )% | (4,440 | ) | |||||||
Brookline Bancorp, Inc. | 3,276 | (0.75 | )% | (4,530 | ) | |||||||
Alleghany Corp. | 109 | (1.25 | )% | (4,848 | ) | |||||||
Medical Properties Trust, Inc. | 2,319 | (0.96 | )% | (5,567 | ) | |||||||
Terreno Realty Corp. | 586 | (0.65 | )% | (5,733 | ) | |||||||
Alexandria Real Estate Equities, Inc. | 282 | (0.96 | )% | (6,126 | ) | |||||||
Sun Communities, Inc. | 391 | (1.13 | )% | (7,322 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Rexford Industrial Realty, Inc. | 1,316 | (1.23 | )% | $ | (9,619 | ) | ||||||
First Republic Bank | 481 | (1.34 | )% | (16,703 | ) | |||||||
Total Financial | (86,844 | ) | ||||||||||
Utilities | ||||||||||||
American States Water Co. | 264 | (0.40 | )% | 1,382 | ||||||||
California Water Service Group | 825 | (0.85 | )% | (3,234 | ) | |||||||
Total Utilities | (1,852 | ) | ||||||||||
Industrial | ||||||||||||
Raytheon Technologies Corp. | 723 | (0.98 | )% | 2,272 | ||||||||
US Ecology, Inc. | 589 | (0.41 | )% | 478 | ||||||||
Boeing Co. | 62 | (0.25 | )% | 340 | ||||||||
AMETEK, Inc. | 207 | (0.48 | )% | (127 | ) | |||||||
TransDigm Group, Inc. | 56 | (0.66 | )% | (4,282 | ) | |||||||
HEICO Corp. | 156 | (0.39 | )% | (4,517 | ) | |||||||
Eagle Materials, Inc. | 205 | (0.40 | )% | (5,328 | ) | |||||||
Martin Marietta Materials, Inc. | 75 | (0.41 | )% | (5,495 | ) | |||||||
Ingersoll Rand, Inc. | 1,343 | (1.16 | )% | (5,827 | ) | |||||||
Crown Holdings, Inc. | 322 | (0.61 | )% | (7,385 | ) | |||||||
Vulcan Materials Co. | 305 | (0.86 | )% | (8,508 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 694 | (0.82 | )% | (9,352 | ) | |||||||
AptarGroup, Inc. | 795 | (2.07 | )% | (9,740 | ) | |||||||
Ball Corp. | 783 | (1.39 | )% | (10,079 | ) | |||||||
Tetra Tech, Inc. | 544 | (1.20 | )% | (12,481 | ) | |||||||
Total Industrial | (80,031 | ) | ||||||||||
Communications | ||||||||||||
Anaplan, Inc. | 200 | (0.27 | )% | (6,084 | ) | |||||||
Okta, Inc. | 89 | (0.43 | )% | (6,531 | ) | |||||||
Liberty Broadband Corp. — Class C | 636 | (1.92 | )% | (9,686 | ) | |||||||
Zendesk, Inc. | 327 | (0.89 | )% | (10,857 | ) | |||||||
Q2 Holdings, Inc. | 367 | (0.88 | )% | (14,152 | ) | |||||||
Total Communications | (47,310 | ) | ||||||||||
Basic Materials | ||||||||||||
Huntsman Corp. | 1,857 | (0.89 | )% | 1,822 | ||||||||
Newmont Corp. | 413 | (0.47 | )% | 289 | ||||||||
Sherwin-Williams Co. | 36 | (0.50 | )% | 69 | ||||||||
Ecolab, Inc. | 92 | (0.38 | )% | (2,770 | ) | |||||||
Ashland Global Holdings, Inc. | 709 | (1.07 | )% | (3,094 | ) | |||||||
Axalta Coating Systems Ltd. | 1,225 | (0.67 | )% | (3,749 | ) | |||||||
PPG Industries, Inc. | 213 | (0.58 | )% | (4,518 | ) | |||||||
DuPont de Nemours, Inc. | 1,022 | (1.38 | )% | (5,110 | ) | |||||||
Air Products and Chemicals, Inc. | 358 | (1.86 | )% | (5,399 | ) | |||||||
Celanese Corp. — Class A | 397 | (0.98 | )% | (8,734 | ) | |||||||
Balchem Corp. | 727 | (1.59 | )% | (12,043 | ) | |||||||
Freeport-McMoRan, Inc. | 880 | (0.44 | )% | (13,486 | ) | |||||||
Linde plc | 395 | (1.98 | )% | (14,258 | ) | |||||||
RPM International, Inc. | 873 | (1.51 | )% | (16,103 | ) | |||||||
Quaker Chemical Corp. | 268 | (1.29 | )% | (29,251 | ) | |||||||
Albemarle Corp. | 393 | (1.10 | )% | (30,402 | ) | |||||||
United States Steel Corp. | 3,705 | (1.18 | )% | (32,946 | ) | |||||||
Total Basic Materials | (179,683 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
United Airlines Holdings, Inc. | 623 | (0.51 | )% | 512 | ||||||||
Alaska Air Group, Inc. | �� | 874 | (0.86 | )% | 14 | |||||||
JetBlue Airways Corp. | 2,314 | (0.64 | )% | (3,826 | ) | |||||||
Delta Air Lines, Inc. | 1,276 | (0.98 | )% | (5,962 | ) | |||||||
Five Below, Inc. | 152 | (0.51 | )% | (6,090 | ) | |||||||
Southwest Airlines Co. | 1,247 | (1.11 | )% | (6,559 | ) | |||||||
Hilton Worldwide Holdings, Inc. | 505 | (1.07 | )% | (7,935 | ) | |||||||
Live Nation Entertainment, Inc. | 414 | (0.58 | )% | (8,812 | ) | |||||||
TJX Companies, Inc. | 826 | (1.07 | )% | (9,249 | ) | |||||||
Copart, Inc. | 479 | (1.16 | )% | (12,189 | ) | |||||||
NIKE, Inc. — Class B | 524 | (1.41 | )% | (13,007 | ) | |||||||
Scotts Miracle-Gro Co. — Class A | 210 | (0.80 | )% | (13,241 | ) | |||||||
Burlington Stores, Inc. | 235 | (1.17 | )% | (14,281 | ) | |||||||
Starbucks Corp. | 825 | (1.68 | )% | (20,603 | ) | |||||||
Total Consumer, Cyclical | (121,228 | ) | ||||||||||
Energy | ||||||||||||
Williams Companies, Inc. | 1,318 | (0.50 | )% | 913 | ||||||||
Cheniere Energy, Inc. | 522 | (0.60 | )% | (575 | ) | |||||||
Ovintiv, Inc. | 2,505 | (0.68 | )% | (2,125 | ) | |||||||
ChampionX Corp. | 2,433 | (0.71 | )% | (3,198 | ) | |||||||
NOV, Inc. | 1,458 | (0.38 | )% | (3,301 | ) | |||||||
Hess Corp. | 775 | (0.78 | )% | (5,362 | ) | |||||||
Phillips 66 | 1,001 | (1.33 | )% | (6,311 | ) | |||||||
Schlumberger N.V. | 3,059 | (1.27 | )% | (6,337 | ) | |||||||
Total Energy | (26,296 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Nevro Corp. | 296 | (0.97 | )% | (478 | ) | |||||||
Moody’s Corp. | 149 | (0.82 | )% | (2,765 | ) | |||||||
Verisk Analytics, Inc. — Class A | 184 | (0.73 | )% | (3,839 | ) | |||||||
CoStar Group, Inc. | 50 | (0.88 | )% | (4,042 | ) | |||||||
WD-40 Co. | 105 | (0.53 | )% | (5,106 | ) | |||||||
Avalara, Inc. | 102 | (0.32 | )% | (7,396 | ) | |||||||
Avery Dennison Corp. | 203 | (0.60 | )% | (7,497 | ) | |||||||
Equifax, Inc. | 291 | (1.07 | )% | (9,320 | ) | |||||||
Total Consumer, Non-cyclical | (40,443 | ) | ||||||||||
Technology | ||||||||||||
Splunk, Inc. | 195 | (0.63 | )% | 3,426 |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
NVIDIA Corp. | 39 | (0.39 | )% | $ | (1,713 | ) | ||||||
salesforce.com, Inc. | 127 | (0.54 | )% | (2,502 | ) | |||||||
Appfolio, Inc. — Class A | 93 | (0.32 | )% | (3,152 | ) | |||||||
Clarivate plc | 1,112 | (0.63 | )% | (3,275 | ) | |||||||
Pegasystems, Inc. | 314 | (0.80 | )% | (3,406 | ) | |||||||
Tyler Technologies, Inc. | 62 | (0.51 | )% | (4,032 | ) | |||||||
Atlassian Corporation plc — Class A | 96 | (0.43 | )% | (4,720 | ) | |||||||
Coupa Software, Inc. | 54 | (0.35 | )% | (5,056 | ) | |||||||
ANSYS, Inc. | 130 | (0.90 | )% | (5,808 | ) | |||||||
Smartsheet, Inc. — Class A | 264 | (0.35 | )% | (6,161 | ) | |||||||
Rapid7, Inc. | 361 | (0.62 | )% | (6,176 | ) | |||||||
Workiva, Inc. | 183 | (0.32 | )% | (8,620 | ) | |||||||
HubSpot, Inc. | 69 | (0.52 | )% | (10,682 | ) | |||||||
Zscaler, Inc. | 97 | (0.37 | )% | (11,171 | ) | |||||||
Varonis Systems, Inc. | 331 | (1.03 | )% | (15,558 | ) | |||||||
Total Technology | (88,606 | ) | ||||||||||
Total GS Long/Short Equity Short Custom Basket | $ | (672,293 | ) | |||||||||
MS EQUITY MARKET NEUTRAL LONG CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Innovative Industrial Properties, Inc. | 840 | 4.22 | % | $ | 84,564 | |||||||
Safehold, Inc. | 1,920 | 3.81 | % | 80,486 | ||||||||
Sun Communities, Inc. | 1,092 | 4.54 | % | 50,592 | ||||||||
Terreno Realty Corp. | 2,578 | 4.13 | % | 37,917 | ||||||||
Kilroy Realty Corp. | 2,102 | 3.30 | % | 20,482 | ||||||||
Weingarten Realty Investors | 6,308 | 3.74 | % | 20,097 | ||||||||
Ventas, Inc. | 3,109 | 4.17 | % | 18,837 | ||||||||
Gaming and Leisure Properties, Inc. | 3,187 | 3.70 | % | 16,119 | ||||||||
Healthpeak Properties, Inc. | 3,970 | 3.28 | % | 13,788 | ||||||||
Colony Capital, Inc. | 15,076 | 1.98 | % | 8,588 | ||||||||
NETSTREIT Corp. | 4,650 | 2.48 | % | 7,844 | ||||||||
Sabra Health Care REIT, Inc. | 7,429 | 3.53 | % | 7,183 | ||||||||
VICI Properties, Inc. | 4,130 | 2.88 | % | 5,952 | ||||||||
CyrusOne, Inc. | 1,359 | 2.72 | % | 4,266 | ||||||||
Equity LifeStyle Properties, Inc. | 1,046 | 1.81 | % | 3,077 | ||||||||
Public Storage | 553 | 3.49 | % | 1,906 | ||||||||
First Industrial Realty Trust, Inc. | 2,311 | 2.66 | % | 1,570 | ||||||||
Invitation Homes, Inc. | 2,146 | 1.74 | % | 1,550 | ||||||||
JBG SMITH Properties | 4,073 | 3.48 | % | 1,432 | ||||||||
National Retail Properties, Inc. | 1,551 | 1.74 | % | 526 | ||||||||
Welltower, Inc. | 1,950 | 3.45 | % | 503 | ||||||||
Apartment Income REIT Corp. | 3,315 | 3.48 | % | (142 | ) | |||||||
Prologis, Inc. | 1,266 | 3.45 | % | (980 | ) | |||||||
UDR, Inc. | 2,383 | 2.51 | % | (1,128 | ) | |||||||
American Assets Trust, Inc. | 2,192 | 1.73 | % | (1,911 | ) | |||||||
Urban Edge Properties | 4,378 | 1.55 | % | (2,132 | ) | |||||||
Boston Properties, Inc. | 758 | 1.96 | % | (2,896 | ) | |||||||
American Tower Corp. — Class A | 407 | 2.50 | % | (2,919 | ) | |||||||
Equity Residential | 2,047 | 3.32 | % | (5,240 | ) | |||||||
Highwoods Properties, Inc. | 3,060 | 3.32 | % | (6,135 | ) | |||||||
AvalonBay Communities, Inc. | 740 | 3.25 | % | (7,985 | ) | |||||||
Total Financial | 355,811 | |||||||||||
Consumer, Cyclical | ||||||||||||
Las Vegas Sands Corp. | 1,587 | 2.59 | % | 2,845 | ||||||||
Wynn Resorts Ltd. | 1,131 | 3.49 | % | 1,589 | ||||||||
Total Consumer, Cyclical | 4,434 | |||||||||||
Total MS Equity Market Neutral Long Custom Basket | $ | 360,245 | ||||||||||
MS EQUITY MARKET NEUTRAL SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Crown Castle International Corp. | 566 | (2.62 | )% | $ | 4,542 | |||||||
Omega Healthcare Investors, Inc. | 3,369 | (3.56 | )% | 4,018 | ||||||||
Equinix, Inc. | 84 | (1.74 | )% | 2,568 | ||||||||
PS Business Parks, Inc. | 696 | (2.68 | )% | 2,311 | ||||||||
Cousins Properties, Inc. | 3,648 | (3.55 | )% | 1,743 | ||||||||
Retail Opportunity Investments Corp. | 4,740 | (1.84 | )% | 1,423 | ||||||||
Duke Realty Corp. | 3,136 | (3.64 | )% | 1,388 | ||||||||
Mid-America Apartment Communities, Inc. | 1,018 | (3.74 | )% | 1,043 | ||||||||
American Campus Communities, Inc. | 1,462 | (1.81 | )% | 854 | ||||||||
Spirit Realty Capital, Inc. | 1,540 | (1.80 | )% | 407 | ||||||||
Camden Property Trust | 1,267 | (3.67 | )% | (184 | ) | |||||||
Independence Realty Trust, Inc. | 4,666 | (1.82 | )% | (536 | ) | |||||||
CoreSite Realty Corp. | 759 | (2.76 | )% | (667 | ) | |||||||
Physicians Realty Trust | 5,378 | (2.78 | )% | (784 | ) | |||||||
Brixmor Property Group, Inc. | 3,978 | (1.91 | )% | (984 | ) | |||||||
Global Net Lease, Inc. | 2,669 | (1.33 | )% | (1,439 | ) | |||||||
Life Storage, Inc. | 1,066 | (3.69 | )% | (2,186 | ) | |||||||
American Homes 4 Rent — Class A | 4,283 | (3.73 | )% | (2,726 | ) | |||||||
Easterly Government Properties, Inc. | 3,316 | (2.18 | )% | (2,883 | ) | |||||||
Industrial Logistics Properties Trust | 2,709 | (1.83 | )% | (3,198 | ) | |||||||
Healthcare Trust of America, Inc. — Class A | 3,665 | (2.93 | )% | (4,652 | ) | |||||||
Hudson Pacific Properties, Inc. | 2,708 | (1.89 | )% | (6,473 | ) | |||||||
Four Corners Property Trust, Inc. | 1,633 | (1.41 | )% | (7,411 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Paramount Group, Inc. | 8,092 | (2.12 | )% | $ | (8,994 | ) | ||||||
Douglas Emmett, Inc. | 2,145 | (1.82 | )% | (11,327 | ) | |||||||
Columbia Property Trust, Inc. | 3,421 | (1.42 | )% | (11,532 | ) | |||||||
Washington Real Estate Investment Trust | 5,127 | (3.22 | )% | (12,368 | ) | |||||||
Essential Properties Realty Trust, Inc. | 4,525 | (2.78 | )% | (12,732 | ) | |||||||
VEREIT, Inc. | 2,600 | (2.85 | )% | (18,269 | ) | |||||||
Kennedy-Wilson Holdings, Inc. | 6,219 | (3.23 | )% | (21,771 | ) | |||||||
Monmouth Real Estate Investment Corp. | 10,887 | (5.47 | )% | (30,850 | ) | |||||||
STORE Capital Corp. | 3,115 | (3.07 | )% | (31,955 | ) | |||||||
Retail Properties of America, Inc. — Class A | 12,854 | (3.19 | )% | (36,278 | ) | |||||||
Total Financial | (209,902 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Hyatt Hotels Corp. — Class A | 1,237 | (2.67 | )% | (1,578 | ) | |||||||
Choice Hotels International, Inc. | 1,201 | (3.72 | )% | (2,541 | ) | |||||||
Total Consumer, Cyclical | (4,119 | ) | ||||||||||
Exchange-Traded Funds | ||||||||||||
Vanguard Real Estate ETF | 2,243 | (5.53 | )% | 13,691 | ||||||||
Total MS Equity Market Neutral Short Custom Basket | $ | (200,330 | ) | |||||||||
GS EQUITY MARKET NEUTRAL LONG CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Innovative Industrial Properties, Inc. | 840 | 4.22 | % | $ | 85,534 | |||||||
Safehold, Inc. | 1,920 | 3.82 | % | 80,418 | ||||||||
Terreno Realty Corp. | 2,578 | 4.13 | % | 24,317 | ||||||||
Sun Communities, Inc. | 1,092 | 4.54 | % | 23,864 | ||||||||
Kilroy Realty Corp. | 2,102 | 3.30 | % | 20,467 | ||||||||
Weingarten Realty Investors | 6,308 | 3.74 | % | 19,834 | ||||||||
Ventas, Inc. | 3,109 | 4.17 | % | 18,728 | ||||||||
Gaming and Leisure Properties, Inc. | 3,146 | 3.65 | % | 16,215 | ||||||||
Colony Capital, Inc. | 15,076 | 1.98 | % | 8,739 | ||||||||
NETSTREIT Corp. | 4,650 | 2.48 | % | 7,759 | ||||||||
Sabra Health Care REIT, Inc. | 7,429 | 3.53 | % | 6,922 | ||||||||
VICI Properties, Inc. | 4,130 | 2.88 | % | 5,779 | ||||||||
CyrusOne, Inc. | 1,359 | 2.72 | % | 4,265 | ||||||||
Equity LifeStyle Properties, Inc. | 1,046 | 1.81 | % | 3,074 | ||||||||
Public Storage | 553 | 3.49 | % | 1,909 | ||||||||
Invitation Homes, Inc. | 2,146 | 1.74 | % | 1,595 | ||||||||
First Industrial Realty Trust, Inc. | 2,311 | 2.66 | % | 1,589 | ||||||||
JBG SMITH Properties | 4,073 | 3.49 | % | 1,502 | ||||||||
Healthpeak Properties, Inc. | 3,970 | 3.28 | % | 1,461 | ||||||||
National Retail Properties, Inc. | 1,551 | 1.74 | % | 545 | ||||||||
Welltower, Inc. | 1,950 | 3.45 | % | 487 | ||||||||
Apartment Income REIT Corp. | 3,315 | 3.48 | % | (81 | ) | |||||||
Prologis, Inc. | 1,266 | 3.45 | % | (959 | ) | |||||||
UDR, Inc. | 2,383 | 2.51 | % | (1,078 | ) | |||||||
American Assets Trust, Inc. | 2,192 | 1.73 | % | (1,901 | ) | |||||||
Urban Edge Properties | 4,378 | 1.55 | % | (2,046 | ) | |||||||
American Tower Corp. — Class A | 407 | 2.50 | % | (2,922 | ) | |||||||
Boston Properties, Inc. | 769 | 1.99 | % | (2,992 | ) | |||||||
Equity Residential | 2,047 | 3.32 | % | (5,726 | ) | |||||||
Highwoods Properties, Inc. | 3,060 | 3.32 | % | (6,207 | ) | |||||||
AvalonBay Communities, Inc. | 740 | 3.25 | % | (7,990 | ) | |||||||
Total Financial | 303,101 | |||||||||||
Consumer, Cyclical | ||||||||||||
Las Vegas Sands Corp. | 1,587 | 2.59 | % | 2,864 | ||||||||
Wynn Resorts Ltd. | 1,131 | 3.49 | % | 1,597 | ||||||||
Total Consumer, Cyclical | 4,461 | |||||||||||
Total GS Equity Market Neutral Long Custom Basket | $ | 307,562 | ||||||||||
GS EQUITY MARKET NEUTRAL SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Crown Castle International Corp. | 566 | (2.62 | )% | $ | 4,576 | |||||||
Omega Healthcare Investors, Inc. | 3,369 | (3.55 | )% | 4,015 | ||||||||
Equinix, Inc. | 84 | (1.74 | )% | 2,405 | ||||||||
PS Business Parks, Inc. | 696 | (2.68 | )% | 2,179 | ||||||||
Cousins Properties, Inc. | 3,648 | (3.55 | )% | 1,739 | ||||||||
Retail Opportunity Investments Corp. | 4,740 | (1.84 | )% | 1,498 | ||||||||
Duke Realty Corp. | 3,136 | (3.64 | )% | 1,416 | ||||||||
Mid-America Apartment Communities, Inc. | 1,018 | (3.74 | )% | 1,087 | ||||||||
American Campus Communities, Inc. | 1,462 | (1.81 | )% | 878 | ||||||||
Spirit Realty Capital, Inc. | 1,540 | (1.80 | )% | 454 | ||||||||
Camden Property Trust | 1,267 | (3.67 | )% | (172 | ) | |||||||
Independence Realty Trust, Inc. | 4,666 | (1.82 | )% | (547 | ) | |||||||
CoreSite Realty Corp. | 759 | (2.76 | )% | (663 | ) | |||||||
Physicians Realty Trust | 5,378 | (2.78 | )% | (763 | ) | |||||||
Brixmor Property Group, Inc. | 3,978 | (1.91 | )% | (946 | ) | |||||||
Global Net Lease, Inc. | 2,577 | (1.28 | )% | (1,303 | ) | |||||||
Life Storage, Inc. | 1,066 | (3.69 | )% | (2,162 | ) | |||||||
American Homes 4 Rent — Class A | 4,283 | (3.73 | )% | (2,697 | ) |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Shares | Percentage Notional Amount | Value and Unrealized Appreciation (Depreciation) | ||||||||||
Easterly Government Properties, Inc. | 3,401 | (2.24 | )% | $ | (2,923 | ) | ||||||
Industrial Logistics Properties Trust | 2,709 | (1.83 | )% | (3,175 | ) | |||||||
Healthcare Trust of America, Inc. — Class A | 3,665 | (2.93 | )% | (4,622 | ) | |||||||
Hudson Pacific Properties, Inc. | 2,708 | (1.89 | )% | (6,399 | ) | |||||||
Four Corners Property Trust, Inc. | 1,633 | (1.41 | )% | (7,367 | ) | |||||||
Paramount Group, Inc. | 8,092 | (2.12 | )% | (8,883 | ) | |||||||
Douglas Emmett, Inc. | 2,145 | (1.82 | )% | (11,311 | ) | |||||||
Columbia Property Trust, Inc. | 3,421 | (1.42 | )% | (11,508 | ) | |||||||
Washington Real Estate Investment Trust | 5,127 | (3.22 | )% | (12,279 | ) | |||||||
Essential Properties Realty Trust, Inc. | 4,525 | (2.78 | )% | (12,710 | ) | |||||||
VEREIT, Inc. | 2,600 | (2.85 | )% | (18,209 | ) | |||||||
Kennedy-Wilson Holdings, Inc. | 6,219 | (3.23 | )% | (21,881 | ) | |||||||
Monmouth Real Estate Investment Corp. | 10,887 | (5.47 | )% | (30,841 | ) | |||||||
STORE Capital Corp. | 3,115 | (3.07 | )% | (31,902 | ) | |||||||
Retail Properties of America, Inc. — Class A | 12,854 | (3.19 | )% | (36,182 | ) | |||||||
Total Financial | (209,198 | ) | ||||||||||
Exchange-Traded Funds | ||||||||||||
Vanguard Real Estate ETF | 2,243 | (5.53 | )% | 13,705 | ||||||||
Consumer, Cyclical | ||||||||||||
Hyatt Hotels Corp. — Class A | 1,237 | (2.67 | )% | (1,589 | ) | |||||||
Choice Hotels International, Inc. | 1,201 | (3.72 | )% | (2,519 | ) | |||||||
Total Consumer, Cyclical | (4,108 | ) | ||||||||||
Total GS Equity Market Neutral Short Custom Basket | $ | (199,601 | ) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Consolidated Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is pledged as short security collateral at December 31, 2020. |
2 | Affiliated issuer. |
3 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
4 | All or a portion of this security is pledged as custom basket swap collateral at December 31, 2020. |
5 | Rate indicated is the effective yield at the time of purchase. |
6 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
7 | Repurchase Agreements — See Note 6. |
8 | Securities lending collateral — See Note 7. |
9 | Rate indicated is the 7-day yield as of December 31, 2020. |
GS — Goldman Sachs International | |
MS — Morgan Stanley Capital Services LLC | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Consolidated Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 14,128,106 | $ | 238,838 | $ | — | $ | 14,366,944 | ||||||||
Rights | 4,041 | — | — | * | 4,041 | |||||||||||
Mutual Funds | 11,907,071 | — | — | 11,907,071 | ||||||||||||
Closed-End Funds | 3,824,634 | — | — | 3,824,634 | ||||||||||||
U.S. Treasury Bills | — | 5,750,286 | — | 5,750,286 | ||||||||||||
Repurchase Agreements | — | 3,857,400 | — | 3,857,400 | ||||||||||||
Securities Lending Collateral | 132,673 | — | — | 132,673 | ||||||||||||
Commodity Futures Contracts** | 702,556 | — | — | 702,556 | ||||||||||||
Currency Futures Contracts** | 299,682 | — | — | 299,682 | ||||||||||||
Interest Rate Futures Contracts** | 41,063 | 35,493 | — | 76,556 | ||||||||||||
Equity Futures Contracts** | 39,212 | 4,378 | — | 43,590 | ||||||||||||
Equity Custom Basket Swap Agreements** | — | 2,216,798 | — | 2,216,798 | ||||||||||||
Total Assets | $ | 31,079,038 | $ | 12,103,193 | $ | — | $ | 43,182,231 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,713,010 | $ | — | $ | — | $ | 4,713,010 | ||||||||
Exchange-Traded Funds | 4,119,563 | — | — | 4,119,563 | ||||||||||||
Commodity Futures Contracts** | 527,817 | — | — | 527,817 | ||||||||||||
Currency Futures Contracts** | 125,553 | — | — | 125,553 | ||||||||||||
Equity Futures Contracts** | 6,657 | 71,181 | — | 77,838 | ||||||||||||
Interest Rate Futures Contracts** | — | 2,477 | — | 2,477 | ||||||||||||
Equity Custom Basket Swap Agreements** | — | 1,744,021 | — | 1,744,021 | ||||||||||||
Total Liabilities | $ | 9,492,600 | $ | 1,817,679 | $ | — | $ | 11,310,279 |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
MULTI-HEDGE STRATEGIES FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 3,223,473 | $ | 45,913 | $ | (1,100,000 | ) | $ | (25,631 | ) | $ | 24,119 | $ | 2,167,874 | 86,854 | $ | 45,885 | |||||||||||||||
Guggenheim Strategy Fund III | 2,969,422 | 46,062 | (600,000 | ) | (7,279 | ) | 44,524 | 2,452,729 | 97,718 | 45,926 | ||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 3,557,751 | 3,354,118 | (1,800,000 | ) | 4,647 | 34,681 | 5,151,197 | 516,152 | 54,012 | |||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 3,372,100 | 38,731 | (1,300,000 | ) | (16,270 | ) | 40,710 | 2,135,271 | 85,274 | 38,691 | ||||||||||||||||||||||
$ | 13,122,746 | $ | 3,484,824 | $ | (4,800,000 | ) | $ | (44,533 | ) | $ | 144,034 | $ | 11,907,071 | $ | 184,514 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $128,795 of securities loaned (cost $23,020,790) | $ | 24,078,578 | ||
Investments in affiliated issuers, at value (cost $11,855,700) | 11,907,071 | |||
Repurchase agreements, at value (cost $3,857,400) | 3,857,400 | |||
Cash | 8,947,605 | |||
Segregated cash with broker | 317,832 | |||
Unrealized appreciation on OTC swap agreements | 2,216,798 | |||
Receivables: | ||||
Variation margin on futures contracts | 193,076 | |||
Swap settlement | 115,846 | |||
Dividends | 29,744 | |||
Fund shares sold | 1,415 | |||
Securities lending income | 603 | |||
Foreign tax reclaims | 476 | |||
Interest | 6 | |||
Total assets | 51,666,450 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $8,057,115) | 8,832,573 | |||
Unrealized depreciation on OTC swap agreements | 1,744,021 | |||
Payable for: | ||||
Securities purchased | 495,255 | |||
Return of securities lending collateral | 132,673 | |||
Fund shares redeemed | 106,293 | |||
Management fees | 38,405 | |||
Miscellaneous | 4,450 | |||
Total liabilities | 11,353,670 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 40,312,780 | ||
Net assets consist of: | ||||
Paid in capital | $ | 39,502,008 | ||
Total distributable earnings (loss) | 810,772 | |||
Net assets | $ | 40,312,780 | ||
Capital shares outstanding | 1,573,240 | |||
Net asset value per share | $ | 25.62 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 305,453 | ||
Dividends from securities of affiliated issuers | 184,514 | |||
Interest | 43,554 | |||
Income from securities lending, net | 5,141 | |||
Total investment income | 538,662 | |||
Expenses: | ||||
Management fees | 470,491 | |||
Short sales dividend expense | 157,691 | |||
Prime broker interest expense | 39,793 | |||
Miscellaneous | 2,031 | |||
Total expenses | 670,006 | |||
Less: | ||||
Expenses waived by Adviser | (23,106 | ) | ||
Net expenses | 646,900 | |||
Net investment loss | (108,238 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 824,277 | |||
Investments in affiliated issuers | (44,533 | ) | ||
Investments sold short | (624,545 | ) | ||
Swap agreements | 2,179,647 | |||
Futures contracts | 516,725 | |||
Options written | 4,024 | |||
Foreign currency transactions | (8,667 | ) | ||
Net realized gain | 2,846,928 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 410,612 | |||
Investments in affiliated issuers | 144,034 | |||
Investments sold short | (560,245 | ) | ||
Swap agreements | (672,847 | ) | ||
Futures contracts | 527,901 | |||
Foreign currency translations | (668 | ) | ||
Net change in unrealized appreciation (depreciation) | (151,213 | ) | ||
Net realized and unrealized gain | 2,695,715 | |||
Net increase in net assets resulting from operations | $ | 2,587,477 |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (108,238 | ) | $ | 349,972 | |||
Net realized gain on investments | 2,846,928 | 442,773 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (151,213 | ) | 1,172,534 | |||||
Net increase in net assets resulting from operations | 2,587,477 | 1,965,279 | ||||||
Distributions to shareholders | (546,653 | ) | (875,142 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 23,023,957 | 3,288,700 | ||||||
Distributions reinvested | 546,653 | 875,142 | ||||||
Cost of shares redeemed | (19,908,660 | ) | (10,979,155 | ) | ||||
Net increase (decrease) from capital share transactions | 3,661,950 | (6,815,313 | ) | |||||
Net increase (decrease) in net assets | 5,702,774 | (5,725,176 | ) | |||||
Net assets: | ||||||||
Beginning of year | 34,610,006 | 40,335,182 | ||||||
End of year | $ | 40,312,780 | $ | 34,610,006 | ||||
Capital share activity: | ||||||||
Shares sold | 907,676 | 135,737 | ||||||
Shares issued from reinvestment of distributions | 21,675 | 36,771 | ||||||
Shares redeemed | (787,955 | ) | (453,659 | ) | ||||
Net increase (decrease) in shares | 141,396 | (281,151 | ) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
MULTI-HEDGE STRATEGIES FUND |
CONSOLIDATED FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 24.17 | $ | 23.55 | $ | 24.83 | $ | 23.95 | $ | 24.09 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (0.07 | ) | .23 | .20 | (.09 | ) | (.16 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.85 | .97 | (1.48 | ) | .97 | .04 | ||||||||||||||
Total from investment operations | 1.78 | 1.20 | (1.28 | ) | .88 | (.12 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.33 | ) | (.58 | ) | — | — | (.02 | ) | ||||||||||||
Total distributions | (.33 | ) | (.58 | ) | — | — | (.02 | ) | ||||||||||||
Net asset value, end of period | $ | 25.62 | $ | 24.17 | $ | 23.55 | $ | 24.83 | $ | 23.95 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 7.39 | % | 5.15 | % | (5.16 | %) | 3.67 | % | (0.48 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 40,313 | $ | 34,610 | $ | 40,335 | $ | 43,695 | $ | 47,953 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.27 | %) | 0.94 | % | 0.85 | % | (0.39 | %) | (0.66 | %) | ||||||||||
Total expensesc | 1.68 | % | 1.72 | % | 1.54 | % | 1.88 | % | 2.27 | % | ||||||||||
Net expensesd | 1.63 | % | 1.69 | % | 1.52 | % | 1.85 | % | 2.23 | % | ||||||||||
Portfolio turnover rate | 207 | % | 163 | % | 162 | % | 158 | % | 119 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers, and may include interest and dividend expense related to short sales. Excluding interest and dividend expense related to short sales, net expense ratios for the year end would be: |
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |
1.13% | 1.16% | 1.16% | 1.16% | 1.17% |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
COMMODITIES STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a benchmark for commodities. The Fund’s current benchmark is the S&P Goldman Sachs Commodity Index (“GSCI” or “Index”).
For the one-year period ended December 31, 2020, Guggenheim Commodities Strategy Fund returned -22.72%, compared with a return of -23.72% for the Index.
Crude Oil and other petroleum prices collapsed in the first four months of the year once COVID-19 restrictions reduced demand combined with limited storage capacity for excess supplies. Crude Oil futures briefly experienced negative prices in April. However, commodities prices rallied strongly from the end of April through year end.
Fourteen of the 24 components in the Index had positive returns during the period. The best-performing component was Silver with a return above 40%. Soybeans had a positive return of 30%. Gold and Copper each rose more than 20%.
Crude Oil fell more than 60%. Gas Oil and Natural Gas were both down more than 40%. Brent Crude, Heating Oil, and Lean Hogs all experienced losses of 30% or more for the year.
Three of the five S&P GSCI sectors experienced positive performance during the period. Precious Metals (+23%), Agriculture (+15%), and Industrial Metals (+15%) were the S&P GSCI sectors with positive performance. Energy (-46%) and Livestock (-22%) were the sector with negative performance.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the most efficient manner, as well as to provide liquidity. Derivatives are the primary way in which the Fund gains exposure to commodities, and therefore most of the Fund’s performance is due to derivatives.
Guggenheim Ultra Short Duration Fund and Guggenheim Strategy Funds were utilized within the Fund to achieve higher yields than what would otherwise be achieved through overnight repurchase agreements or short-term investments.
Performance displayed represents past performance which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 61 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Consolidated Holdings Diversification (Market Exposure as % of Net Assets)
“Consolidated Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: September 30, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 25.0% |
Guggenheim Strategy Fund II | 14.5% |
Total | 39.5% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Commodities Strategy Fund | (22.72%) | (2.71%) | (10.25%) |
S&P Goldman Sachs Commodity Index | (23.72%) | (1.85%) | (8.76%) |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P Goldman Sachs Commodity Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
62 | THE RYDEX FUNDS ANNUAL REPORT |
CONSOLIDATED SCHEDULE OF INVESTMENTS | December 31, 2020 |
COMMODITIES STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 39.5% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 87,921 | $ | 877,450 | |||||
Guggenheim Strategy Fund II1 | 20,331 | 507,465 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,379,909) | 1,384,915 | |||||||
Face |
| |||||||
U.S. TREASURY BILLS†† - 6.3% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/212,3 | $ | 219,000 | 218,992 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $218,987) | 218,992 | |||||||
FEDERAL AGENCY NOTES†† - 2.9% | ||||||||
Federal Farm Credit Bank | ||||||||
1.75% due 04/01/21 | 100,000 | 100,420 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $100,399) | 100,420 | |||||||
REPURCHASE AGREEMENTS††,4 - 49.9% | ||||||||
J.P. Morgan Securities LLC issued 12/31/20 at 0.06% due 01/04/21 | 970,643 | 970,643 | ||||||
Barclays Capital, Inc. issued 12/31/20 at 0.06% due 01/04/21 | 404,381 | 404,381 | ||||||
BofA Securities, Inc. issued 12/31/20 at 0.06% due 01/04/21 | 374,426 | 374,426 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,749,450) | 1,749,450 | |||||||
Total Investments - 98.6% | ||||||||
(Cost $3,448,745) | $ | 3,453,777 | ||||||
Other Assets & Liabilities, net - 1.4% | 50,797 | |||||||
Total Net Assets - 100.0% | $ | 3,504,574 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Commodity Futures Contracts Purchased† | ||||||||||||||||
Goldman Sachs Commodity Index Futures Contracts | 34 | Jan 2021 | $ | 3,482,875 | $ | 147,694 |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Consolidated Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
COMMODITIES STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Consolidated Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,384,915 | $ | — | $ | — | $ | 1,384,915 | ||||||||
U.S. Treasury Bills | — | 218,992 | — | 218,992 | ||||||||||||
Federal Agency Notes | — | 100,420 | — | 100,420 | ||||||||||||
Repurchase Agreements | — | 1,749,450 | — | 1,749,450 | ||||||||||||
Commodity Futures Contracts** | 147,694 | — | — | 147,694 | ||||||||||||
Total Assets | $ | 1,532,609 | $ | 2,068,862 | $ | — | $ | 3,601,471 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 750,731 | $ | 258,275 | $ | (500,000 | ) | $ | (4,944 | ) | $ | 3,403 | $ | 507,465 | 20,331 | $ | 8,268 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 789,733 | 932,717 | (845,000 | ) | (1,278 | ) | 1,278 | 877,450 | 87,921 | 7,708 | ||||||||||||||||||||||
$ | 1,540,464 | $ | 1,190,992 | $ | (1,345,000 | ) | $ | (6,222 | ) | $ | 4,681 | $ | 1,384,915 | $ | 15,976 |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $319,386) | $ | 319,412 | ||
Investments in affiliated issuers, at value (cost $1,379,909) | 1,384,915 | |||
Repurchase agreements, at value (cost $1,749,450) | 1,749,450 | |||
Cash | 12 | |||
Segregated cash with broker | 37,106 | |||
Receivables: | ||||
Variation margin on futures contracts | 19,550 | |||
Fund shares sold | 2,199 | |||
Dividends | 911 | |||
Interest | 441 | |||
Total assets | 3,513,996 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 2,981 | |||
Management fees | 1,645 | |||
Printing fees | 1,264 | |||
Securities purchased | 1,007 | |||
Transfer agent and administrative fees | 627 | |||
Investor service fees | 583 | |||
Portfolio accounting fees | 233 | |||
Fund shares redeemed | 132 | |||
Trustees’ fees* | 38 | |||
Miscellaneous | 912 | |||
Total liabilities | 9,422 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 3,504,574 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,348,525 | ||
Total distributable earnings (loss) | (1,843,951 | ) | ||
Net assets | $ | 3,504,574 | ||
Capital shares outstanding | 56,145 | |||
Net asset value per share | $ | 62.42 |
CONSOLIDATED STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 15,976 | ||
Interest | 3,851 | |||
Total investment income | 19,827 | |||
Expenses: | ||||
Management fees | 20,238 | |||
Investor service fees | 5,721 | |||
Transfer agent and administrative fees | 7,686 | |||
Professional fees | 5,911 | |||
Portfolio accounting fees | 2,288 | |||
Trustees’ fees* | 628 | |||
Custodian fees | 374 | |||
Miscellaneous | 177 | |||
Total expenses | 43,023 | |||
Less: | ||||
Expenses waived by Adviser | (4,319 | ) | ||
Net expenses | 38,704 | |||
Net investment loss | (18,877 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 712 | |||
Investments in affiliated issuers | (6,222 | ) | ||
Futures contracts | (560,140 | ) | ||
Net realized loss | (565,650 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 29 | |||
Investments in affiliated issuers | 4,681 | |||
Futures contracts | 46,814 | |||
Net change in unrealized appreciation (depreciation) | 51,524 | |||
Net realized and unrealized loss | (514,126 | ) | ||
Net decrease in net assets resulting from operations | $ | (533,003 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
COMMODITIES STRATEGY FUND |
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (18,877 | ) | $ | 25,602 | |||
Net realized loss on investments | (565,650 | ) | (13,365 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 51,524 | 382,283 | ||||||
Net increase (decrease) in net assets resulting from operations | (533,003 | ) | 394,520 | |||||
Distributions to shareholders | (22,689 | ) | (45,134 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 6,730,863 | 7,665,863 | ||||||
Distributions reinvested | 22,689 | 45,134 | ||||||
Cost of shares redeemed | (5,886,207 | ) | (7,966,181 | ) | ||||
Net increase (decrease) from capital share transactions | 867,345 | (255,184 | ) | |||||
Net increase in net assets | 311,653 | 94,202 | ||||||
Net assets: | ||||||||
Beginning of year | 3,192,921 | 3,098,719 | ||||||
End of year | $ | 3,504,574 | $ | 3,192,921 | ||||
Capital share activity: | ||||||||
Shares sold | 122,212 | 97,122 | ||||||
Shares issued from reinvestment of distributions | 414 | 581 | ||||||
Shares redeemed | (105,719 | ) | (101,688 | ) | ||||
Net increase (decrease) in shares | 16,907 | (3,985 | ) |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
COMMODITIES STRATEGY FUND |
CONSOLIDATED FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 81.37 | $ | 71.69 | $ | 87.44 | $ | 83.74 | $ | 75.82 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.47 | ) | .61 | .67 | — | b | (.03 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (18.06 | ) | 10.26 | (13.34 | ) | 3.70 | 7.95 | |||||||||||||
Total from investment operations | (18.53 | ) | 10.87 | (12.67 | ) | 3.70 | 7.92 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.42 | ) | (1.19 | ) | (3.08 | ) | — | — | ||||||||||||
Total distributions | (.42 | ) | (1.19 | ) | (3.08 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 62.42 | $ | 81.37 | $ | 71.69 | $ | 87.44 | $ | 83.74 | ||||||||||
| ||||||||||||||||||||
Total Returnc | (22.72 | %) | 15.25 | % | (15.12 | %) | 4.43 | % | 10.40 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,505 | $ | 3,193 | $ | 3,099 | $ | 4,731 | $ | 4,498 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.82 | %) | 0.77 | % | 0.75 | % | — | g | (0.48 | %) | ||||||||||
Total expensesd | 1.88 | % | 1.98 | % | 1.81 | % | 1.82 | % | 1.80 | % | ||||||||||
Net expensese | 1.69 | % | 1.78 | % | 1.69 | % | 1.72 | % | 1.67 | % | ||||||||||
Portfolio turnover rate | 123 | % | 128 | % | 187 | % | 107 | % | 231 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Net investment income is less than $0.01 per share. |
c | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
d | Does not include expenses of the underlying funds in which the Fund invests. |
e | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
f | Reverse Share Split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:16 reverse share split effective December 1, 2016. |
g | Less than 0.01%. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Note 1 – Organization, Consolidation of Subsidiary and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust may issue an unlimited number of authorized shares. The Trust accounts for the assets of each Fund separately. At December 31, 2020, the Trust consisted of forty-nine funds. The Trust offers shares of the funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment |
Long Short Equity Fund | Non-diversified |
Global Managed Futures Strategy Fund | Diversified |
Multi-Hedge Strategies Fund | Non-diversified |
Commodities Strategy Fund | Non-diversified |
The Commodities Strategy Fund is designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offers unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Fund to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Consolidation of Subsidiary
Each of the consolidated financial statements of the Funds include the accounts of a wholly-owned and controlled Cayman Islands subsidiary (the “Subsidiary”). Significant inter-company accounts and transactions have been eliminated in consolidation for the Funds.
Each Fund may invest up to 25% of its total assets in its Subsidiary which acts as an investment vehicle in order to effect certain investments consistent with the Fund’s investment objectives and policies.
A summary of each Fund’s investment in its respective Subsidiary is as follows:
Fund | Inception | Subsidiary | % of Net | |||||||||
Global Managed Futures Strategy Fund | 11/07/08 | $ | 1,225,532 | 9.0 | % | |||||||
Multi-Hedge Strategies Fund | 04/15/09 | 1,802,532 | 4.5 | % | ||||||||
Commodities Strategy Fund | 07/21/09 | 609,446 | 17.4 | % |
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
68 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds and closed-end investment companies are valued at the last quoted sale price.
U.S. Government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value. Money market funds are valued at their NAV.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The values of swap agreements entered into by a fund are accounted for using the unrealized appreciation or depreciation on the agreements that are determined by marking the agreements to the last quoted value of the index or other underlying position that the swaps pertain to at the close of the New York Stock Exchange (“NYSE”).
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis. In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Consolidated Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Short Sales
When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales.
Fees, if any, paid to brokers to borrow securities in connection with short sales are recorded as interest expense. In addition, the Fund must pay out the dividend rate of the equity or coupon
THE RYDEX FUNDS ANNUAL REPORT | 69 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
rate of the obligation to the lender and record this as an expense. Short dividend or interest expense is a cost associated with the investment objective of short sales transactions, rather than an operational cost associated with the day-to-day management of any mutual fund. The Fund may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
(d) Options
Upon the purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund upon exercise increases by the premium originally paid.
When the Fund writes (sells) an option, an amount equal to the premium received is entered in that Fund’s accounting records as an asset and equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the option written. When a written option expires, or if the Fund enters into a closing purchase transaction, it realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold).
(e) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(f) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(g) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain or loss and unrealized appreciation or depreciation on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized appreciation and depreciation arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(h) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Consolidated Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on
70 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
investments. Foreign taxes payable or deferred as of December 31, 2020, if any, are disclosed in the Funds’ Consolidated Statements of Assets and Liabilities.
(i) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(j) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(k) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.09% at December 31, 2020.
(l) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Financial Instruments and Derivatives
As part of their investment strategy, the Funds utilize short sales and a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized on the Consolidated Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Consolidated Financial Statements.
Short Sales
A short sale is a transaction in which a Fund sells a security it does not own. If the security sold short decreases in price between the time the Fund sells the security and closes its short position, the Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, the Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
Derivatives
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Hedge: an investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position to protect against broad market moves.
Income: the use of any instrument that distributes cash flows typically based upon some rate of interest.
THE RYDEX FUNDS ANNUAL REPORT | 71 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
Speculation: the use of an instrument to express macro-economic and other investment views.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Options Purchased and Written
A call option on a security gives the purchaser of the option the right to buy, and the writer of a call option the obligation to sell, the underlying security. The purchaser of a put option has the right to sell, and the writer of the put option the obligation to buy, the underlying security at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid.
The risk in writing a call option is that a Fund may incur a loss if the market price of the underlying security increases and the option is exercised. The risk in writing a put option is that a Fund may incur a loss if the market price of the underlying security decreases and the option is exercised. In addition, there may be an imperfect correlation between the movement in prices of options and the underlying securities where a Fund may not be able to enter into a closing transaction because of an illiquid secondary market; or, for over-the-counter (“OTC”) options, a Fund may be at risk because of the counterparty’s inability to perform.
The following table represents the Fund’s use and volume of call/put options written on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Call | Put | ||||||
Multi-Hedge Strategies Fund | Hedge, Income | $ | 34,374 | $ | — |
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Consolidated Statements of Assets and Liabilities; securities held as collateral are noted on the Consolidated Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Global Managed Futures Strategy Fund | Hedge, Leverage, Liquidity, Speculation | $ | 56,078,194 | $ | 22,118,234 | ||||
Multi-Hedge Strategies Fund | Duration, Hedge, Index exposure, Leverage, Liquidity, Speculation | 58,469,195 | 31,455,172 | ||||||
Commodities Strategy Fund | Index exposure, Liquidity | 2,265,821 | — |
72 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing OTC swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally-cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Custom basket swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as a custom basket of securities) for a fixed or variable interest rate. Custom basket swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. When utilizing custom basket swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in value.
The following table represents the Funds’ use and volume of custom basket swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Long Short Equity Fund | Index exposure, Liquidity | $ | 11,080,935 | $ | 17,591,921 | ||||
Multi-Hedge Strategies Fund | Hedge, Index exposure, Leverage, Liquidity, Speculation | 20,360,790 | 15,793,923 |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Consolidated Statements of Assets and Liabilities as of December 31, 2020:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency/Interest Rate/Commodity contracts | Variation margin on futures contracts |
|
Equity contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
The following tables set forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2020:
Asset Derivative Investments Value | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total Value at | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | 1,316,857 | $ | — | $ | — | $ | — | $ | 1,316,857 | ||||||||||||
Global Managed Futures Strategy Fund | 90,412 | — | 114,265 | 42,228 | 313,253 | 560,158 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 43,590 | 2,216,798 | 299,682 | 76,556 | 702,556 | 3,339,182 | ||||||||||||||||||
Commodities Strategy Fund | — | — | — | — | 147,694 | 147,694 |
THE RYDEX FUNDS ANNUAL REPORT | 73 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Liability Derivative Investments Value | ||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Total Value at | ||||||||||||||||||
Long Short Equity Fund | $ | — | $ | 2,400,932 | $ | — | $ | — | $ | — | $ | 2,400,932 | ||||||||||||
Global Managed Futures Strategy Fund | 9,916 | — | 7,940 | 7,878 | 190,164 | 215,898 | ||||||||||||||||||
Multi-Hedge Strategies Fund | 77,838 | 1,744,021 | 125,553 | 2,477 | 527,817 | 2,477,706 |
* | Includes cumulative appreciation (depreciation) of exchange-traded, OTC and centrally-cleared derivatives contracts as reported on the Consolidated Schedules of Investments. For exchange-traded and centrally-cleared derivatives, variation margin is reported within the Consolidated Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Consolidated Statements of Operations for the year ended December 31, 2020:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Currency/Interest Rate/Commodity contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
Equity contracts | Net realized gain (loss) on swap agreements |
| Net change in unrealized appreciation (depreciation) on swap agreements |
Net realized gain (loss) on options written |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Consolidated Statements of Operations categorized by primary risk exposure for the year ended December 31, 2020:
Realized Gain (Loss) on Derivative Investments Recognized on the Consolidated Statements of Operations | ||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Options | Total | |||||||||||||||||||||
Long Short Equity Fund | $ | — | $ | (621,511 | ) | $ | — | $ | — | $ | — | $ | — | $ | (621,511 | ) | ||||||||||||
Global Managed Futures Strategy Fund | 140,074 | — | (484,838 | ) | 530,889 | (172,724 | ) | — | 13,401 | |||||||||||||||||||
Multi-Hedge Strategies Fund | 315,960 | 2,179,647 | (118,185 | ) | 287,415 | 31,535 | 4,024 | 2,700,396 | ||||||||||||||||||||
Commodities Strategy Fund | (1,577 | ) | — | — | — | (558,563 | ) | — | (560,140 | ) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Consolidated Statements of Operations | ||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Futures | Options | Total | |||||||||||||||||||||
Long Short Equity Fund | $ | — | $ | (362,699 | ) | $ | — | $ | — | $ | — | $ | — | $ | (362,699 | ) | ||||||||||||
Global Managed Futures Strategy Fund | 107,867 | — | 119,571 | 69,823 | 93,035 | — | 390,296 | |||||||||||||||||||||
Multi-Hedge Strategies Fund | 114,515 | (672,847 | ) | 208,761 | 80,982 | 123,643 | — | (144,946 | ) | |||||||||||||||||||
Commodities Strategy Fund | — | — | — | — | 46,814 | — | 46,814 |
In conjunction with short sales and the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
74 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Consolidated Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Consolidated Statements of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
Gross Amounts Not Offset in | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Long Short Equity Fund | Custom basket swap agreements | $ | 1,316,857 | $ | — | $ | 1,316,857 | $ | (1,316,857 | ) | $ | — | $ | — | |||||||||||
Multi-Hedge Strategies Fund | Custom basket swap agreements | 2,216,798 | — | 2,216,798 | (1,744,021 | ) | — | 472,777 |
THE RYDEX FUNDS ANNUAL REPORT | 75 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Gross Amounts Not Offset in | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Long Short Equity Fund | Custom basket swap agreements | $ | 2,400,932 | $ | — | $ | 2,400,932 | $ | (2,400,932 | ) | $ | — | $ | — | |||||||||||
Multi-Hedge Strategies Fund | Custom basket swap agreements | 1,744,021 | — | 1,744,021 | (1,744,021 | ) | — | — |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2020.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Global Managed Futures Strategy Fund | Goldman Sachs International | Futures contracts | $ | 155,720 | $ | — | ||||
Multi-Hedge Strategies Fund | Goldman Sachs International | Futures contracts | 317,832 | — | ||||||
Commodities Strategy Fund | Goldman Sachs International | Futures contracts | 37,106 | — |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
76 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees | |||
Long Short Equity Fund | 0.90 | % | ||
Global Managed Futures Strategy Fund | 0.90 | % | ||
Multi-Hedge Strategies Fund | 1.15 | % | ||
Commodities Strategy Fund | 0.75 | % |
GI has contractually agreed to waive the management fee it receives from each Subsidiary in an amount equal to the management fee paid to GI by the Subsidiary. This undertaking will continue in effect for so long as the Funds invest in the Subsidiaries, and may not be terminated by GI unless GI obtains the prior approval of the Funds’ Board for such termination. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2020, the Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund and Commodities Strategy Fund waived $9,848, $13,130 and $3,075, respectively, related to advisory fees in the Subsidiary.
As part of its agreement with the Trust, GI will pay all expenses of the Multi-Hedge Strategies Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except interest expense, taxes (expected to be de minimis), brokerage commissions and other expenses connected with execution of portfolio transactions, short dividend expenses, subsidiary expenses and extraordinary expenses.
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs.
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. Fee waivers will be calculated at the investing Fund level without regard to any expense cap in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2020, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Global Managed Futures Strategy Fund | $ | 1,971 | ||
Multi-Hedge Strategies Fund | 9,976 | |||
Commodities Strategy Fund | 1,244 |
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
THE RYDEX FUNDS ANNUAL REPORT | 77 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At December 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Note | |||||||||||||||||
0.06% | 2.13% | |||||||||||||||||
Due 01/04/21 | $ | 52,863,147 | $ | 52,863,499 | 02/29/24 | $ | 50,484,000 | $ | 53,920,527 | |||||||||
Barclays Capital, Inc. | U.S. Treasury Note | |||||||||||||||||
0.06% | 1.63% | |||||||||||||||||
Due 01/04/21 | 22,023,354 | 22,023,501 | 11/15/22 | 21,811,900 | 22,463,921 | |||||||||||||
BofA Securities, Inc. | U.S. Treasury Bond | |||||||||||||||||
0.06% | 5.25% | |||||||||||||||||
Due 01/04/21 | 20,391,995 | 20,392,131 | 11/15/28 | 15,370,000 | 20,799,887 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Consolidated Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
At December 31, 2020, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
Long Short Equity Fund | $ | 167,230 | $ | (167,230 | ) | $ | — | $ | 175,597 | $ | — | $ | 175,597 | ||||||||||||
Multi-Hedge Strategies Fund | 128,795 | (128,795 | ) | — | 132,673 | — | 132,673 |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
78 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ consolidated financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund, and Commodities Strategy Fund intend to invest up to 25% of their assets in the respective Subsidiary which is expected to provide the Funds with exposure to the commodities markets within the limitations of the U.S. federal income tax requirements under Subchapter M of the Internal Revenue Code. The Funds have received a private letter ruling from the IRS that concludes that the income the Funds receive from the Subsidiary will constitute qualifying income for purposes of Subchapter M of the Internal Revenue Code. The Subsidiary will be classified as a corporation for U.S. federal income tax purposes. A foreign corporation, such as the Subsidiary, will generally not be subject to U.S. federal income taxation unless it is deemed to be engaged in a U.S. trade or business. If, during a taxable year, the Subsidiary’s taxable losses (and other deductible items) exceed its income and gains, the net loss will not pass through to the Fund as a deductible amount for Federal income tax purposes and cannot be carried forward to reduce future income from the Subsidiary in subsequent years.
The tax character of distributions paid during the year ended December 31, 2020 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | 189,586 | $ | — | $ | 189,586 | ||||||
Global Managed Futures Strategy Fund | 647,598 | 94,949 | 742,547 | |||||||||
Multi-Hedge Strategies Fund | 546,653 | — | 546,653 | |||||||||
Commodities Strategy Fund | 22,689 | — | 22,689 |
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | 168,099 | $ | — | $ | 168,099 | ||||||
Global Managed Futures Strategy Fund | 124,141 | — | 124,141 | |||||||||
Multi-Hedge Strategies Fund | 875,142 | — | 875,142 | |||||||||
Commodities Strategy Fund | 45,134 | — | 45,134 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
THE RYDEX FUNDS ANNUAL REPORT | 79 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
The tax components of distributable earnings/(loss) as of December 31, 2020 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
Long Short Equity Fund | $ | 168,180 | $ | — | $ | 2,064,416 | $ | (3,885,270 | ) | $ | (1,652,674 | ) | ||||||||
Global Managed Futures Strategy Fund | 30,985 | 128,711 | (847,498 | ) | — | (687,802 | ) | |||||||||||||
Multi-Hedge Strategies Fund | — | 1,020,616 | (328,524 | ) | (36,236 | ) | 655,856 | |||||||||||||
Commodities Strategy Fund | — | — | (1,434,657 | ) | (21,531 | ) | (1,456,188 | ) |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. The Funds are permitted to carry forward capital losses for an unlimited period and such capital loss carryforwards retain their character as either short-term or long-term capital losses. As of December 31, 2020, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Long Short Equity Fund | $ | (3,679,498 | ) | $ | (205,772 | ) | $ | (3,885,270 | ) | |||
Commodities Strategy Fund | — | (21,531 | ) | (21,531 | ) |
For the year ended December 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
Long Short Equity Fund | $ | 477,305 | ||
Multi-Hedge Strategies Fund | 2,153,061 |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in subsidiaries, the “mark-to-market” of certain derivatives, losses deferred due to wash sales, investments in real estate investment trusts, the tax treatment of net operating losses, investments in securities sold short, special dividends, foreign currency gains and losses, distributions in connection with redemption of fund shares, and investments in swaps. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2020 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Global Managed Futures Strategy Fund | $ | (129,810 | ) | $ | 129,810 | |||
Multi-Hedge Strategies Fund | 52,584 | (52,584 | ) | |||||
Commodities Strategy Fund | (579,017 | ) | 579,017 |
80 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
At December 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net Tax | ||||||||||||
Long Short Equity Fund | $ | 21,115,817 | $ | 4,782,150 | $ | (2,717,734 | ) | $ | 2,064,416 | |||||||
Global Managed Futures Strategy Fund | 14,335,564 | — | (847,336 | ) | (847,336 | ) | ||||||||||
Multi-Hedge Strategies Fund | 32,004,578 | 3,657,290 | (3,985,096 | ) | (327,806 | ) | ||||||||||
Commodities Strategy Fund | 4,944,866 | — | (1,434,657 | ) | (1,434,657 | ) |
Note 9 – Securities Transactions
For the year ended December 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
Long Short Equity Fund | $ | 38,420,084 | $ | 46,681,752 | ||||
Global Managed Futures Strategy Fund | 165,947 | 5,365,000 | ||||||
Multi-Hedge Strategies Fund | 68,742,116 | 68,347,338 | ||||||
Commodities Strategy Fund | 1,190,992 | 1,345,000 |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2020, the Funds did not engage in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act.
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expired June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. On June 8, 2020, the line of credit agreement was renewed at the increased $150,000,000 amount and expires on June 7, 2021. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 1.54% for the year ended December 31, 2020. The Funds did not have any borrowings outstanding under this agreement at December 31, 2020.
The average daily balances borrowed for the year ended December 31, 2020, were as follows:
Fund | Average Daily Balance | |||
Multi-Hedge Strategies Fund | $ | 628 |
Note 11 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020. On July 6, 2020, plaintiffs filed a new petition for a writ of certiorari in the U.S. Supreme Court. In that petition, plaintiffs stated that “[t]o make it more likely that there will be a quorum for this petition,” they have “abandon[ed] the case and let the judgment below stand” with respect to certain defendants. That list did not include Rydex Variable Trust. Defendants filed an opposition to the petition for certiorari on August 26, 2020, and plaintiffs filed a reply in support of the petition for certiorari on September 8, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded) |
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020. Plaintiff filed a reply brief on May 18, 2020. The Court held oral argument on August 24, 2020.
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 12 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 13 – Subsequent Events
On February 10, 2021, the Trust, along with other affiliated trusts, increased the line of credit agreement with U.S. Bank, N.A. from $150,000,000 to $200,000,000.
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events, other than disclosed above, that would require adjustment to or disclosure in the Funds’ consolidated financial statements.
THE RYDEX FUNDS ANNUAL REPORT | 83 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Guggenheim Long Short Equity Fund, Global Managed Futures Strategy Fund, Multi-Hedge Strategies Fund and Commodities Strategy Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Guggenheim Long Short Equity Fund, Global Managed Futures Strategy Fund (consolidated), Multi-Hedge Strategies Fund (consolidated) and Commodities Strategy Fund (consolidated) (collectively referred to as the “Funds”), (four of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2020, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated, where applicable, financial position of each of the Funds (four of the funds constituting Rydex Variable Trust) at December 31, 2020, the consolidated, where applicable, results of their operations for the year then ended, the consolidated, where applicable, changes in their net assets for each of the two years in the period then ended and their consolidated, where applicable, financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 26, 2021
84 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2020, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
Long Short Equity Fund | 100.00 | % | ||
Multi-Hedge Strategies Fund | 44.79 | % |
With respect to the taxable year ended December 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term | From long-term capital | ||||||
Global Managed Futures Strategy Fund | $ | 94,949 | $ | 61,310 | ||||
Multi-Hedge Strategies Fund | — | 123,832 |
Delivery of Shareholder Reports
Paper copies of the Funds’ annual and semi-annual shareholder reports are not sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract or from your financial intermediary. Instead, the reports are made available on a website, and you are notified by mail each time a report is posted and provided with a website address to access the report.
You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper may apply to all portfolio companies available under your contract.
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
THE RYDEX FUNDS ANNUAL REPORT | 85 |
OTHER INFORMATION (Unaudited) (concluded) |
Sector Classification
Information in the Consolidated Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 (Trustee)
Since 2020 (Chair of the Valuation Oversight Committee) | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Bowhead Insurance GP, LLC (2020-present); Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946)1 | Trustee | Since 2019 | Current: Retired.
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946)1 | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946)1 | Trustee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Chair of the Contracts Review Committee | Since 2005 (Trustee)
Since 2020 (Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Of Counsel, Momkus LLP (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (3) (2018-present); Edward-Elmhurst Healthcare System (2012-present).
Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (81) (2018-present); SPDR Index Shares Funds (30) (2018-present); SSGA Active Trust (14) (2018-present).
Former: SSGA Master Trust (1) (2018-2020). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INTERESTED TRUSTEE |
|
|
|
| |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2019 | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. |
*** | Each Trustee also serves on the Boards of Trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the Board of Trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
1 | Under the Funds’ Independent Trustees Retirement Policy, Messrs. Chubb, Farley and Friedrich are expected to retire in 2021. |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited) |
In compliance with SEC Rule 22e-4 under the U.S. Investment Company Act of 1940 (the “Liquidity Rule”), the Rydex Variable Trust (the “Trust”) has adopted and implemented a written liquidity risk management program (the “Program”) for each series of the Trust (each, a “Fund” and, collectively, the “Funds”). The Trust’s Board of Trustees (the “Board”) previously approved the designation of a Program administrator (the “Administrator”).
The Liquidity Rule requires that the Program be reasonably designed to assess and manage each Fund’s liquidity risk. A Fund’s “liquidity risk” is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of the remaining investors’ interests in the Fund. The Program includes a number of elements that support the assessment, management and review of liquidity risk. In accordance with the Program, each Fund’s liquidity risk is assessed no less frequently than annually taking into consideration a variety of factors, including, as applicable, the Fund’s investment strategy and liquidity of portfolio investments, cash flow projections, and holdings of cash and cash equivalents, as well as borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions. There is no guarantee that the Program will achieve its objective under all circumstances.
Under the Program, each Fund portfolio investment is classified into one of four liquidity categories based on a determination of the number of days it is reasonably expected to take to convert the investment to cash, or sell or dispose of the investment, in current market conditions without significantly changing the investment’s market value. The Program is reasonably designed to meet Liquidity Rule requirements relating to “highly liquid investment minimums” (i.e., the minimum amount of Fund net assets to be invested in highly liquid investments that are assets) and to monitor compliance with the Liquidity Rule’s limitations on a Fund’s investments in illiquid investments. Under the Liquidity Rule, a Fund is prohibited from acquiring any illiquid investment if, immediately after the acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments that are assets.
During the period covered by this shareholder report, the Board received a written report (the “Report”) prepared by the Administrator addressing the Program’s operation and assessing the adequacy and effectiveness of its implementation for the period from December 1, 2018, through March 31, 2020. The Report concluded that the Program operated effectively, the Program had been and continued to be reasonably designed to assess and manage each Fund’s liquidity risk and the Program has been adequately and effectively implemented to monitor and respond to the Funds’ liquidity developments, as applicable.
Please refer to your Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
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12.31.2020
Rydex Variable Trust Funds Annual Report
Sector Funds | ||
Banking Fund | ||
Basic Materials Fund | ||
Biotechnology Fund | ||
Consumer Products Fund | ||
Electronics Fund | ||
Energy Fund | ||
Energy Services Fund | ||
Financial Services Fund | ||
Health Care Fund | ||
Internet Fund | ||
Leisure Fund | ||
Precious Metals Fund | ||
Real Estate Fund | ||
Retailing Fund | ||
Technology Fund | ||
Telecommunications Fund | ||
Transportation Fund | ||
Utilities Fund |
GuggenheimInvestments.com | RVASECF-ANN-2-1220x1221 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 3 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 5 |
BANKING FUND | 7 |
BASIC MATERIALS FUND | 14 |
BIOTECHNOLOGY FUND | 21 |
CONSUMER PRODUCTS FUND | 28 |
ELECTRONICS FUND | 35 |
ENERGY FUND | 42 |
ENERGY SERVICES FUND | 49 |
FINANCIAL SERVICES FUND | 56 |
HEALTH CARE FUND | 64 |
INTERNET FUND | 71 |
LEISURE FUND | 78 |
PRECIOUS METALS FUND | 86 |
REAL ESTATE FUND | 93 |
RETAILING FUND | 101 |
TECHNOLOGY FUND | 108 |
TELECOMMUNICATIONS FUND | 116 |
TRANSPORTATION FUND | 123 |
UTILITIES FUND | 130 |
NOTES TO FINANCIAL STATEMENTS | 137 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 149 |
OTHER INFORMATION | 150 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 152 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 157 |
LIQUIDITY RISK MANAGEMENT PROGRAM | 160 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2020 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for 18 of our Funds (the “Funds”) that are part of the Rydex Variable Trust. This report covers performance of the Funds for the annual period ended December 31, 2020.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2021
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Sector funds may not be suitable for all investors. Investing in sector funds is more volatile than investing in broadly diversified funds, as there is a greater risk due to the concentration of the Fund’s holdings in issuers of the same or similar offerings. Certain of the sector funds are considered non-diversified and can invest a greater portion of their assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund.
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ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2020 |
In what could have been one of the worst years on record for equity investors due to the devastating human and economic cost of the COVID-19 pandemic combined with political unrest in the U.S., the 12-month period ended December 31, 2020, witnessed the Standard & Poor’s® (“S&P 500®”) Index reach a record high of 3,756.07 from 3,234.85 at the start of the year. This was despite plummeting to 2,237.40 on March 23, 2020 as the effects of the pandemic caused the U.S. economy to stall. This dramatic change in fortune for equity markets was due in large part by a swift, sweeping response to the economic shutdown in March 2020 by the U.S. Federal Reserve (the “Fed”), which has continued to signal its intention to use ultra-accommodative monetary policy to strive toward full employment and 2% inflation via unprecedented measures. The central bank’s commitment to keeping interest rates near zero and its bond-buying program to lessen the risk of corporate defaults resulted in bountiful debt issuance by corporate borrowers and a growing confidence among equity investors that the investment environment would remain benign for the foreseeable future.
As such, our economic outlook for the coming year is positive, owing to another round of COVID-19 relief and more planned by the new administration, plus the expectation for a successful vaccine distribution. The new package, titled the Coronavirus Response and Relief Supplemental Appropriations Act, delivers a $900 billion injection into the economy, bringing total COVID-related aid to over $3.5 trillion including the 2020 bill, or roughly 8.5% of 2020–2021 gross domestic product (“GDP”). On this measure, it is already 3.5x more than the stimulus delivered in the five years following the financial crisis.
The latest round of fiscal stimulus should cause a surge in personal income during the first quarter, and a significant percentage of the population should be vaccinated or immune from prior infection by mid-2021. It is likely that local governments will be able to begin to relax restrictions even before herd immunity is reached since hospitalizations should fall once the elderly are vaccinated. As we move through the year, consumer spending growth should start to accelerate, spurred on by elevated personal savings and strong gains in household net worth. Elsewhere, the housing market will continue to benefit from tight supply and low interest rates, and business investment should rebound as corporations look to put to work record levels of precautionary cash. As a result, we expect real GDP growth to be well above potential for the year.
If the unemployment rate continues to fall at its recent pace and inflation picks up with its usual six-quarter lag behind economic activity, the experience of prior cycles would suggest that the Fed could start its hiking cycle as early as late-2022. However, the change in the Fed’s playbook will keep it sidelined for years as it looks to make up for shortfalls related to its 2% inflation target and no longer worries about an overly tight labor market.
This means the Fed is likely to keep rates at zero for several years beyond the late-2023 liftoff currently priced into the bond market. Similarly, the odds are low of a tapering of the Fed’s bond purchases in 2021. While we believe the government response to the pandemic was necessary and appropriate, investors are already paying some price with more elevated valuations due in part to the Fed’s aggressive relaunch of quantitative easing. Under these circumstances, investors will likely continue to take on more risk as long as more fiscal support is underway and while the Fed remains willing to backstop credit markets to support financial conditions.
For the 12-month period ended December 31, 2020, the S&P 500® Index* returned 18.40%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 7.82%. The return of the MSCI Emerging Markets Index* was 15.84%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 7.51% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.11%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.67% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
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ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2020 |
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
MSCI U.S. REIT Index is a free float market capitalization weighted index that is comprised of equity real estate investment trust (“REIT”) securities that belong to the MSCI U.S. Investable Market 2500 Index. The MSCI U.S. REIT Index includes only REIT securities that are of reasonable size in terms of full and free float-adjusted market capitalization to ensure that the performance of the equity REIT universe can be captured and replicated in actual institutional and retail portfolios of different sizes.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P 500® Consumer Discretionary Index is a sub-index of the S&P 500®. The Consumer Discretionary index includes companies in the following industries: automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing.
S&P 500® Consumer Staples Index is a sub-index of the S&P 500®. The Consumer Staples index comprises companies whose businesses are less sensitive to economic cycles. It includes manufacturers and distributors of food, beverages and tobacco and producers of non-durable household goods and personal products. It also includes food & drug retailing companies as well as hypermarkets and consumer super centers.
S&P 500® Energy Index is a sub-index of the S&P 500®. The Energy index comprises companies whose businesses are dominated by either of the following activities: The construction or provision of oil rigs, drilling equipment and other energy-related equipment and services, including seismic data collection; companies engaged in the exploration, production, marketing, refining and/or transportation of oil and gas products, coal and other consumable fuels.
S&P 500® Financials Index is a sub-index of the S&P 500®. The Financials index contains companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, and financial investment, and real estate, including REITs.
S&P 500® Health Care Index is a sub-index of the S&P 500®. The Health Care index encompasses two main industry groups. The first includes companies who manufacture health care equipment and supplies or provide health care related services, including distributors of health care products, providers of basic health-care services, and owners and operators of health care facilities and organizations. The first group also includes companies operating in the health care technology industry. The second group includes companies primarily involved in the research, development, production and marketing of pharmaceuticals, biotechnology and life sciences products.
S&P 500® Industrials Index is a sub-index of the S&P 500®. The Industrials index includes companies whose businesses are dominated by one of the following activities: the manufacture and distribution of capital goods, including aerospace & defense, construction, engineering & building products, electrical equipment and industrial machinery; the provision of commercial services and supplies, including printing, environmental, office and security services; the provision of professional services, including employment and research & consulting services; or the provision of transportation services, including airlines, couriers, marine, road & rail and transportation infrastructure.
S&P 500® Information Technology Index is a sub-index of the S&P 500®. The Information Technology index covers the following general areas: technology software & services, including companies that primarily develop software in various fields such as the Internet, applications, systems, databases management and/or home entertainment, and companies that provide information technology consulting and services, as well as data processing and outsourced services; secondly, technology hardware & equipment, including manufacturers and distributors of communications equipment, computers & peripherals, electronic equipment and related instruments; and thirdly, semiconductors & semiconductor equipment manufacturers.
S&P 500® Materials Index is a sub-index of the S&P 500®. The Materials index encompasses a wide range of commodity-related manufacturing industries. Included in this sector are companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products, and metals, minerals and mining companies, including producers of steel.
S&P 500® Telecommunications Services Index is a sub-index of the S&P 500®. The Telecommunications Services index contains companies that provide communications services primarily through a fixed-line, cellular, wireless, high bandwidth and/or fiber optic cable network.
S&P 500® Utilities Index is a sub-index of the S&P 500®. The Utilities index encompasses those companies considered electric, gas or water utilities, or companies that operate as independent producers and/or distributors of power.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
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All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2020 and ending December 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
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| Expense | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Banking Fund | 1.82% | 33.69% | $ 1,000.00 | $ 1,336.90 | $ 10.72 |
Basic Materials Fund | 1.81% | 31.98% | 1,000.00 | 1,319.80 | 10.58 |
Biotechnology Fund | 1.81% | 11.15% | 1,000.00 | 1,111.50 | 9.63 |
Consumer Products Fund | 1.81% | 16.15% | 1,000.00 | 1,161.50 | 9.86 |
Electronics Fund | 1.81% | 43.69% | 1,000.00 | 1,436.90 | 11.12 |
Energy Fund | 1.81% | 9.02% | 1,000.00 | 1,090.20 | 9.54 |
Energy Services Fund | 1.81% | 31.18% | 1,000.00 | 1,311.80 | 10.55 |
Financial Services Fund | 1.81% | 23.05% | 1,000.00 | 1,230.50 | 10.18 |
Health Care Fund | 1.81% | 16.33% | 1,000.00 | 1,163.30 | 9.87 |
Internet Fund | 1.81% | 29.95% | 1,000.00 | 1,299.50 | 10.49 |
Leisure Fund | 1.81% | 38.98% | 1,000.00 | 1,389.80 | 10.90 |
Precious Metals Fund | 1.71% | 11.25% | 1,000.00 | 1,112.50 | 9.11 |
Real Estate Fund | 1.81% | 15.69% | 1,000.00 | 1,156.90 | 9.84 |
Retailing Fund | 1.81% | 31.56% | 1,000.00 | 1,315.60 | 10.56 |
Technology Fund | 1.81% | 31.79% | 1,000.00 | 1,317.90 | 10.57 |
Telecommunications Fund | 1.81% | 11.96% | 1,000.00 | 1,119.60 | 9.67 |
Transportation Fund | 1.81% | 53.16% | 1,000.00 | 1,531.60 | 11.55 |
Utilities Fund | 1.81% | 10.78% | 1,000.00 | 1,107.80 | 9.62 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Banking Fund | 1.82% | 5.00% | $ 1,000.00 | $ 1,016.03 | $ 9.25 |
Basic Materials Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Biotechnology Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Consumer Products Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Electronics Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Energy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Energy Services Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Financial Services Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Health Care Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Internet Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Leisure Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Precious Metals Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Real Estate Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Retailing Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Technology Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Telecommunications Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Transportation Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Utilities Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2020 to December 31, 2020. |
6 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
BANKING FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the banking sector, including commercial banks (and their holding companies) and savings and loan institutions (“Banking Companies”).
For the year ended December 31, 2020, Banking Fund returned -8.46%, compared with the S&P 500 Index, which returned 18.40%. The S&P 500 Financials Index returned -1.69%.
The industries that contributed the most to performance were diversified financial services and diversified capital markets. The industries that detracted the most were diversified banks, thrifts & mortgage finance, and asset management & custody banks.
SVB Financial Group, First Republic Bank, and Independent Bank Group, Inc. were the holdings that contributed the most to the Fund’s return for the period. Wells Fargo & Co., Citigroup, Inc., and U.S. Bancorp detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
JPMorgan Chase & Co. | 4.1% |
Bank of America Corp. | 4.1% |
Citigroup, Inc. | 4.0% |
Wells Fargo & Co. | 4.0% |
U.S. Bancorp | 3.5% |
Truist Financial Corp. | 3.3% |
PNC Financial Services Group, Inc. | 3.2% |
Capital One Financial Corp. | 2.8% |
Bank of New York Mellon Corp. | 2.6% |
State Street Corp. | 2.2% |
Top Ten Total | 33.8% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 7 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Banking Fund | (8.46%) | 6.33% | 5.26% |
S&P 500 Financials Index | (1.69%) | 11.13% | 10.79% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Financials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
BANKING FUND |
| Shares |
| ||||||
COMMON STOCKS† - 99.5% | ||||||||
Banks - 90.9% | ||||||||
JPMorgan Chase & Co. | 1,378 | $ | 175,102 | |||||
Bank of America Corp. | 5,718 | 173,313 | ||||||
Citigroup, Inc. | 2,745 | 169,257 | ||||||
Wells Fargo & Co. | 5,594 | 168,827 | ||||||
U.S. Bancorp | 3,141 | 146,339 | ||||||
Truist Financial Corp. | 2,945 | 141,154 | ||||||
PNC Financial Services Group, Inc. | 922 | 137,378 | ||||||
Bank of New York Mellon Corp. | 2,555 | 108,434 | ||||||
State Street Corp. | 1,262 | 91,848 | ||||||
First Republic Bank | 591 | 86,836 | ||||||
SVB Financial Group* | 203 | 78,729 | ||||||
Northern Trust Corp. | 830 | 77,306 | ||||||
Fifth Third Bancorp | 2,802 | 77,251 | ||||||
KeyCorp | 4,381 | 71,892 | ||||||
M&T Bank Corp. | 554 | 70,524 | ||||||
Regions Financial Corp. | 4,358 | 70,251 | ||||||
Citizens Financial Group, Inc. | 1,924 | 68,802 | ||||||
Huntington Bancshares, Inc. | 5,092 | 64,312 | ||||||
Comerica, Inc. | 895 | 49,995 | ||||||
ICICI Bank Ltd. ADR* | 3,289 | 48,875 | ||||||
HDFC Bank Ltd. ADR* | 676 | 48,848 | ||||||
Zions Bancorp North America | 1,104 | 47,958 | ||||||
Commerce Bancshares, Inc. | 727 | 47,764 | ||||||
First Horizon National Corp. | 3,687 | 47,046 | ||||||
Signature Bank | 340 | 45,999 | ||||||
East West Bancorp, Inc. | 900 | 45,639 | ||||||
Toronto-Dominion Bank | 792 | 44,685 | ||||||
HSBC Holdings plc ADR*,1 | 1,703 | 44,125 | ||||||
Bank of Nova Scotia | 813 | 43,934 | ||||||
Royal Bank of Canada | 531 | 43,574 | ||||||
Prosperity Bancshares, Inc. | 626 | 43,419 | ||||||
Popular, Inc. | 763 | 42,972 | ||||||
UBS Group AG | 2,976 | 42,051 | ||||||
Bank of Montreal | 553 | 42,045 | ||||||
Credit Suisse Group AG ADR | 3,283 | 42,022 | ||||||
Western Alliance Bancorporation | 691 | 41,425 | ||||||
Deutsche Bank AG* | 3,751 | 40,886 | ||||||
TCF Financial Corp. | 1,104 | 40,870 | ||||||
Canadian Imperial Bank of Commerce | 473 | 40,427 | ||||||
Cullen/Frost Bankers, Inc. | 460 | 40,126 | ||||||
First Financial Bankshares, Inc. | 1,065 | 38,526 | ||||||
Synovus Financial Corp. | 1,166 | 37,743 | ||||||
South State Corp. | 520 | 37,596 | ||||||
Pinnacle Financial Partners, Inc. | 583 | 37,545 | ||||||
United Bankshares, Inc. | 1,097 | 35,543 | ||||||
Bank OZK | 1,104 | 34,522 | ||||||
Glacier Bancorp, Inc. | 750 | 34,507 | ||||||
Webster Financial Corp. | 779 | 32,835 | ||||||
CIT Group, Inc. | 890 | 31,951 | ||||||
Umpqua Holdings Corp. | 2,080 | 31,491 | ||||||
Wintrust Financial Corp. | 514 | 31,400 | ||||||
UMB Financial Corp. | 452 | 31,183 | ||||||
Community Bank System, Inc. | 496 | 30,906 | ||||||
Home BancShares, Inc. | 1,574 | 30,662 | ||||||
First Hawaiian, Inc. | 1,300 | 30,654 | ||||||
PacWest Bancorp | 1,184 | 30,074 | ||||||
Bank of Hawaii Corp. | 392 | 30,035 | ||||||
BankUnited, Inc. | 861 | 29,946 | ||||||
Texas Capital Bancshares, Inc.* | 490 | 29,155 | ||||||
Hancock Whitney Corp. | 847 | 28,815 | ||||||
Old National Bancorp | 1,720 | 28,483 | ||||||
Columbia Banking System, Inc. | 790 | 28,361 | ||||||
BancorpSouth Bank | 1,031 | 28,291 | ||||||
Associated Banc-Corp. | 1,652 | 28,167 | ||||||
Independent Bank Group, Inc. | 437 | 27,321 | ||||||
Simmons First National Corp. — Class A | 1,228 | 26,513 | ||||||
United Community Banks, Inc. | 932 | 26,506 | ||||||
Cadence BanCorp | 1,524 | 25,024 | ||||||
Fulton Financial Corp. | 1,935 | 24,613 | ||||||
Total Banks | 3,850,608 | |||||||
Savings & Loans - 3.3% | ||||||||
People’s United Financial, Inc. | 3,164 | 40,911 | ||||||
New York Community Bancorp, Inc. | 3,662 | 38,634 | ||||||
Sterling Bancorp | 1,784 | 32,076 | ||||||
Investors Bancorp, Inc. | 2,706 | 28,575 | ||||||
Total Savings & Loans | 140,196 | |||||||
Diversified Financial Services - 2.8% | ||||||||
Capital One Financial Corp. | 1,188 | 117,434 | ||||||
Insurance - 2.5% | ||||||||
Equitable Holdings, Inc. | 2,310 | 59,113 | ||||||
Voya Financial, Inc. | 823 | 48,401 | ||||||
Total Insurance | 107,514 | |||||||
Total Common Stocks | ||||||||
(Cost $2,645,658) | 4,215,752 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 9 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
BANKING FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,2 - 0.5% | ||||||||
J.P. Morgan Securities LLC | $ | 11,199 | $ | 11,199 | ||||
Barclays Capital, Inc. | 4,666 | 4,666 | ||||||
BofA Securities, Inc. | 4,320 | 4,320 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $20,185) | 20,185 | |||||||
| Shares | |||||||
SECURITIES LENDING COLLATERAL†,3 - 0.9% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 36,565 | 36,565 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $36,565) | 36,565 | |||||||
Total Investments - 100.9% | ||||||||
(Cost $2,702,408) | $ | 4,272,502 | ||||||
Other Assets & Liabilities, net - (0.9)% | (38,597 | ) | ||||||
Total Net Assets - 100.0% | $ | 4,233,905 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,215,752 | $ | — | $ | — | $ | 4,215,752 | ||||||||
Repurchase Agreements | — | 20,185 | — | 20,185 | ||||||||||||
Securities Lending Collateral | 36,565 | — | — | 36,565 | ||||||||||||
Total Assets | $ | 4,252,317 | $ | 20,185 | $ | — | $ | 4,272,502 |
10 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BANKING FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $35,600 of securities loaned (cost $2,682,223) | $ | 4,252,317 | ||
Repurchase agreements, at value (cost $20,185) | 20,185 | |||
Receivables: | ||||
Securities sold | 499,970 | |||
Dividends | 11,083 | |||
Foreign tax reclaims | 307 | |||
Securities lending income | 2 | |||
Total assets | 4,783,864 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 497,451 | |||
Return of securities lending collateral | 36,565 | |||
Management fees | 3,341 | |||
Transfer agent and administrative fees | 1,057 | |||
Investor service fees | 982 | |||
Portfolio accounting fees | 393 | |||
Trustees’ fees* | 74 | |||
Miscellaneous | 10,096 | |||
Total liabilities | 549,959 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 4,233,905 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,723,473 | ||
Total distributable earnings (loss) | 510,432 | |||
Net assets | $ | 4,233,905 | ||
Capital shares outstanding | 48,090 | |||
Net asset value per share | $ | 88.04 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $1,842) | $ | 114,466 | ||
Interest | 100 | |||
Income from securities lending, net | 28 | |||
Total investment income | 114,594 | |||
Expenses: | ||||
Management fees | 28,498 | |||
Investor service fees | 8,382 | |||
Transfer agent and administrative fees | 11,238 | |||
Professional fees | 6,426 | |||
Portfolio accounting fees | 3,353 | |||
Trustees’ fees* | 891 | |||
Custodian fees | 702 | |||
Line of credit fees | 14 | |||
Miscellaneous | 1,613 | |||
Total expenses | 61,117 | |||
Net investment income | 53,477 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 56,292 | |||
Net realized gain | 56,292 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (514,301 | ) | ||
Net change in unrealized appreciation (depreciation) | (514,301 | ) | ||
Net realized and unrealized loss | (458,009 | ) | ||
Net decrease in net assets resulting from operations | $ | (404,532 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
BANKING FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 53,477 | $ | 50,080 | ||||
Net realized gain on investments | 56,292 | 396,840 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (514,301 | ) | 851,331 | |||||
Net increase (decrease) in net assets resulting from operations | (404,532 | ) | 1,298,251 | |||||
Distributions to shareholders | (50,080 | ) | (40,316 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 18,198,255 | 13,610,333 | ||||||
Distributions reinvested | 50,080 | 40,316 | ||||||
Cost of shares redeemed | (19,397,850 | ) | (14,618,756 | ) | ||||
Net decrease from capital share transactions | (1,149,515 | ) | (968,107 | ) | ||||
Net increase (decrease) in net assets | (1,604,127 | ) | 289,828 | |||||
Net assets: | ||||||||
Beginning of year | 5,838,032 | 5,548,204 | ||||||
End of year | $ | 4,233,905 | $ | 5,838,032 | ||||
Capital share activity: | ||||||||
Shares sold | 260,948 | 155,138 | ||||||
Shares issued from reinvestment of distributions | 752 | 458 | ||||||
Shares redeemed | (273,669 | ) | (168,105 | ) | ||||
Net decrease in shares | (11,969 | ) | (12,509 | ) |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BANKING FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 97.20 | $ | 76.46 | $ | 95.19 | $ | 84.90 | $ | 67.87 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.18 | .94 | .56 | .28 | .10 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (9.63 | ) | 20.67 | (18.70 | ) | 10.28 | 17.11 | |||||||||||||
Total from investment operations | (8.45 | ) | 21.61 | (18.14 | ) | 10.56 | 17.21 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.71 | ) | (.87 | ) | (.56 | ) | (.27 | ) | (.18 | ) | ||||||||||
Net realized gains | — | — | (.03 | ) | — | — | ||||||||||||||
Total distributions | (.71 | ) | (.87 | ) | (.59 | ) | (.27 | ) | (.18 | ) | ||||||||||
Net asset value, end of period | $ | 88.04 | $ | 97.20 | $ | 76.46 | $ | 95.19 | $ | 84.90 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (8.46 | %) | 28.39 | % | (19.19 | %) | 12.48 | % | 27.25 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,234 | $ | 5,838 | $ | 5,548 | $ | 9,692 | $ | 16,076 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.60 | % | 1.07 | % | 0.59 | % | 0.33 | % | 0.69 | % | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.71 | % | 1.70 | % | 1.67 | % | ||||||||||
Portfolio turnover rate | 529 | % | 246 | % | 320 | % | 273 | % | 417 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:6 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
BASIC MATERIALS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in the mining, manufacture, or sale of basic materials, such as lumber, steel, iron, aluminum, concrete, chemicals, and other basic building and manufacturing materials (“Basic Materials Companies”).
For the year ended December 31, 2020, Basic Materials Fund returned 19.75%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Materials Index returned 20.73%.
The gold industry was the largest contributor to the Fund’s return for the period, followed by the specialty chemicals industry and the metal & glass containers industry. The construction materials industry detracted the most from the Fund’s return for the period, followed by the paper products industry and the aluminum industry.
The top-performing holdings were Newmont Corp., Barrick Gold Corp., and Freeport-McMoRan, Inc. The worst-performing holdings included Carpenter Technology Corp., CF Industries Holdings, Inc., and W R Grace & Co.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Sherwin-Williams Co. | 3.1% |
Air Products and Chemicals, Inc. | 3.0% |
Ecolab, Inc. | 3.0% |
DuPont de Nemours, Inc. | 2.7% |
Newmont Corp. | 2.6% |
Dow, Inc. | 2.5% |
Freeport-McMoRan, Inc. | 2.4% |
PPG Industries, Inc. | 2.3% |
Ball Corp. | 2.2% |
LyondellBasell Industries N.V. — Class A | 2.1% |
Top Ten Total | 25.9% |
“Ten Largest Holdings” excludes any temporary cash investments. |
14 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Basic Materials Fund | 19.75% | 13.79% | 3.79% |
S&P 500 Materials Index | 20.73% | 13.14% | 9.00% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Materials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
BASIC MATERIALS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.0% | ||||||||
Chemicals - 42.8% | ||||||||
Sherwin-Williams Co. | 353 | $ | 259,423 | |||||
Air Products and Chemicals, Inc. | 919 | 251,089 | ||||||
Ecolab, Inc. | 1,149 | 248,598 | ||||||
DuPont de Nemours, Inc.1 | 3,174 | 225,703 | ||||||
Dow, Inc. | 3,757 | 208,514 | ||||||
PPG Industries, Inc. | 1,297 | 187,053 | ||||||
LyondellBasell Industries N.V. — Class A | 1,923 | 176,262 | ||||||
Linde plc | 578 | 152,309 | ||||||
Albemarle Corp. | 886 | 130,703 | ||||||
FMC Corp. | 1,090 | 125,274 | ||||||
Celanese Corp. — Class A | 955 | 124,093 | ||||||
Eastman Chemical Co. | 1,153 | 115,623 | ||||||
RPM International, Inc. | 1,195 | 108,482 | ||||||
International Flavors & Fragrances, Inc.1 | 981 | 106,772 | ||||||
Westlake Chemical Corp. | 1,251 | 102,082 | ||||||
CF Industries Holdings, Inc. | 2,453 | 94,956 | ||||||
Mosaic Co. | 4,037 | 92,891 | ||||||
Axalta Coating Systems Ltd.* | 2,855 | 81,510 | ||||||
Nutrien Ltd. | 1,545 | 74,407 | ||||||
Huntsman Corp. | 2,891 | 72,680 | ||||||
Sociedad Quimica y Minera de Chile S.A. ADR | 1,400 | 68,726 | ||||||
Ashland Global Holdings, Inc. | 857 | 67,874 | ||||||
Valvoline, Inc. | 2,793 | 64,630 | ||||||
Element Solutions, Inc. | 3,454 | 61,239 | ||||||
W R Grace & Co. | 1,102 | 60,412 | ||||||
Chemours Co. | 2,366 | 58,653 | ||||||
Olin Corp. | 2,343 | 57,544 | ||||||
Sensient Technologies Corp. | 780 | 57,541 | ||||||
Ingevity Corp.* | 739 | 55,964 | ||||||
HB Fuller Co. | 990 | 51,361 | ||||||
Total Chemicals | 3,542,368 | |||||||
Mining - 19.9% | ||||||||
Newmont Corp. | 3,554 | 212,849 | ||||||
Freeport-McMoRan, Inc. | 7,739 | 201,369 | ||||||
Barrick Gold Corp. | 6,380 | 145,336 | ||||||
Rio Tinto plc ADR | 1,118 | 84,096 | ||||||
BHP Group Ltd. ADR1 | 1,287 | 84,093 | ||||||
Wheaton Precious Metals Corp. | 2,010 | 83,897 | ||||||
Agnico Eagle Mines Ltd. | 1,149 | 81,016 | ||||||
Royal Gold, Inc. | 739 | 78,600 | ||||||
Franco-Nevada Corp. | 614 | 76,953 | ||||||
First Majestic Silver Corp.* | 5,660 | 76,070 | ||||||
AngloGold Ashanti Ltd. ADR | 3,356 | 75,913 | ||||||
Pan American Silver Corp. | 2,181 | 75,266 | ||||||
Kirkland Lake Gold Ltd. | 1,805 | 74,492 | ||||||
Teck Resources Ltd. — Class B | 4,000 | 72,600 | ||||||
Alcoa Corp.* | 3,001 | 69,173 | ||||||
Arconic Corp.* | 1,980 | 59,004 | ||||||
Livent Corp.* | 2,810 | 52,941 | ||||||
Coeur Mining, Inc.* | 4,000 | 41,400 | ||||||
Total Mining | 1,645,068 | |||||||
Packaging & Containers - 13.3% | ||||||||
Ball Corp. | 1,909 | 177,881 | ||||||
Crown Holdings, Inc.* | 1,175 | 117,735 | ||||||
Packaging Corporation of America | 831 | 114,603 | ||||||
Amcor plc | 9,515 | 111,992 | ||||||
Westrock Co. | 2,405 | 104,690 | ||||||
AptarGroup, Inc. | 680 | 93,085 | ||||||
Berry Global Group, Inc.* | 1,576 | 88,555 | ||||||
Sealed Air Corp. | 1,885 | 86,314 | ||||||
Sonoco Products Co. | 1,297 | 76,847 | ||||||
Graphic Packaging Holding Co. | 3,999 | 67,743 | ||||||
Silgan Holdings, Inc. | 1,712 | 63,481 | ||||||
Total Packaging & Containers | 1,102,926 | |||||||
Iron & Steel - 8.8% | ||||||||
Vale S.A. ADR | 7,733 | 129,605 | ||||||
Nucor Corp. | 2,360 | 125,529 | ||||||
Steel Dynamics, Inc. | 2,414 | 89,004 | ||||||
Reliance Steel & Aluminum Co. | 739 | 88,495 | ||||||
Cleveland-Cliffs, Inc. | 5,100 | 74,256 | ||||||
ArcelorMittal S.A.* | 3,020 | 69,158 | ||||||
United States Steel Corp. | 3,273 | 54,888 | ||||||
Commercial Metals Co. | 2,393 | 49,152 | ||||||
Allegheny Technologies, Inc.* | 2,778 | 46,587 | ||||||
Total Iron & Steel | 726,674 | |||||||
Building Materials - 5.7% | ||||||||
Vulcan Materials Co. | 1,005 | 149,052 | ||||||
Martin Marietta Materials, Inc. | 498 | 141,417 | ||||||
Eagle Materials, Inc. | 634 | 64,256 | ||||||
Louisiana-Pacific Corp. | 1,632 | 60,661 | ||||||
Summit Materials, Inc. — Class A* | 2,528 | 50,762 | ||||||
Total Building Materials | 466,148 | |||||||
Forest Products & Paper - 2.2% | ||||||||
International Paper Co. | 2,788 | 138,620 | ||||||
Domtar Corp. | 1,345 | 42,569 | ||||||
Total Forest Products & Paper | 181,189 | |||||||
Biotechnology - 2.0% | ||||||||
Corteva, Inc. | 4,297 | 166,380 | ||||||
Household Products & Housewares - 1.4% | ||||||||
Avery Dennison Corp. | 742 | 115,091 | ||||||
Housewares - 1.2% | ||||||||
Scotts Miracle-Gro Co. — Class A | 494 | 98,375 | ||||||
Distribution & Wholesale - 0.7% | ||||||||
Avient Corp. | 1,491 | 60,058 | ||||||
Total Common Stocks | ||||||||
(Cost $4,135,670) | 8,104,277 | |||||||
EXCHANGE-TRADED FUNDS† - 1.3% | ||||||||
VanEck Vectors Junior Gold Miners ETF | 1,900 | 103,056 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $89,725) | 103,056 | |||||||
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
BASIC MATERIALS FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,2 - 0.9% | ||||||||
J.P. Morgan Securities LLC | $ | 43,209 | $ | 43,209 | ||||
Barclays Capital, Inc. | 18,001 | 18,001 | ||||||
BofA Securities, Inc. | 16,668 | 16,668 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $77,878) | 77,878 | |||||||
| Shares | |||||||
SECURITIES LENDING COLLATERAL†,3 - 3.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 300,671 | 300,671 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $300,671) | 300,671 | |||||||
Total Investments - 103.8% | ||||||||
(Cost $4,603,944) | $ | 8,585,882 | ||||||
Other Assets & Liabilities, net - (3.8)% | (312,953 | ) | ||||||
Total Net Assets - 100.0% | $ | 8,272,929 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 8,104,277 | $ | — | $ | — | $ | 8,104,277 | ||||||||
Exchange-Traded Funds | 103,056 | — | — | 103,056 | ||||||||||||
Repurchase Agreements | — | 77,878 | — | 77,878 | ||||||||||||
Securities Lending Collateral | 300,671 | — | — | 300,671 | ||||||||||||
Total Assets | $ | 8,508,004 | $ | 77,878 | $ | — | $ | 8,585,882 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
BASIC MATERIALS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $292,808 of securities loaned (cost $4,526,066) | $ | 8,508,004 | ||
Repurchase agreements, at value (cost $77,878) | 77,878 | |||
Cash | 180 | |||
Receivables: | ||||
Fund shares sold | 29,741 | |||
Dividends | 8,982 | |||
Securities lending income | 80 | |||
Total assets | 8,624,865 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 300,671 | |||
Deferred foreign capital gain taxes | 19,017 | |||
Management fees | 6,528 | |||
Transfer agent and administrative fees | 2,066 | |||
Investor service fees | 1,920 | |||
Fund shares redeemed | 1,786 | |||
Portfolio accounting fees | 768 | |||
Trustees’ fees* | 139 | |||
Miscellaneous | 19,041 | |||
Total liabilities | 351,936 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 8,272,929 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,828,459 | ||
Total distributable earnings (loss) | 3,444,470 | |||
Net assets | $ | 8,272,929 | ||
Capital shares outstanding | 92,898 | |||
Net asset value per share | $ | 89.05 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $1,230) | $ | 128,033 | ||
Interest | 221 | |||
Income from securities lending, net | 550 | |||
Total investment income | 128,804 | |||
Expenses: | ||||
Management fees | 51,325 | |||
Investor service fees | 15,096 | |||
Transfer agent and administrative fees | 19,534 | |||
Professional fees | 10,840 | |||
Portfolio accounting fees | 6,038 | |||
Trustees’ fees* | 1,292 | |||
Custodian fees | 1,084 | |||
Miscellaneous | 4,862 | |||
Total expenses | 110,071 | |||
Net investment income | 18,733 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 457,821 | |||
Net realized gain | 457,821 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 898,643 | |||
Net change in unrealized appreciation (depreciation) | 898,643 | |||
Net realized and unrealized gain | 1,356,464 | |||
Net increase in net assets resulting from operations | $ | 1,375,197 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BASIC MATERIALS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 18,733 | $ | 31,109 | ||||
Net realized gain on investments | 457,821 | 374,167 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 898,643 | 758,223 | ||||||
Net increase in net assets resulting from operations | 1,375,197 | 1,163,499 | ||||||
Distributions to shareholders | (123,282 | ) | (299,363 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 11,298,895 | 6,035,444 | ||||||
Distributions reinvested | 123,282 | 299,363 | ||||||
Cost of shares redeemed | (10,950,730 | ) | (6,817,453 | ) | ||||
Net increase (decrease) from capital share transactions | 471,447 | (482,646 | ) | |||||
Net increase in net assets | 1,723,362 | 381,490 | ||||||
Net assets: | ||||||||
Beginning of year | 6,549,567 | 6,168,077 | ||||||
End of year | $ | 8,272,929 | $ | 6,549,567 | ||||
Capital share activity: | ||||||||
Shares sold | 152,164 | 82,680 | ||||||
Shares issued from reinvestment of distributions | 1,707 | 4,086 | ||||||
Shares redeemed | (147,158 | ) | (94,867 | ) | ||||
Net increase (decrease) in shares | 6,713 | (8,101 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
BASIC MATERIALS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 75.99 | $ | 65.42 | $ | 81.27 | $ | 67.61 | $ | 52.52 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .22 | .35 | .05 | (.07 | ) | .02 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 14.43 | 13.55 | (13.91 | ) | 14.47 | 15.43 | ||||||||||||||
Total from investment operations | 14.65 | 13.90 | (13.86 | ) | 14.40 | 15.45 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.97 | ) | — | (.42 | ) | (.50 | ) | — | ||||||||||||
Net realized gains | (.62 | ) | (3.33 | ) | (1.57 | ) | (.24 | ) | (.36 | ) | ||||||||||
Total distributions | (1.59 | ) | (3.33 | ) | (1.99 | ) | (.74 | ) | (.36 | ) | ||||||||||
Net asset value, end of period | $ | 89.05 | $ | 75.99 | $ | 65.42 | $ | 81.27 | $ | 67.61 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 19.75 | % | 21.43 | % | (17.44 | %) | 21.43 | % | 30.86 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,273 | $ | 6,550 | $ | 6,168 | $ | 17,067 | $ | 15,229 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.31 | % | 0.49 | % | 0.06 | % | (0.10 | %) | 0.08 | % | ||||||||||
Total expensesc | 1.82 | % | 1.82 | % | 1.73 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 194 | % | 88 | % | 83 | % | 181 | % | 266 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:3 reverse share split effective December 1, 2016. |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
BIOTECHNOLOGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the biotechnology industry, including companies involved in research and development, genetic, or other biological engineering, and in the design, manufacture, or sale of related biotechnology products or services (“Biotechnology Companies”).
For the year ended December 31, 2020, Biotechnology Fund returned 21.31%, compared with the S&P 500 Index, which returned 18.40%. The S&P 500 Health Care Index returned 13.45%.
Companies in the biotechnology industry contributed the most to return, followed by the health care equipment industry and the life sciences tools & services industry. No industry detracted from return for the period.
The best-performing holdings in the Fund were Immunomedics, Inc., Moderna, Inc., and Regeneron Pharmaceuticals, Inc. The worst-performing holdings in the Fund included Amarin Corp. plc ADR, Intercept Pharmaceuticals, Inc., and Bluebird Bio, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
AbbVie, Inc. | 6.6% |
Amgen, Inc. | 5.4% |
Gilead Sciences, Inc. | 4.1% |
Vertex Pharmaceuticals, Inc. | 3.6% |
Illumina, Inc. | 3.4% |
Regeneron Pharmaceuticals, Inc. | 3.3% |
Biogen, Inc. | 2.8% |
Moderna, Inc. | 2.6% |
Corteva, Inc. | 2.5% |
Alexion Pharmaceuticals, Inc. | 2.4% |
Top Ten Total | 36.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 21 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Biotechnology Fund | 21.31% | 7.33% | 16.87% |
S&P 500 Health Care Index | 13.45% | 11.63% | 15.88% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
22 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
BIOTECHNOLOGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.7% | ||||||||
Biotechnology - 73.0% | ||||||||
Amgen, Inc. | 5,762 | $ | 1,324,799 | |||||
Gilead Sciences, Inc. | 17,155 | 999,450 | ||||||
Vertex Pharmaceuticals, Inc.* | 3,752 | 886,748 | ||||||
Illumina, Inc.* | 2,285 | 845,450 | ||||||
Regeneron Pharmaceuticals, Inc.* | 1,686 | 814,524 | ||||||
Biogen, Inc.* | 2,836 | 694,423 | ||||||
Moderna, Inc.* | 6,222 | 650,012 | ||||||
Corteva, Inc. | 15,635 | 605,387 | ||||||
Alexion Pharmaceuticals, Inc.* | 3,752 | 586,213 | ||||||
Seagen, Inc.* | 3,313 | 580,239 | ||||||
Exact Sciences Corp.* | 3,898 | 516,446 | ||||||
Incyte Corp.* | 5,576 | 485,001 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 805 | 469,267 | ||||||
BioMarin Pharmaceutical, Inc.* | 4,861 | 426,261 | ||||||
Alnylam Pharmaceuticals, Inc.* | 3,228 | 419,543 | ||||||
Guardant Health, Inc.* | 3,206 | 413,189 | ||||||
Mirati Therapeutics, Inc.* | 1,655 | 363,504 | ||||||
Ionis Pharmaceuticals, Inc.* | 6,031 | 340,993 | ||||||
ACADIA Pharmaceuticals, Inc.* | 6,134 | 327,924 | ||||||
CRISPR Therapeutics AG* | 2,091 | 320,153 | ||||||
BeiGene Ltd. ADR* | 1,213 | 313,427 | ||||||
Acceleron Pharma, Inc.* | 2,328 | 297,844 | ||||||
Iovance Biotherapeutics, Inc.* | 6,270 | 290,928 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 3,765 | 288,888 | ||||||
United Therapeutics Corp.* | 1,892 | 287,187 | ||||||
BioNTech SE ADR*,1 | 3,473 | 283,119 | ||||||
Ultragenyx Pharmaceutical, Inc.* | 2,040 | 282,397 | ||||||
Twist Bioscience Corp.* | 1,980 | 279,754 | ||||||
Exelixis, Inc.* | 13,879 | 278,552 | ||||||
Novavax, Inc.*,1 | 2,481 | 276,656 | ||||||
Amicus Therapeutics, Inc.* | 11,876 | 274,217 | ||||||
Halozyme Therapeutics, Inc.* | 6,316 | 269,756 | ||||||
Blueprint Medicines Corp.* | 2,345 | 262,992 | ||||||
Fate Therapeutics, Inc.* | 2,878 | 261,697 | ||||||
Sage Therapeutics, Inc.* | 2,895 | 250,446 | ||||||
Biohaven Pharmaceutical Holding Company Ltd.* | 2,863 | 245,388 | ||||||
Arena Pharmaceuticals, Inc.* | 3,155 | 242,399 | ||||||
ChemoCentryx, Inc.* | 3,782 | 234,181 | ||||||
PTC Therapeutics, Inc.* | 3,739 | 228,191 | ||||||
Emergent BioSolutions, Inc.* | 2,544 | 227,942 | ||||||
Bluebird Bio, Inc.* | 4,549 | 196,835 | ||||||
Global Blood Therapeutics, Inc.* | 4,353 | 188,528 | ||||||
Inovio Pharmaceuticals, Inc.*,1 | 15,720 | 139,122 | ||||||
Total Biotechnology | 17,969,972 | |||||||
Pharmaceuticals - 17.6% | ||||||||
AbbVie, Inc. | 15,135 | 1,621,715 | ||||||
Viatris, Inc.* | 30,110 | 564,261 | ||||||
Horizon Therapeutics plc* | 6,623 | 484,472 | ||||||
Jazz Pharmaceuticals plc* | 2,473 | 408,169 | ||||||
Sarepta Therapeutics, Inc.* | 2,383 | 406,278 | ||||||
Neurocrine Biosciences, Inc.* | 3,460 | 331,641 | ||||||
PRA Health Sciences, Inc.* | 2,566 | 321,879 | ||||||
Pacira BioSciences, Inc.* | 3,108 | 185,983 | ||||||
Total Pharmaceuticals | 4,324,398 | |||||||
Healthcare-Products - 5.7% | ||||||||
Bio-Techne Corp. | 1,281 | 406,781 | ||||||
Novocure Ltd.* | 2,220 | 384,149 | ||||||
Natera, Inc.* | 3,110 | 309,507 | ||||||
Adaptive Biotechnologies Corp.* | 5,128 | 303,219 | ||||||
Total Healthcare-Products | 1,403,656 | |||||||
Healthcare-Services - 3.4% | ||||||||
Invitae Corp.*,1 | 7,337 | 306,760 | ||||||
Syneos Health, Inc.* | 4,453 | 303,383 | ||||||
Medpace Holdings, Inc.* | 1,713 | 238,450 | ||||||
Total Healthcare-Services | 848,593 | |||||||
Total Common Stocks | ||||||||
(Cost $11,866,479) | 24,546,619 | |||||||
RIGHTS††† - 0.0% | ||||||||
Biotechnology - 0.0% | ||||||||
Clinical Data, Inc.* | 4,730 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
J.P. Morgan Securities LLC | $ | 82,601 | 82,601 | |||||
Barclays Capital, Inc. | 34,412 | 34,412 | ||||||
BofA Securities, Inc. | 31,863 | 31,863 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $148,876) | 148,876 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 810,720 | 810,720 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $810,720) | 810,720 | |||||||
Total Investments - 103.6% | ||||||||
(Cost $12,826,075) | $ | 25,506,215 | ||||||
Other Assets & Liabilities, net - (3.6)% | (884,412 | ) | ||||||
Total Net Assets - 100.0% | $ | 24,621,803 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
BIOTECHNOLOGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 24,546,619 | $ | — | $ | — | $ | 24,546,619 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 148,876 | — | 148,876 | ||||||||||||
Securities Lending Collateral | 810,720 | — | — | 810,720 | ||||||||||||
Total Assets | $ | 25,357,339 | $ | 148,876 | $ | — | $ | 25,506,215 |
* | Security has a market value of $0. |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BIOTECHNOLOGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $754,067 of securities loaned (cost $12,677,199) | $ | 25,357,339 | ||
Repurchase agreements, at value (cost $148,876) | 148,876 | |||
Receivables: | ||||
Fund shares sold | 75,983 | |||
Securities lending income | 2,097 | |||
Total assets | 25,584,295 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 810,720 | |||
Securities purchased | 59,780 | |||
Management fees | 17,853 | |||
Fund shares redeemed | 8,899 | |||
Transfer agent and administrative fees | 5,650 | |||
Investor service fees | 5,251 | |||
Portfolio accounting fees | 2,100 | |||
Trustees’ fees* | 378 | |||
Miscellaneous | 51,861 | |||
Total liabilities | 962,492 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 24,621,803 | ||
Net assets consist of: | ||||
Paid in capital | $ | 10,860,937 | ||
Total distributable earnings (loss) | 13,760,866 | |||
Net assets | $ | 24,621,803 | ||
Capital shares outstanding | 230,097 | |||
Net asset value per share | $ | 107.01 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $30) | $ | 187,243 | ||
Interest | 510 | |||
Income from securities lending, net | 10,593 | |||
Total investment income | 198,346 | |||
Expenses: | ||||
Management fees | 191,753 | |||
Investor service fees | 56,398 | |||
Transfer agent and administrative fees | 73,247 | |||
Professional fees | 41,250 | |||
Portfolio accounting fees | 22,559 | |||
Trustees’ fees* | 4,867 | |||
Custodian fees | 3,545 | |||
Line of credit fees | 73 | |||
Miscellaneous | 17,558 | |||
Total expenses | 411,250 | |||
Net investment loss | (212,904 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 4,373,565 | |||
Net realized gain | 4,373,565 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 359,007 | |||
Net change in unrealized appreciation (depreciation) | 359,007 | |||
Net realized and unrealized gain | 4,732,572 | |||
Net increase in net assets resulting from operations | $ | 4,519,668 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
BIOTECHNOLOGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (212,904 | ) | $ | (206,746 | ) | ||
Net realized gain on investments | 4,373,565 | 3,097,358 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 359,007 | 1,789,927 | ||||||
Net increase in net assets resulting from operations | 4,519,668 | 4,680,539 | ||||||
Distributions to shareholders | (1,815,028 | ) | (553,949 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 29,630,953 | 21,705,706 | ||||||
Distributions reinvested | 1,815,028 | 553,949 | ||||||
Cost of shares redeemed | (31,215,524 | ) | (25,699,255 | ) | ||||
Net increase (decrease) from capital share transactions | 230,457 | (3,439,600 | ) | |||||
Net increase in net assets | 2,935,097 | 686,990 | ||||||
Net assets: | ||||||||
Beginning of year | 21,686,706 | 20,999,716 | ||||||
End of year | $ | 24,621,803 | $ | 21,686,706 | ||||
Capital share activity: | ||||||||
Shares sold | 309,476 | 246,464 | ||||||
Shares issued from reinvestment of distributions | 17,983 | 6,606 | ||||||
Shares redeemed | (326,022 | ) | (293,073 | ) | ||||
Net increase (decrease) in shares | 1,437 | (40,003 | ) |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
BIOTECHNOLOGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 94.84 | $ | 78.16 | $ | 86.53 | $ | 66.86 | $ | 83.22 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.91 | ) | (.83 | ) | (.96 | ) | (.79 | ) | (.80 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 20.68 | 19.81 | (7.17 | ) | 20.46 | (15.56 | ) | |||||||||||||
Total from investment operations | 19.77 | 18.98 | (8.13 | ) | 19.67 | (16.36 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (7.60 | ) | (2.30 | ) | (.24 | ) | — | — | ||||||||||||
Total distributions | (7.60 | ) | (2.30 | ) | (.24 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 107.01 | $ | 94.84 | $ | 78.16 | $ | 86.53 | $ | 66.86 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 21.31 | % | 24.67 | % | (9.44 | %) | 29.44 | % | (19.66 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 24,622 | $ | 21,687 | $ | 21,000 | $ | 29,272 | $ | 22,231 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.94 | %) | (0.95 | %) | (1.08 | %) | (0.99 | %) | (1.16 | %) | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 160 | % | 105 | % | 109 | % | 137 | % | 127 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
CONSUMER PRODUCTS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in manufacturing finished goods and services both domestically and internationally (“Consumer Products Companies”).
For the year ended December 31, 2020, Consumer Products Fund returned 7.58%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Consumer Staples Index returned 10.75%.
The household products industry was the largest contributor to the Fund’s return for the period, followed by the soft drinks industry and packaged foods & meats industry. The tobacco industry detracted the most from return, followed by the food distributors industry.
Fund performance for the year got the biggest boost from Boston Beer Company, Inc. Class A, Monster Beverage Corp., and Estee Lauder Companies, Inc. Class A. The Fund’s weakest performers during the year were Coty, Inc. Class A, Tyson Foods, Inc. Class A, and Altria Group, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Procter & Gamble Co. | 7.0% |
Coca-Cola Co. | 5.9% |
PepsiCo, Inc. | 5.4% |
Philip Morris International, Inc. | 4.1% |
Estee Lauder Companies, Inc. — Class A | 3.6% |
Mondelez International, Inc. — Class A | 3.5% |
Colgate-Palmolive Co. | 3.2% |
Altria Group, Inc. | 3.2% |
Monster Beverage Corp. | 2.6% |
Kimberly-Clark Corp. | 2.5% |
Top Ten Total | 41.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
28 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Consumer Products Fund | 7.58% | 6.34% | 9.98% |
S&P 500 Consumer Staples Index | 10.75% | 9.14% | 11.79% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Consumer Staples Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
CONSUMER PRODUCTS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Food - 35.9% | ||||||||
Mondelez International, Inc. — Class A | 9,420 | $ | 550,787 | |||||
Kraft Heinz Co. | 11,081 | 384,067 | ||||||
Sysco Corp. | 5,034 | 373,825 | ||||||
General Mills, Inc. | 6,048 | 355,622 | ||||||
Hershey Co. | 2,195 | 334,364 | ||||||
McCormick & Company, Inc. | 3,143 | 300,471 | ||||||
Tyson Foods, Inc. — Class A | 4,617 | 297,520 | ||||||
Kroger Co. | 9,323 | 296,099 | ||||||
Hormel Foods Corp. | 6,286 | 292,990 | ||||||
Kellogg Co. | 4,402 | 273,936 | ||||||
Conagra Brands, Inc. | 6,838 | 247,946 | ||||||
Campbell Soup Co. | 4,759 | 230,098 | ||||||
J M Smucker Co. | 1,884 | 217,790 | ||||||
Lamb Weston Holdings, Inc. | 2,525 | 198,819 | ||||||
US Foods Holding Corp.* | 4,849 | 161,520 | ||||||
Beyond Meat, Inc.*,1 | 1,226 | 153,250 | ||||||
Post Holdings, Inc.* | 1,497 | 151,212 | ||||||
Performance Food Group Co.* | 3,174 | 151,114 | ||||||
Ingredion, Inc. | 1,756 | 138,145 | ||||||
Flowers Foods, Inc. | 5,647 | 127,792 | ||||||
Hain Celestial Group, Inc.* | 3,029 | 121,614 | ||||||
Grocery Outlet Holding Corp.* | 2,831 | 111,117 | ||||||
Sanderson Farms, Inc. | 774 | 102,323 | ||||||
Sprouts Farmers Market, Inc.* | 4,476 | 89,968 | ||||||
Total Food | 5,662,389 | |||||||
Beverages - 27.3% | ||||||||
Coca-Cola Co. | 16,961 | 930,141 | ||||||
PepsiCo, Inc. | 5,788 | 858,360 | ||||||
Monster Beverage Corp.* | 4,477 | 414,033 | ||||||
Keurig Dr Pepper, Inc. | 12,508 | 400,256 | ||||||
Constellation Brands, Inc. — Class A | 1,753 | 383,995 | ||||||
Brown-Forman Corp. — Class B | 4,590 | 364,584 | ||||||
Boston Beer Company, Inc. — Class A* | 210 | 208,801 | ||||||
Molson Coors Beverage Co. — Class B | 4,160 | 187,990 | ||||||
Coca-Cola European Partners plc | 3,424 | 170,618 | ||||||
Anheuser-Busch InBev S.A. ADR | 2,127 | 148,699 | ||||||
Diageo plc ADR | 778 | 123,554 | ||||||
Fomento Economico Mexicano SAB de CV ADR | 1,557 | 117,974 | ||||||
Total Beverages | 4,309,005 | |||||||
Cosmetics & Personal Care - 13.8% | ||||||||
Procter & Gamble Co. | 7,932 | 1,103,658 | ||||||
Estee Lauder Companies, Inc. — Class A | 2,115 | 562,992 | ||||||
Colgate-Palmolive Co. | 5,919 | 506,134 | ||||||
Total Cosmetics & Personal Care | 2,172,784 | |||||||
Agriculture - 12.3% | ||||||||
Philip Morris International, Inc. | 7,775 | 643,692 | ||||||
Altria Group, Inc. | 12,111 | 496,551 | ||||||
Archer-Daniels-Midland Co. | 6,380 | 321,616 | ||||||
Bunge Ltd. | 2,720 | 178,377 | ||||||
Darling Ingredients, Inc.* | 3,013 | 173,790 | ||||||
British American Tobacco plc ADR | 3,383 | 126,829 | ||||||
Total Agriculture | 1,940,855 | |||||||
Household Products & Housewares - 6.2% | ||||||||
Kimberly-Clark Corp. | 2,978 | 401,524 | ||||||
Clorox Co. | 1,474 | 297,630 | ||||||
Church & Dwight Company, Inc. | 3,154 | 275,123 | ||||||
Total Household Products & Housewares | 974,277 | |||||||
Retail - 1.9% | ||||||||
Casey’s General Stores, Inc. | 872 | 155,757 | ||||||
Freshpet, Inc.* | 1,019 | 144,688 | ||||||
Total Retail | 300,445 | |||||||
Pharmaceuticals - 0.9% | ||||||||
Herbalife Nutrition Ltd.* | 3,141 | 150,925 | ||||||
Electrical Components & Equipment - 0.6% | ||||||||
Energizer Holdings, Inc. | 2,364 | 99,714 | ||||||
Commercial Services - 0.6% | ||||||||
Medifast, Inc. | 459 | 90,120 | ||||||
Total Common Stocks | ||||||||
(Cost $8,307,465) | 15,700,514 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.1% | ||||||||
J.P. Morgan Securities LLC | $ | 12,772 | 12,772 | |||||
Barclays Capital, Inc. | 5,321 | 5,321 | ||||||
BofA Securities, Inc. | 4,926 | 4,926 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $23,019) | 23,019 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.8% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 120,321 | 120,321 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $120,321) | 120,321 | |||||||
Total Investments - 100.4% | ||||||||
(Cost $8,450,805) | $ | 15,843,854 | ||||||
Other Assets & Liabilities, net - (0.4)% | (56,800 | ) | ||||||
Total Net Assets - 100.0% | $ | 15,787,054 |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
CONSUMER PRODUCTS FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 15,700,514 | $ | — | $ | — | $ | 15,700,514 | ||||||||
Repurchase Agreements | — | 23,019 | — | 23,019 | ||||||||||||
Securities Lending Collateral | 120,321 | — | — | 120,321 | ||||||||||||
Total Assets | $ | 15,820,835 | $ | 23,019 | $ | — | $ | 15,843,854 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
CONSUMER PRODUCTS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $115,875 of securities loaned (cost $8,427,786) | $ | 15,820,835 | ||
Repurchase agreements, at value (cost $23,019) | 23,019 | |||
Receivables: | ||||
Securities sold | 135,568 | |||
Dividends | 46,623 | |||
Fund shares sold | 4,198 | |||
Securities lending income | 84 | |||
Total assets | 16,030,327 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 120,321 | |||
Fund shares redeemed | 69,334 | |||
Management fees | 11,426 | |||
Transfer agent and administrative fees | 3,616 | |||
Investor service fees | 3,361 | |||
Portfolio accounting fees | 1,344 | |||
Trustees’ fees* | 245 | |||
Miscellaneous | 33,626 | |||
Total liabilities | 243,273 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 15,787,054 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,515,030 | ||
Total distributable earnings (loss) | 6,272,024 | |||
Net assets | $ | 15,787,054 | ||
Capital shares outstanding | 222,741 | |||
Net asset value per share | $ | 70.88 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $76) | $ | 389,449 | ||
Interest | 384 | |||
Income from securities lending, net | 1,131 | |||
Total investment income | 390,964 | |||
Expenses: | ||||
Management fees | 127,468 | |||
Investor service fees | 37,491 | |||
Transfer agent and administrative fees | 49,230 | |||
Professional fees | 27,929 | |||
Portfolio accounting fees | 14,996 | |||
Trustees’ fees* | 3,509 | |||
Custodian fees | 2,443 | |||
Line of credit fees | 35 | |||
Miscellaneous | 10,099 | |||
Total expenses | 273,200 | |||
Net investment income | 117,764 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 539,920 | |||
Net realized gain | 539,920 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 194,302 | |||
Net change in unrealized appreciation (depreciation) | 194,302 | |||
Net realized and unrealized gain | 734,222 | |||
Net increase in net assets resulting from operations | $ | 851,986 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
CONSUMER PRODUCTS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 117,764 | $ | 146,706 | ||||
Net realized gain (loss) on investments | 539,920 | (171,518 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 194,302 | 3,086,914 | ||||||
Net increase in net assets resulting from operations | 851,986 | 3,062,102 | ||||||
Distributions to shareholders | (384,959 | ) | (191,931 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 21,469,149 | 31,752,552 | ||||||
Distributions reinvested | 384,959 | 191,931 | ||||||
Cost of shares redeemed | (25,139,935 | ) | (29,329,889 | ) | ||||
Net increase (decrease) from capital share transactions | (3,285,827 | ) | 2,614,594 | |||||
Net increase (decrease) in net assets | (2,818,800 | ) | 5,484,765 | |||||
Net assets: | ||||||||
Beginning of year | 18,605,854 | 13,121,089 | ||||||
End of year | $ | 15,787,054 | $ | 18,605,854 | ||||
Capital share activity: | ||||||||
Shares sold | 331,860 | 505,783 | ||||||
Shares issued from reinvestment of distributions | 6,054 | 3,006 | ||||||
Shares redeemed | (391,088 | ) | (468,116 | ) | ||||
Net increase (decrease) in shares | (53,174 | ) | 40,673 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
CONSUMER PRODUCTS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 67.43 | $ | 55.78 | $ | 66.30 | $ | 61.79 | $ | 61.56 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .51 | .56 | .70 | .17 | .44 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 4.44 | 11.84 | (8.51 | ) | 6.79 | 3.10 | ||||||||||||||
Total from investment operations | 4.95 | 12.40 | (7.81 | ) | 6.96 | 3.54 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.59 | ) | (.60 | ) | (.45 | ) | (.64 | ) | (.42 | ) | ||||||||||
Net realized gains | (.91 | ) | (.15 | ) | (2.26 | ) | (1.81 | ) | (2.89 | ) | ||||||||||
Total distributions | (1.50 | ) | (.75 | ) | (2.71 | ) | (2.45 | ) | (3.31 | ) | ||||||||||
Net asset value, end of period | $ | 70.88 | $ | 67.43 | $ | 55.78 | $ | 66.30 | $ | 61.79 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 7.58 | % | 22.33 | % | (12.12 | %) | 11.53 | % | 5.42 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 15,787 | $ | 18,606 | $ | 13,121 | $ | 16,024 | $ | 18,410 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.79 | % | 0.88 | % | 1.14 | % | 0.27 | % | 0.68 | % | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.72 | % | 1.70 | % | 1.65 | % | ||||||||||
Portfolio turnover rate | 155 | % | 177 | % | 176 | % | 133 | % | 161 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
ELECTRONICS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the electronics sector, including semiconductor manufacturers and distributors, and makers and vendors of other electronic components and devices (“Electronics Companies”).
For the year ended December 31, 2020, Electronics Fund returned 55.96%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Information Technology Index returned 43.89%.
The semiconductors group was the largest contributor to return, followed by the semiconductor equipment industry. No industry detracted from return.
Fund performance got the biggest boost from NVIDIA Corp., Advanced Micro Devices, Inc., and Enphase Energy, Inc. Detracting the most from the Fund’s performance for the period were Intel Corp., SunPower Corp. and Cirrus Logic, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: August 3, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
NVIDIA Corp. | 7.4% |
Intel Corp. | 6.0% |
QUALCOMM, Inc. | 5.6% |
Broadcom, Inc. | 5.5% |
Texas Instruments, Inc. | 5.2% |
Advanced Micro Devices, Inc. | 4.2% |
Micron Technology, Inc. | 3.9% |
Applied Materials, Inc. | 3.7% |
Lam Research Corp. | 3.4% |
Analog Devices, Inc. | 3.1% |
Top Ten Total | 48.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 35 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Electronics Fund | 55.96% | 28.72% | 17.67% |
S&P 500 Information Technology Index | 43.89% | 27.79% | 20.68% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
36 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
ELECTRONICS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Semiconductors - 90.5% | ||||||||
NVIDIA Corp. | 1,727 | $ | 901,839 | |||||
Intel Corp. | 14,503 | 722,539 | ||||||
QUALCOMM, Inc. | 4,493 | 684,464 | ||||||
Broadcom, Inc. | 1,524 | 667,283 | ||||||
Texas Instruments, Inc. | 3,824 | 627,633 | ||||||
Advanced Micro Devices, Inc.* | 5,527 | 506,881 | ||||||
Micron Technology, Inc.* | 6,303 | 473,860 | ||||||
Applied Materials, Inc. | 5,180 | 447,034 | ||||||
Lam Research Corp. | 878 | 414,653 | ||||||
Analog Devices, Inc. | 2,553 | 377,155 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 3,331 | 363,212 | ||||||
KLA Corp. | 1,237 | 320,272 | ||||||
Microchip Technology, Inc. | 2,207 | 304,809 | ||||||
Xilinx, Inc. | 1,995 | 282,831 | ||||||
Marvell Technology Group Ltd. | 5,768 | 274,211 | ||||||
NXP Semiconductor N.V. | 1,712 | 272,225 | ||||||
Skyworks Solutions, Inc. | 1,726 | 263,871 | ||||||
Maxim Integrated Products, Inc. | 2,817 | 249,727 | ||||||
ASML Holding N.V. — Class G | 491 | 239,471 | ||||||
Qorvo, Inc.* | 1,382 | 229,785 | ||||||
Teradyne, Inc. | 1,868 | 223,954 | ||||||
Monolithic Power Systems, Inc. | 570 | 208,751 | ||||||
ON Semiconductor Corp.* | 5,673 | 185,677 | ||||||
Entegris, Inc. | 1,913 | 183,839 | ||||||
STMicroelectronics N.V. — Class Y | 4,913 | 182,371 | ||||||
Cree, Inc.* | 1,712 | 181,301 | ||||||
MKS Instruments, Inc. | 986 | 148,344 | ||||||
Inphi Corp.* | 904 | 145,065 | ||||||
Lattice Semiconductor Corp.* | 2,780 | 127,380 | ||||||
Silicon Laboratories, Inc.* | 938 | 119,445 | ||||||
Power Integrations, Inc. | 1,394 | 114,113 | ||||||
Cirrus Logic, Inc.* | 1,388 | 114,094 | ||||||
CMC Materials, Inc. | 740 | 111,962 | ||||||
Semtech Corp.* | 1,537 | 110,802 | ||||||
Brooks Automation, Inc. | 1,611 | 109,306 | ||||||
Synaptics, Inc.* | 1,046 | 100,834 | ||||||
Total Semiconductors | 10,990,993 | |||||||
Energy-Alternate Sources - 7.8% | ||||||||
SolarEdge Technologies, Inc.* | 714 | 227,851 | ||||||
Canadian Solar, Inc.* | 4,363 | 223,560 | ||||||
Enphase Energy, Inc.* | 1,270 | 222,847 | ||||||
First Solar, Inc.* | 1,703 | 168,461 | ||||||
SunPower Corp. — Class A*,1 | 3,916 | 100,406 | ||||||
Total Energy-Alternate Sources | 943,125 | |||||||
Electrical Components & Equipment - 1.3% | ||||||||
Universal Display Corp. | 706 | 162,239 | ||||||
Total Common Stocks | ||||||||
(Cost $3,919,818) | 12,096,357 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.9% | ||||||||
J.P. Morgan Securities LLC | $ | 57,606 | 57,606 | |||||
Barclays Capital, Inc. | 24,000 | 24,000 | ||||||
BofA Securities, Inc. | 22,222 | 22,222 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $103,828) | 103,828 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 78,160 | 78,160 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $78,160) | 78,160 | |||||||
Total Investments - 101.1% | ||||||||
(Cost $4,101,806) | $ | 12,278,345 | ||||||
Other Assets & Liabilities, net - (1.1)% | (127,738 | ) | ||||||
Total Net Assets - 100.0% | $ | 12,150,607 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
ELECTRONICS FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 12,096,357 | $ | — | $ | — | $ | 12,096,357 | ||||||||
Repurchase Agreements | — | 103,828 | — | 103,828 | ||||||||||||
Securities Lending Collateral | 78,160 | — | — | 78,160 | ||||||||||||
Total Assets | $ | 12,174,517 | $ | 103,828 | $ | — | $ | 12,278,345 |
38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ELECTRONICS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $75,305 of securities loaned (cost $3,997,978) | $ | 12,174,517 | ||
Repurchase agreements, at value (cost $103,828) | 103,828 | |||
Receivables: | ||||
Dividends | 3,698 | |||
Securities lending income | 4 | |||
Total assets | 12,282,047 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 78,160 | |||
Fund shares redeemed | 13,117 | |||
Management fees | 8,622 | |||
Transfer agent and administrative fees | 2,729 | |||
Investor service fees | 2,536 | |||
Portfolio accounting fees | 1,014 | |||
Trustees’ fees* | 183 | |||
Miscellaneous | 25,079 | |||
Total liabilities | 131,440 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 12,150,607 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,991,876 | ||
Total distributable earnings (loss) | 8,158,731 | |||
Net assets | $ | 12,150,607 | ||
Capital shares outstanding | 74,824 | |||
Net asset value per share | $ | 162.39 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $374) | $ | 110,856 | ||
Interest | 256 | |||
Income from securities lending, net | 147 | |||
Total investment income | 111,259 | |||
Expenses: | ||||
Management fees | 78,871 | |||
Investor service fees | 23,197 | |||
Transfer agent and administrative fees | 29,771 | |||
Professional fees | 17,548 | |||
Portfolio accounting fees | 9,279 | |||
Trustees’ fees* | 1,848 | |||
Custodian fees | 1,363 | |||
Line of credit fees | 46 | |||
Miscellaneous | 6,969 | |||
Total expenses | 168,892 | |||
Net investment loss | (57,633 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,465,750 | |||
Net realized gain | 1,465,750 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 2,593,723 | |||
Net change in unrealized appreciation (depreciation) | 2,593,723 | |||
Net realized and unrealized gain | 4,059,473 | |||
Net increase in net assets resulting from operations | $ | 4,001,840 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
ELECTRONICS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (57,633 | ) | $ | (17,256 | ) | ||
Net realized gain on investments | 1,465,750 | 118,036 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 2,593,723 | 3,133,221 | ||||||
Net increase in net assets resulting from operations | 4,001,840 | 3,234,001 | ||||||
Distributions to shareholders | (143,071 | ) | (94,380 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 15,132,392 | 19,375,763 | ||||||
Distributions reinvested | 143,071 | 94,380 | ||||||
Cost of shares redeemed | (18,276,966 | ) | (16,176,082 | ) | ||||
Net increase (decrease) from capital share transactions | (3,001,503 | ) | 3,294,061 | |||||
Net increase in net assets | 857,266 | 6,433,682 | ||||||
Net assets: | ||||||||
Beginning of year | 11,293,341 | 4,859,659 | ||||||
End of year | $ | 12,150,607 | $ | 11,293,341 | ||||
Capital share activity: | ||||||||
Shares sold | 130,397 | 218,456 | ||||||
Shares issued from reinvestment of distributions | 1,197 | 1,043 | ||||||
Shares redeemed | (163,470 | ) | (185,011 | ) | ||||
Net increase (decrease) in shares | (31,876 | ) | 34,488 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ELECTRONICS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 105.84 | $ | 67.30 | $ | 79.89 | $ | 60.95 | $ | 49.03 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.73 | ) | (.20 | ) | (.07 | ) | (.34 | ) | (.07 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 59.27 | 39.89 | (9.54 | ) | 19.28 | 11.99 | ||||||||||||||
Total from investment operations | 58.54 | 39.69 | (9.61 | ) | 18.94 | 11.92 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.99 | ) | (1.15 | ) | (2.98 | ) | — | — | ||||||||||||
Total distributions | (1.99 | ) | (1.15 | ) | (2.98 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 162.39 | $ | 105.84 | $ | 67.30 | $ | 79.89 | $ | 60.95 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 55.96 | % | 59.28 | % | (12.71 | %) | 31.06 | % | 24.34 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 12,151 | $ | 11,293 | $ | 4,860 | $ | 11,236 | $ | 8,709 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.62 | %) | (0.23 | %) | (0.09 | %) | (0.48 | %) | (0.14 | %) | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.71 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 158 | % | 208 | % | 248 | % | 327 | % | 362 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
ENERGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies involved in the energy field, including the exploration, production, and development of oil, gas, coal, and alternative sources of energy (“Energy Companies”).
For the year ended December 31, 2020, Energy Fund returned -34.17%, compared with the 18.40% return of the S&P 500 Index. The S&P 500 Energy Index returned -33.68%.
The coal & consumable fuels industry was the only contributor to return for the period. The integrated oil & gas industry detracted the most from return, followed by the oil & gas exploration & production industry and the oil & gas storage & transportation industry.
Renewable Energy Group, Inc., EQT Corp., and Tenaris SA ADR contributed the most to the Fund’s return for the year. Holdings detracting the most from performance were Exxon Mobil Corp., Occidental Petroleum Corp., and ONEOK, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Chevron Corp. | 8.1% |
Exxon Mobil Corp. | 8.0% |
ConocoPhillips | 4.1% |
Phillips 66 | 3.6% |
Kinder Morgan, Inc. | 3.5% |
Schlumberger N.V. | 3.4% |
Marathon Petroleum Corp. | 3.4% |
EOG Resources, Inc. | 3.4% |
Valero Energy Corp. | 3.2% |
Williams Companies, Inc. | 3.0% |
Top Ten Total | 43.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
42 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Energy Fund | (34.17%) | (8.39%) | (7.96%) |
S&P 500 Energy Index | (33.68%) | (5.20%) | (2.67%) |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Energy index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
ENERGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.8% | ||||||||
Oil & Gas - 70.3% | ||||||||
Chevron Corp. | 5,938 | $ | 501,464 | |||||
Exxon Mobil Corp. | 11,966 | 493,239 | ||||||
ConocoPhillips | 6,420 | 256,736 | ||||||
Phillips 66 | 3,211 | 224,577 | ||||||
Marathon Petroleum Corp. | 5,102 | 211,019 | ||||||
EOG Resources, Inc. | 4,174 | 208,157 | ||||||
Valero Energy Corp. | 3,476 | 196,637 | ||||||
Pioneer Natural Resources Co. | 1,484 | 169,013 | ||||||
Hess Corp. | 2,823 | 149,026 | ||||||
Occidental Petroleum Corp. | 8,504 | 147,204 | ||||||
Petroleo Brasileiro S.A. ADR | 11,898 | 133,615 | ||||||
Concho Resources, Inc. | 2,278 | 132,921 | ||||||
Diamondback Energy, Inc. | 2,256 | 109,190 | ||||||
BP plc ADR | 5,271 | 108,161 | ||||||
Devon Energy Corp. | 6,153 | 97,279 | ||||||
Continental Resources, Inc. | 5,956 | 97,083 | ||||||
Parsley Energy, Inc. — Class A | 6,705 | 95,211 | ||||||
Cabot Oil & Gas Corp. — Class A | 5,823 | 94,798 | ||||||
HollyFrontier Corp. | 3,289 | 85,021 | ||||||
Apache Corp. | 5,959 | 84,558 | ||||||
Royal Dutch Shell plc — Class A ADR | 2,372 | 83,352 | ||||||
Ovintiv, Inc. | 5,160 | 74,098 | ||||||
Equities Corp. | 5,781 | 73,476 | ||||||
Cimarex Energy Co. | 1,945 | 72,957 | ||||||
Helmerich & Payne, Inc. | 2,547 | 58,989 | ||||||
Suncor Energy, Inc. | 3,465 | 58,143 | ||||||
PDC Energy, Inc.* | 2,781 | 57,094 | ||||||
CNX Resources Corp.* | 5,110 | 55,188 | ||||||
Murphy Oil Corp. | 4,456 | 53,918 | ||||||
Matador Resources Co.* | 3,700 | 44,622 | ||||||
Delek US Holdings, Inc. | 2,750 | 44,192 | ||||||
Canadian Natural Resources Ltd. | 1,826 | 43,915 | ||||||
Equinor ASA ADR | 2,135 | 35,057 | ||||||
Total Oil & Gas | 4,349,910 | |||||||
Pipelines - 15.2% | ||||||||
Kinder Morgan, Inc. | 15,866 | 216,888 | ||||||
Williams Companies, Inc. | 9,200 | 184,460 | ||||||
ONEOK, Inc. | 4,069 | 156,168 | ||||||
Cheniere Energy, Inc.* | 2,579 | 154,817 | ||||||
Targa Resources Corp. | 3,425 | 90,352 | ||||||
Enbridge, Inc. | 2,180 | 69,738 | ||||||
TC Energy Corp. | 1,206 | 49,108 | ||||||
Pembina Pipeline Corp. | 780 | 18,455 | ||||||
Total Pipelines | 939,986 | |||||||
Oil & Gas Services - 11.4% | ||||||||
Schlumberger N.V. | 9,762 | 213,105 | ||||||
Baker Hughes Co. | 8,657 | 180,498 | ||||||
Halliburton Co. | 8,090 | 152,901 | ||||||
NOV, Inc. | 6,682 | 91,744 | ||||||
ChampionX Corp.* | 4,527 | 69,263 | ||||||
Total Oil & Gas Services | 707,511 | |||||||
Energy-Alternate Sources - 0.9% | ||||||||
Renewable Energy Group, Inc.* | 816 | 57,789 | ||||||
Retail - 0.9% | ||||||||
World Fuel Services Corp. | 1,760 | 54,842 | ||||||
Metal Fabricate & Hardware - 0.4% | ||||||||
Tenaris S.A. ADR | 1,364 | 21,756 | ||||||
Mining - 0.4% | ||||||||
Cameco Corp. | 1,620 | 21,708 | ||||||
Food - 0.3% | ||||||||
Cosan Ltd. — Class A | 1,110 | 20,457 | ||||||
Total Common Stocks | ||||||||
(Cost $3,610,256) | 6,173,959 | |||||||
WARRANTS† - 0.0% | ||||||||
Occidental Petroleum Corp. | ||||||||
$22.00, 08/03/27* | 1 | 7 | ||||||
Total Warrants | ||||||||
(Cost $—) | 7 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.8% | ||||||||
J.P. Morgan Securities LLC | $ | 29,304 | 29,304 | |||||
Barclays Capital, Inc. | 12,209 | 12,209 | ||||||
BofA Securities, Inc. | 11,304 | 11,304 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $52,817) | 52,817 | |||||||
Total Investments - 100.6% | ||||||||
(Cost $3,663,073) | $ | 6,226,783 | ||||||
Other Assets & Liabilities, net - (0.6)% | (38,106 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,188,677 |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
ENERGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,173,959 | $ | — | $ | — | $ | 6,173,959 | ||||||||
Warrants | 7 | — | — | 7 | ||||||||||||
Repurchase Agreements | — | 52,817 | — | 52,817 | ||||||||||||
Total Assets | $ | 6,173,966 | $ | 52,817 | $ | — | $ | 6,226,783 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
ENERGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value (cost $3,610,256) | $ | 6,173,966 | ||
Repurchase agreements, at value (cost $52,817) | 52,817 | |||
Receivables: | ||||
Securities sold | 280,872 | |||
Dividends | 4,849 | |||
Fund shares sold | 1,823 | |||
Securities lending income | 3 | |||
Total assets | 6,514,330 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 304,331 | |||
Management fees | 4,520 | |||
Transfer agent and administrative fees | 1,431 | |||
Investor service fees | 1,330 | |||
Portfolio accounting fees | 532 | |||
Trustees’ fees* | 98 | |||
Miscellaneous | 13,411 | |||
Total liabilities | 325,653 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 6,188,677 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,031,522 | ||
Total distributable earnings (loss) | (7,842,845 | ) | ||
Net assets | $ | 6,188,677 | ||
Capital shares outstanding | 53,819 | |||
Net asset value per share | $ | 114.99 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $2,643) | $ | 249,376 | ||
Interest | 183 | |||
Income from securities lending, net | 3,173 | |||
Total investment income | 252,732 | |||
Expenses: | ||||
Management fees | 55,638 | |||
Investor service fees | 16,364 | |||
Transfer agent and administrative fees | 22,023 | |||
Professional fees | 12,290 | |||
Portfolio accounting fees | 6,546 | |||
Trustees’ fees* | 1,739 | |||
Custodian fees | 1,009 | |||
Line of credit fees | 40 | |||
Miscellaneous | 3,615 | |||
Total expenses | 119,264 | |||
Net investment income | 133,468 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (1,040,480 | ) | ||
Net realized loss | (1,040,480 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,447,830 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,447,830 | ) | ||
Net realized and unrealized loss | (2,488,310 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,354,842 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ENERGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 133,468 | $ | 86,442 | ||||
Net realized gain (loss) on investments | (1,040,480 | ) | 556,001 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,447,830 | ) | 158,152 | |||||
Net increase (decrease) in net assets resulting from operations | (2,354,842 | ) | 800,595 | |||||
Distributions to shareholders | (99,610 | ) | (18,218 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 19,419,055 | 10,611,542 | ||||||
Distributions reinvested | 99,610 | 18,218 | ||||||
Cost of shares redeemed | (20,641,084 | ) | (11,318,712 | ) | ||||
Net decrease from capital share transactions | (1,122,419 | ) | (688,952 | ) | ||||
Net increase (decrease) in net assets | (3,576,871 | ) | 93,425 | |||||
Net assets: | ||||||||
Beginning of year | 9,765,548 | 9,672,123 | ||||||
End of year | $ | 6,188,677 | $ | 9,765,548 | ||||
Capital share activity:* | ||||||||
Shares sold | 188,405 | 60,290 | ||||||
Shares issued from reinvestment of distributions | 921 | 102 | ||||||
Shares redeemed | (190,712 | ) | (63,466 | ) | ||||
Net decrease in shares | (1,386 | ) | (3,074 | ) |
* | Capital share activity for the year ended December 31, 2020, has been restated to reflect a 1:3 reverse share split effective August 24, 2020 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
ENERGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 176.90 | $ | 165.96 | $ | 223.73 | $ | 240.28 | $ | 184.29 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .96 | 1.71 | .12 | 1.59 | .24 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (62.41 | ) | 9.62 | (56.84 | ) | (16.85 | ) | 56.17 | ||||||||||||
Total from investment operations | (61.45 | ) | 11.33 | (56.72 | ) | (15.26 | ) | 56.41 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.46 | ) | (.39 | ) | (1.05 | ) | (1.29 | ) | (.42 | ) | ||||||||||
Total distributions | (.46 | ) | (.39 | ) | (1.05 | ) | (1.29 | ) | (.42 | ) | ||||||||||
Net asset value, end of period | $ | 114.99 | $ | 176.90 | $ | 165.96 | $ | 223.73 | $ | 240.28 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (34.17 | %) | 6.81 | % | (25.49 | %) | (6.26 | %) | 31.37 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,189 | $ | 9,766 | $ | 9,672 | $ | 17,318 | $ | 28,117 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 2.04 | % | 0.97 | % | 0.06 | % | 0.75 | % | 0.42 | % | ||||||||||
Total expenses | 1.82 | % | 1.83 | % | 1.72 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 317 | % | 114 | % | 490 | % | 573 | % | 293 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the years presented through December 31, 2020 have been restated to reflect a 1:3 reverse share split effective August 24, 2020 — See Note 9. |
d | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
ENERGY SERVICES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the energy services field, including those that provide services and equipment in the areas of oil, coal, and gas exploration and production (“Energy Services Companies”).
For the year ended December 31, 2020, Energy Services Fund returned -37.33%, compared with the S&P 500 Index, which returned 18.40%. The S&P 500 Energy Index returned -33.68%.
No industry contributed to return for the period. The oil & gas equipment & services industry detracted the most from return, followed by the oil & gas drilling industry.
Nabors Industries Ltd., Archrock, Inc., and Liberty Oilfield Services, Inc. Class A were the Fund’s best-performing holdings for the year. The Fund’s worst-performing holdings included Schlumberger N.V., Transocean Ltd., and Helix Energy Solutions Group, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Schlumberger N.V. | 13.7% |
Baker Hughes Co. | 11.6% |
Halliburton Co. | 9.8% |
NOV, Inc. | 6.4% |
ChampionX Corp. | 4.8% |
Helmerich & Payne, Inc. | 4.1% |
Cactus, Inc. — Class A | 3.8% |
Archrock, Inc. | 3.6% |
TechnipFMC plc | 3.5% |
Liberty Oilfield Services, Inc. — Class A | 3.4% |
Top Ten Total | 64.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 49 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Energy Services Fund | (37.33%) | (19.36%) | (15.49%) |
S&P 500 Energy Index | (33.68%) | (5.20%) | (2.67%) |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Energy Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
50 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
ENERGY SERVICES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Oil & Gas Services - 76.9% | ||||||||
Schlumberger N.V. | 24,055 | $ | 525,121 | |||||
Baker Hughes Co. | 21,327 | 444,668 | ||||||
Halliburton Co. | 19,926 | 376,601 | ||||||
NOV, Inc. | 17,905 | 245,836 | ||||||
ChampionX Corp.* | 12,121 | 185,451 | ||||||
Archrock, Inc. | 15,713 | 136,075 | ||||||
TechnipFMC plc | 14,265 | 134,091 | ||||||
Liberty Oilfield Services, Inc. — Class A | 12,593 | 129,834 | ||||||
Dril-Quip, Inc.* | 4,050 | 119,961 | ||||||
Core Laboratories N.V. | 3,871 | 102,620 | ||||||
ProPetro Holding Corp.* | 13,011 | 96,151 | ||||||
Oceaneering International, Inc.* | 12,044 | 95,750 | ||||||
DMC Global, Inc. | 2,129 | 92,079 | ||||||
US Silica Holdings, Inc. | 10,734 | 75,353 | ||||||
Oil States International, Inc.* | 12,721 | 63,859 | ||||||
Solaris Oilfield Infrastructure, Inc. — Class A | 7,698 | 62,662 | ||||||
Matrix Service Co.* | 5,200 | 57,304 | ||||||
Total Oil & Gas Services | 2,943,416 | |||||||
Oil & Gas - 8.8% | ||||||||
Helmerich & Payne, Inc. | 6,808 | 157,674 | ||||||
Patterson-UTI Energy, Inc. | 20,681 | 108,782 | ||||||
Nabors Industries Ltd. | 1,187 | 69,119 | ||||||
Total Oil & Gas | 335,575 | |||||||
Transportation - 7.0% | ||||||||
SEACOR Holdings, Inc.* | 2,675 | 110,879 | ||||||
Bristow Group, Inc.* | 3,776 | 99,384 | ||||||
Tidewater, Inc.* | 6,394 | 55,244 | ||||||
Total Transportation | 265,507 | |||||||
Machinery-Diversified - 3.8% | ||||||||
Cactus, Inc. — Class A | 5,602 | 146,044 | ||||||
Metal Fabricate & Hardware - 2.9% | ||||||||
Tenaris S.A. ADR | 6,927 | 110,486 | ||||||
Total Common Stocks | ||||||||
(Cost $2,555,583) | 3,801,028 | |||||||
| Face | |||||||
REPURCHASE AGREEMENTS††,1 - 0.9% | ||||||||
J.P. Morgan Securities LLC | $ | 20,113 | 20,113 | |||||
Barclays Capital, Inc. | 8,379 | 8,379 | ||||||
BofA Securities, Inc. | 7,758 | 7,758 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $36,250) | 36,250 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $2,591,833) | $ | 3,837,278 | ||||||
Other Assets & Liabilities, net - (0.3)% | (12,187 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,825,091 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
ENERGY SERVICES FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,801,028 | $ | — | $ | — | $ | 3,801,028 | ||||||||
Repurchase Agreements | — | 36,250 | — | 36,250 | ||||||||||||
Total Assets | $ | 3,801,028 | $ | 36,250 | $ | — | $ | 3,837,278 |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ENERGY SERVICES FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value (cost $2,555,583) | $ | 3,801,028 | ||
Repurchase agreements, at value (cost $36,250) | 36,250 | |||
Receivables: | ||||
Securities sold | 574,411 | |||
Fund shares sold | 13,742 | |||
Dividends | 2,219 | |||
Total assets | 4,427,650 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 589,835 | |||
Management fees | 2,819 | |||
Transfer agent and administrative fees | 892 | |||
Investor service fees | 829 | |||
Portfolio accounting fees | 332 | |||
Trustees’ fees* | 57 | |||
Miscellaneous | 7,795 | |||
Total liabilities | 602,559 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,825,091 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,279,411 | ||
Total distributable earnings (loss) | (10,454,320 | ) | ||
Net assets | $ | 3,825,091 | ||
Capital shares outstanding | 20,323 | |||
Net asset value per share | $ | 188.21 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $91) | $ | 67,642 | ||
Interest | 79 | |||
Income from securities lending, net | 633 | |||
Total investment income | 68,354 | |||
Expenses: | ||||
Management fees | 25,669 | |||
Investor service fees | 7,550 | |||
Transfer agent and administrative fees | 9,991 | |||
Professional fees | 5,422 | |||
Portfolio accounting fees | 3,020 | |||
Trustees’ fees* | 746 | |||
Custodian fees | 458 | |||
Miscellaneous | 2,140 | |||
Total expenses | 54,996 | |||
Net investment income | 13,358 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (1,587,927 | ) | ||
Net realized loss | (1,587,927 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 276,831 | |||
Net change in unrealized appreciation (depreciation) | 276,831 | |||
Net realized and unrealized loss | (1,311,096 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,297,738 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
ENERGY SERVICES FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 13,358 | $ | 17,503 | ||||
Net realized loss on investments | (1,587,927 | ) | (684,717 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 276,831 | 617,252 | ||||||
Net decrease in net assets resulting from operations | (1,297,738 | ) | (49,962 | ) | ||||
Distributions to shareholders | (20,199 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 23,713,509 | 17,158,557 | ||||||
Distributions reinvested | 20,199 | — | ||||||
Cost of shares redeemed | (21,836,022 | ) | (17,355,257 | ) | ||||
Net increase (decrease) from capital share transactions | 1,897,686 | (196,700 | ) | |||||
Net increase (decrease) in net assets | 579,749 | (246,662 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,245,342 | 3,492,004 | ||||||
End of year | $ | 3,825,091 | $ | 3,245,342 | ||||
Capital share activity:* | ||||||||
Shares sold | 150,113 | 55,157 | ||||||
Shares issued from reinvestment of distributions | 132 | — | ||||||
Shares redeemed | (140,635 | ) | (55,964 | ) | ||||
Net decrease in shares | 9,610 | (807 | ) |
* | Capital share activity for the year ended December 31, 2020, has been restated to reflect a 1:10 reverse split effective August 24, 2020 — See Note 9. |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
ENERGY SERVICES FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 302.92 | $ | 303.11 | $ | 575.98 | $ | 708.02 | $ | 580.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .11 | 1.50 | (.70 | ) | 11.10 | (.30 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | (114.69 | ) | (1.69 | ) | (254.57 | ) | (143.14 | ) | 129.22 | |||||||||||
Total from investment operations | (114.58 | ) | (.19 | ) | (255.27 | ) | (132.04 | ) | 128.92 | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.13 | ) | — | (17.60 | ) | — | (.90 | ) | ||||||||||||
Total distributions | (.13 | ) | — | (17.60 | ) | — | (.90 | ) | ||||||||||||
Net asset value, end of period | $ | 188.21 | $ | 302.92 | $ | 303.11 | $ | 575.98 | $ | 708.02 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (37.33 | %) | (0.07 | %) | (45.65 | %) | (18.64 | %) | 23.15 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,825 | $ | 3,245 | $ | 3,492 | $ | 9,047 | $ | 13,770 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | % | 0.45 | % | (0.13 | %) | 1.92 | % | (0.26 | %) | ||||||||||
Total expenses | 1.82 | % | 1.83 | % | 1.71 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 817 | % | 423 | % | 331 | % | 338 | % | 291 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the year ended through December 31, 2016 have been restated to reflect a 1:6 share split effective December 1, 2016. |
d | Reverse share split — Per share amounts for the years presented through December 31, 2020 have been restated to reflect a 1:10 reverse share split effective August 24, 2020 — See Note 9. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
FINANCIAL SERVICES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the financial services sector (“Financial Services Companies”).
For the year ended December 31, 2020, Financial Services Fund returned -0.11%, while the S&P 500 Index returned 18.40% over the same period. The S&P 500 Financials Index returned -1.69%.
The financial exchanges & data industry was the largest contributor to return, followed by the asset management & custody banks industry and the investment banking & brokerage industry. The diversified banks industry was the largest detractor from return, followed by the residential real estate investment trust (“REIT”) industry and the retail REIT industry.
Morgan Stanley, BlackRock, Inc. Class A, and MSCI Inc. Class A were the holdings that contributed the most to the Fund’s return for the period. Wells Fargo & Co., Simon Property Group, Inc., and Citigroup, Inc. detracted the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 20, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Berkshire Hathaway, Inc. — Class B | 3.3% |
JPMorgan Chase & Co. | 2.9% |
Bank of America Corp. | 2.3% |
Morgan Stanley | 1.6% |
Citigroup, Inc. | 1.6% |
Wells Fargo & Co. | 1.6% |
BlackRock, Inc. — Class A | 1.5% |
American Express Co. | 1.4% |
American Tower Corp. — Class A | 1.4% |
Charles Schwab Corp. | 1.4% |
Top Ten Total | 19.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
56 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Financial Services Fund | (0.11%) | 8.48% | 8.02% |
S&P 500 Financials Index | (1.69%) | 11.13% | 10.79% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and S&P 500 Financials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 57 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
FINANCIAL SERVICES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.8% | ||||||||
REITs - 29.5% | ||||||||
American Tower Corp. — Class A | 644 | $ | 144,552 | |||||
Crown Castle International Corp. | 766 | 121,940 | ||||||
Prologis, Inc. | 1,219 | 121,486 | ||||||
Equinix, Inc. | 156 | 111,412 | ||||||
Digital Realty Trust, Inc. | 677 | 94,448 | ||||||
Public Storage | 379 | 87,522 | ||||||
SBA Communications Corp. | 285 | 80,407 | ||||||
Simon Property Group, Inc. | 885 | 75,473 | ||||||
Welltower, Inc. | 1,137 | 73,473 | ||||||
AvalonBay Communities, Inc. | 442 | 70,910 | ||||||
Alexandria Real Estate Equities, Inc. | 387 | 68,971 | ||||||
Equity Residential | 1,156 | 68,528 | ||||||
Realty Income Corp. | 1,094 | 68,014 | ||||||
Weyerhaeuser Co. | 1,998 | 66,993 | ||||||
Invitation Homes, Inc. | 2,024 | 60,113 | ||||||
Ventas, Inc. | 1,206 | 59,142 | ||||||
Healthpeak Properties, Inc. | 1,918 | 57,981 | ||||||
Sun Communities, Inc. | 372 | 56,525 | ||||||
Essex Property Trust, Inc. | 237 | 56,269 | ||||||
Extra Space Storage, Inc. | 480 | 55,613 | ||||||
Boston Properties, Inc. | 574 | 54,260 | ||||||
Duke Realty Corp. | 1,348 | 53,880 | ||||||
VICI Properties, Inc. | 2,020 | 51,510 | ||||||
UDR, Inc. | 1,297 | 49,844 | ||||||
Medical Properties Trust, Inc. | 2,262 | 49,289 | ||||||
WP Carey, Inc. | 697 | 49,194 | ||||||
Host Hotels & Resorts, Inc. | 3,342 | 48,893 | ||||||
Equity LifeStyle Properties, Inc. | 760 | 48,154 | ||||||
Camden Property Trust | 444 | 44,365 | ||||||
American Homes 4 Rent — Class A | 1,477 | 44,310 | ||||||
Gaming and Leisure Properties, Inc. | 1,028 | 43,595 | ||||||
STORE Capital Corp. | 1,272 | 43,223 | ||||||
AGNC Investment Corp. | 2,714 | 42,338 | ||||||
CyrusOne, Inc. | 576 | 42,134 | ||||||
Americold Realty Trust | 1,108 | 41,362 | ||||||
Lamar Advertising Co. — Class A | 483 | 40,195 | ||||||
Omega Healthcare Investors, Inc. | 1,099 | 39,916 | ||||||
Vornado Realty Trust | 1,057 | 39,468 | ||||||
Regency Centers Corp. | 863 | 39,344 | ||||||
National Retail Properties, Inc. | 930 | 38,056 | ||||||
Kilroy Realty Corp. | 640 | 36,736 | ||||||
CubeSmart | 1,085 | 36,467 | ||||||
Rexford Industrial Realty, Inc. | 730 | 35,850 | ||||||
CoreSite Realty Corp. | 280 | 35,078 | ||||||
Federal Realty Investment Trust | 410 | 34,899 | ||||||
Healthcare Trust of America, Inc. — Class A | 1,250 | 34,425 | ||||||
American Campus Communities, Inc. | 790 | 33,788 | ||||||
Life Storage, Inc. | 280 | 33,429 | ||||||
EastGroup Properties, Inc. | 240 | 33,134 | ||||||
First Industrial Realty Trust, Inc. | 780 | 32,861 | ||||||
Douglas Emmett, Inc. | 1,114 | 32,507 | ||||||
Brixmor Property Group, Inc. | 1,918 | 31,743 | ||||||
SL Green Realty Corp. | 511 | 30,445 | ||||||
Healthcare Realty Trust, Inc. | 970 | 28,712 | ||||||
QTS Realty Trust, Inc. — Class A | 460 | 28,465 | ||||||
Hudson Pacific Properties, Inc. | 1,149 | 27,599 | ||||||
Agree Realty Corp. | 410 | 27,298 | ||||||
Total REITs | 3,056,538 | |||||||
Banks - 24.8% | ||||||||
JPMorgan Chase & Co. | 2,330 | 296,109 | ||||||
Bank of America Corp. | 7,946 | 240,843 | ||||||
Morgan Stanley | 2,415 | 165,500 | ||||||
Citigroup, Inc. | 2,653 | 163,584 | ||||||
Wells Fargo & Co. | 5,401 | 163,002 | ||||||
Goldman Sachs Group, Inc. | 541 | 142,667 | ||||||
U.S. Bancorp | 2,630 | 122,532 | ||||||
Truist Financial Corp. | 2,467 | 118,243 | ||||||
PNC Financial Services Group, Inc. | 759 | 113,091 | ||||||
Bank of New York Mellon Corp. | 2,135 | 90,609 | ||||||
State Street Corp. | 1,058 | 77,001 | ||||||
First Republic Bank | 483 | 70,967 | ||||||
SVB Financial Group* | 172 | 66,707 | ||||||
Fifth Third Bancorp | 2,342 | 64,569 | ||||||
Northern Trust Corp. | 682 | 63,522 | ||||||
KeyCorp | 3,670 | 60,225 | ||||||
Regions Financial Corp. | 3,643 | 58,725 | ||||||
M&T Bank Corp. | 458 | 58,303 | ||||||
Citizens Financial Group, Inc. | 1,610 | 57,574 | ||||||
ICICI Bank Ltd. ADR* | 3,629 | 53,927 | ||||||
HDFC Bank Ltd. ADR* | 746 | 53,906 | ||||||
Huntington Bancshares, Inc. | 4,261 | 53,817 | ||||||
Toronto-Dominion Bank | 865 | 48,803 | ||||||
HSBC Holdings plc ADR1 | 1,865 | 48,322 | ||||||
Zions Bancorp North America | 927 | 40,269 | ||||||
First Horizon National Corp. | 3,086 | 39,377 | ||||||
Signature Bank | 278 | 37,611 | ||||||
Total Banks | 2,569,805 | |||||||
Insurance - 23.2% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 1,493 | 346,182 | ||||||
Marsh & McLennan Companies, Inc. | 922 | 107,874 | ||||||
Progressive Corp. | 1,085 | 107,285 | ||||||
Aon plc — Class A | 470 | 99,297 | ||||||
Chubb Ltd. | 626 | 96,354 | ||||||
MetLife, Inc. | 2,049 | 96,201 | ||||||
Travelers Companies, Inc. | 605 | 84,924 | ||||||
American International Group, Inc. | 2,232 | 84,503 | ||||||
Willis Towers Watson plc | 399 | 84,061 | ||||||
Prudential Financial, Inc. | 1,053 | 82,208 | ||||||
Allstate Corp. | 747 | 82,118 | ||||||
Aflac, Inc. | 1,831 | 81,425 | ||||||
Arthur J Gallagher & Co. | 537 | 66,432 | ||||||
Hartford Financial Services Group, Inc. | 1,262 | 61,813 | ||||||
Principal Financial Group, Inc. | 1,128 | 55,960 | ||||||
Everest Re Group Ltd. | 238 | 55,713 | ||||||
Athene Holding Ltd. — Class A* | 1,279 | 55,176 | ||||||
Arch Capital Group Ltd.* | 1,510 | 54,466 | ||||||
Cincinnati Financial Corp. | 614 | 53,645 | ||||||
Brown & Brown, Inc. | 1,103 | 52,293 |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
FINANCIAL SERVICES FUND |
| Shares | Value | ||||||
Markel Corp.* | 50 | $ | 51,665 | |||||
RenaissanceRe Holdings Ltd. | 310 | 51,404 | ||||||
Loews Corp. | 1,104 | 49,702 | ||||||
Equitable Holdings, Inc. | 1,930 | 49,389 | ||||||
Fidelity National Financial, Inc. | 1,217 | 47,573 | ||||||
Lincoln National Corp. | 933 | 46,939 | ||||||
Globe Life, Inc. | 480 | 45,581 | ||||||
Assurant, Inc. | 301 | 41,002 | ||||||
Reinsurance Group of America, Inc. — Class A | 350 | 40,565 | ||||||
American Financial Group, Inc. | 460 | 40,305 | ||||||
Voya Financial, Inc. | 682 | 40,108 | ||||||
Unum Group | 1,445 | 33,148 | ||||||
First American Financial Corp. | 630 | 32,527 | ||||||
MGIC Investment Corp. | 2,358 | 29,593 | ||||||
Total Insurance | 2,407,431 | |||||||
Diversified Financial Services - 14.6% | ||||||||
BlackRock, Inc. — Class A | 210 | 151,523 | ||||||
American Express Co. | 1,212 | 146,543 | ||||||
Charles Schwab Corp. | 2,716 | 144,057 | ||||||
Intercontinental Exchange, Inc. | 987 | 113,791 | ||||||
CME Group, Inc. — Class A | 625 | 113,781 | ||||||
Capital One Financial Corp. | 980 | 96,873 | ||||||
T. Rowe Price Group, Inc. | 565 | 85,535 | ||||||
Discover Financial Services | 831 | 75,230 | ||||||
Ameriprise Financial, Inc. | 355 | 68,987 | ||||||
Nasdaq, Inc. | 500 | 66,370 | ||||||
Synchrony Financial | 1,894 | 65,741 | ||||||
Ally Financial, Inc. | 1,469 | 52,385 | ||||||
Franklin Resources, Inc. | 1,978 | 49,430 | ||||||
Tradeweb Markets, Inc. — Class A | 780 | 48,711 | ||||||
Cboe Global Markets, Inc. | 504 | 46,933 | ||||||
LPL Financial Holdings, Inc. | 395 | 41,167 | ||||||
Invesco Ltd. | 2,349 | 40,943 | ||||||
Eaton Vance Corp. | 590 | 40,079 | ||||||
Credit Acceptance Corp.*,1 | 100 | 34,614 | ||||||
SLM Corp. | 2,410 | 29,860 | ||||||
Total Diversified Financial Services | 1,512,553 | |||||||
Private Equity - 3.1% | ||||||||
Blackstone Group, Inc. — Class A | 1,901 | 123,204 | ||||||
KKR & Company, Inc. — Class A | 2,074 | 83,976 | ||||||
Apollo Global Management, Inc. | 1,348 | 66,025 | ||||||
Brookfield Asset Management, Inc. — Class A | 1,213 | 50,061 | ||||||
Total Private Equity | 323,266 | |||||||
Commercial Services - 2.9% | ||||||||
S&P Global, Inc. | 395 | 129,849 | ||||||
Moody’s Corp. | 371 | 107,679 | ||||||
MarketAxess Holdings, Inc. | 113 | 64,473 | ||||||
Total Commercial Services | 302,001 | |||||||
Software - 0.9% | ||||||||
MSCI, Inc. — Class A | 196 | 87,520 | ||||||
Media - 0.5% | ||||||||
FactSet Research Systems, Inc. | 152 | 50,540 | ||||||
Savings & Loans - 0.3% | ||||||||
People’s United Financial, Inc. | 2,653 | 34,303 | ||||||
Total Common Stocks | ||||||||
(Cost $6,488,378) | 10,343,957 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.2% | ||||||||
J.P. Morgan Securities LLC | $ | 13,452 | 13,452 | |||||
Barclays Capital, Inc. | 5,604 | 5,604 | ||||||
BofA Securities, Inc. | 5,189 | 5,189 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $24,245) | 24,245 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 63,433 | 63,433 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $63,433) | 63,433 | |||||||
Total Investments - 100.6% | ||||||||
(Cost $6,576,056) | $ | 10,431,635 | ||||||
Other Assets & Liabilities, net - (0.6)% | (64,607 | ) | ||||||
Total Net Assets - 100.0% | $ | 10,367,028 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
FINANCIAL SERVICES FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 10,343,957 | $ | — | $ | — | $ | 10,343,957 | ||||||||
Repurchase Agreements | — | 24,245 | — | 24,245 | ||||||||||||
Securities Lending Collateral | 63,433 | — | — | 63,433 | ||||||||||||
Total Assets | $ | 10,407,390 | $ | 24,245 | $ | — | $ | 10,431,635 |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL SERVICES FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $62,183 of securities loaned (cost $6,551,811) | $ | 10,407,390 | ||
Repurchase agreements, at value (cost $24,245) | 24,245 | |||
Cash | 190 | |||
Receivables: | ||||
Dividends | 25,376 | |||
Fund shares sold | 6,858 | |||
Securities lending income | 28 | |||
Total assets | 10,464,087 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 63,433 | |||
Professional fees | 9,484 | |||
Management fees | 7,143 | |||
Transfer agent and administrative fees | 2,260 | |||
Investor service fees | 2,101 | |||
Portfolio accounting fees | 840 | |||
Fund shares redeemed | 717 | |||
Trustees’ fees* | 150 | |||
Miscellaneous | 10,931 | |||
Total liabilities | 97,059 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 10,367,028 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,468,625 | ||
Total distributable earnings (loss) | 2,898,403 | |||
Net assets | $ | 10,367,028 | ||
Capital shares outstanding | 121,225 | |||
Net asset value per share | $ | 85.52 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $330) | $ | 198,817 | ||
Interest | 219 | |||
Income from securities lending, net | 174 | |||
Total investment income | 199,210 | |||
Expenses: | ||||
Management fees | 61,884 | |||
Investor service fees | 18,201 | |||
Transfer agent and administrative fees | 24,384 | |||
Professional fees | 13,813 | |||
Portfolio accounting fees | 7,280 | |||
Trustees’ fees* | 1,921 | |||
Custodian fees | 1,302 | |||
Miscellaneous | 3,761 | |||
Total expenses | 132,546 | |||
Net investment income | 66,664 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 522,950 | |||
Net realized gain | 522,950 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (943,101 | ) | ||
Net change in unrealized appreciation (depreciation) | (943,101 | ) | ||
Net realized and unrealized loss | (420,151 | ) | ||
Net decrease in net assets resulting from operations | $ | (353,487 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
FINANCIAL SERVICES FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 66,664 | $ | 81,315 | ||||
Net realized gain on investments | 522,950 | 348,506 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (943,101 | ) | 1,713,291 | |||||
Net increase (decrease) in net assets resulting from operations | (353,487 | ) | 2,143,112 | |||||
Distributions to shareholders | (348,018 | ) | (507,612 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 25,637,728 | 25,665,558 | ||||||
Distributions reinvested | 348,018 | 507,612 | ||||||
Cost of shares redeemed | (26,244,148 | ) | (23,580,143 | ) | ||||
Net increase (decrease) from capital share transactions | (258,402 | ) | 2,593,027 | |||||
Net increase (decrease) in net assets | (959,907 | ) | 4,228,527 | |||||
Net assets: | ||||||||
Beginning of year | 11,326,935 | 7,098,408 | ||||||
End of year | $ | 10,367,028 | $ | 11,326,935 | ||||
Capital share activity: | ||||||||
Shares sold | 337,386 | 302,628 | ||||||
Shares issued from reinvestment of distributions | 4,870 | 6,012 | ||||||
Shares redeemed | (347,179 | ) | (279,122 | ) | ||||
Net increase (decrease) in shares | (4,923 | ) | 29,518 |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
FINANCIAL SERVICES FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 89.79 | $ | 73.46 | $ | 84.47 | $ | 73.42 | $ | 64.46 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .70 | .70 | .45 | .77 | — | b | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (1.47 | ) | 19.67 | (10.74 | ) | 10.63 | 9.32 | |||||||||||||
Total from investment operations | (.77 | ) | 20.37 | (10.29 | ) | 11.40 | 9.32 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.74 | ) | (.71 | ) | (.72 | ) | (.35 | ) | (.36 | ) | ||||||||||
Net realized gains | (2.76 | ) | (3.33 | ) | — | — | — | |||||||||||||
Total distributions | (3.50 | ) | (4.04 | ) | (.72 | ) | (.35 | ) | (.36 | ) | ||||||||||
Net asset value, end of period | $ | 85.52 | $ | 89.79 | $ | 73.46 | $ | 84.47 | $ | 73.42 | ||||||||||
| ||||||||||||||||||||
Total Returnc | (0.11 | %) | 28.08 | % | (12.28 | %) | 15.57 | % | 15.83 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,367 | $ | 11,327 | $ | 7,098 | $ | 16,357 | $ | 16,230 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.92 | % | 0.83 | % | 0.54 | % | 1.00 | % | — | e | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 339 | % | 218 | % | 403 | % | 364 | % | 329 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Net investment income is less than $0.01 per share. |
c | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
d | Reverse share split — Per share amounts for the year ended through December 31, 2016 have been restated to reflect a 1:3 reverse share split effective December 1, 2016. |
e | Less than 0.01%. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
HEALTH CARE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the health care industry (“Health Care Companies”).
For the year ended December 31, 2020, Health Care Fund returned 18.68%, compared with a 18.40% return for the S&P 500 Index. The S&P 500 Health Care Index returned 13.45%.
The health care equipment industry was the largest contributor to the Fund for the period, followed by the biotechnology industry and the life sciences tools & services industry. Health care facilities was the only industry that detracted from return.
The best-performing holdings in the Fund were Immunomedics, Inc., Moderna, Inc., and Thermo Fisher Scientific, Inc. The worst-performing holdings in the Fund included Amarin Corp. plc ADR, Intercept Pharmaceuticals, Inc., and Boston Scientific Corp.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 19, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Johnson & Johnson | 3.3% |
UnitedHealth Group, Inc. | 3.1% |
Merck & Company, Inc. | 2.4% |
Pfizer, Inc. | 2.4% |
AbbVie, Inc. | 2.3% |
Abbott Laboratories | 2.3% |
Thermo Fisher Scientific, Inc. | 2.3% |
Danaher Corp. | 2.1% |
Bristol-Myers Squibb Co. | 1.9% |
Eli Lilly & Co. | 1.9% |
Top Ten Total | 24.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
64 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Health Care Fund | 18.68% | 10.32% | 13.98% |
S&P 500 Health Care Index | 13.45% | 11.63% | 15.88% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P Health Care Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 65 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
HEALTH CARE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Pharmaceuticals - 31.9% | ||||||||
Johnson & Johnson | 4,485 | $ | 705,849 | |||||
Merck & Company, Inc. | 6,248 | 511,086 | ||||||
Pfizer, Inc. | 13,634 | 501,868 | ||||||
AbbVie, Inc. | 4,543 | 486,782 | ||||||
Bristol-Myers Squibb Co. | 6,569 | 407,475 | ||||||
Eli Lilly & Co. | 2,391 | 403,696 | ||||||
CVS Health Corp. | 4,915 | 335,695 | ||||||
Cigna Corp. | 1,514 | 315,185 | ||||||
Zoetis, Inc. | 1,844 | 305,182 | ||||||
Becton Dickinson and Co. | 1,171 | 293,008 | ||||||
DexCom, Inc.* | 560 | 207,043 | ||||||
McKesson Corp. | 1,078 | 187,486 | ||||||
Viatris, Inc.* | 9,039 | 169,391 | ||||||
AstraZeneca plc ADR | 3,193 | 159,618 | ||||||
AmerisourceBergen Corp. — Class A | 1,609 | 157,296 | ||||||
Jazz Pharmaceuticals plc* | 945 | 155,972 | ||||||
Canopy Growth Corp.*,1 | 6,273 | 154,567 | ||||||
Horizon Therapeutics plc* | 1,986 | 145,276 | ||||||
Novartis AG ADR | 1,512 | 142,778 | ||||||
Cardinal Health, Inc. | 2,534 | 135,721 | ||||||
GlaxoSmithKline plc ADR | 3,688 | 135,718 | ||||||
Elanco Animal Health, Inc.* | 4,228 | 129,673 | ||||||
Perrigo Company plc | 2,739 | 122,488 | ||||||
Teva Pharmaceutical Industries Ltd. ADR* | 12,671 | 122,275 | ||||||
Sarepta Therapeutics, Inc.* | 716 | 122,071 | ||||||
Henry Schein, Inc.* | 1,571 | 105,037 | ||||||
Neurocrine Biosciences, Inc.* | 1,039 | 99,588 | ||||||
Total Pharmaceuticals | 6,717,824 | |||||||
Healthcare-Products - 30.6% | ||||||||
Abbott Laboratories | 4,404 | 482,194 | ||||||
Thermo Fisher Scientific, Inc. | 1,020 | 475,096 | ||||||
Danaher Corp. | 1,949 | 432,951 | ||||||
Medtronic plc | 3,379 | 395,816 | ||||||
Intuitive Surgical, Inc.* | 426 | 348,511 | ||||||
Stryker Corp. | 1,382 | 338,645 | ||||||
Edwards Lifesciences Corp.* | 2,924 | 266,756 | ||||||
Boston Scientific Corp.* | 6,870 | 246,976 | ||||||
IDEXX Laboratories, Inc.* | 453 | 226,441 | ||||||
Align Technology, Inc.* | 422 | 225,508 | ||||||
Baxter International, Inc. | 2,694 | 216,167 | ||||||
Zimmer Biomet Holdings, Inc. | 1,273 | 196,157 | ||||||
ResMed, Inc. | 895 | 190,241 | ||||||
West Pharmaceutical Services, Inc. | 568 | 160,920 | ||||||
Insulet Corp.* | 594 | 151,844 | ||||||
Novocure Ltd.* | 846 | 146,392 | ||||||
STERIS plc | 772 | 146,325 | ||||||
Hologic, Inc.* | 2,000 | 145,660 | ||||||
Avantor, Inc.* | 5,000 | 140,750 | ||||||
ABIOMED, Inc.* | 432 | 140,054 | ||||||
Varian Medical Systems, Inc.* | 792 | 138,608 | ||||||
Masimo Corp.* | 495 | 132,848 | ||||||
QIAGEN N.V.* | 2,487 | 131,438 | ||||||
10X Genomics, Inc. — Class A* | 916 | 129,706 | ||||||
Dentsply Sirona, Inc. | 2,228 | 116,658 | ||||||
Repligen Corp.* | 571 | 109,421 | ||||||
Penumbra, Inc.* | 527 | 92,225 | ||||||
Quidel Corp.* | 503 | 90,364 | ||||||
Tandem Diabetes Care, Inc.* | 941 | 90,035 | ||||||
Hill-Rom Holdings, Inc. | 891 | 87,291 | ||||||
Haemonetics Corp.* | 710 | 84,312 | ||||||
Nevro Corp.* | 459 | 79,453 | ||||||
iRhythm Technologies, Inc.* | 332 | 78,754 | ||||||
Total Healthcare-Products | 6,434,517 | |||||||
Biotechnology - 16.9% | ||||||||
Amgen, Inc. | 1,729 | 397,532 | ||||||
Gilead Sciences, Inc. | 5,148 | 299,923 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,124 | 265,646 | ||||||
Illumina, Inc.* | 684 | 253,080 | ||||||
Regeneron Pharmaceuticals, Inc.* | 507 | 244,937 | ||||||
Biogen, Inc.* | 849 | 207,886 | ||||||
Moderna, Inc.* | 1,869 | 195,254 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,124 | 175,614 | ||||||
Seagen, Inc.* | 995 | 174,264 | ||||||
Exact Sciences Corp.* | 1,170 | 155,013 | ||||||
Incyte Corp.* | 1,673 | 145,518 | ||||||
BioMarin Pharmaceutical, Inc.* | 1,458 | 127,852 | ||||||
Alnylam Pharmaceuticals, Inc.* | 968 | 125,811 | ||||||
Guardant Health, Inc.* | 962 | 123,983 | ||||||
Mirati Therapeutics, Inc.* | 497 | 109,161 | ||||||
BioNTech SE ADR*,1 | 1,325 | 108,014 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 1,128 | 86,552 | ||||||
United Therapeutics Corp.* | 570 | 86,520 | ||||||
Exelixis, Inc.* | 4,163 | 83,551 | ||||||
Novavax, Inc.*,1 | 745 | 83,075 | ||||||
Emergent BioSolutions, Inc.* | 764 | 68,454 | ||||||
Inovio Pharmaceuticals, Inc.*,1 | 4,718 | 41,754 | ||||||
Total Biotechnology | 3,559,394 | |||||||
Healthcare-Services - 15.2% | ||||||||
UnitedHealth Group, Inc. | 1,846 | 647,355 | ||||||
Anthem, Inc. | 989 | 317,558 | ||||||
Humana, Inc. | 647 | 265,445 | ||||||
HCA Healthcare, Inc. | 1,535 | 252,446 | ||||||
Centene Corp.* | 3,413 | 204,882 | ||||||
IQVIA Holdings, Inc.* | 1,108 | 198,520 | ||||||
Teladoc Health, Inc.* | 955 | 190,962 | ||||||
Laboratory Corporation of America Holdings* | 751 | 152,866 | ||||||
Quest Diagnostics, Inc. | 1,171 | 139,548 | ||||||
Catalent, Inc.* | 1,327 | 138,101 | ||||||
Molina Healthcare, Inc.* | 607 | 129,097 | ||||||
DaVita, Inc.* | 1,048 | 123,035 | ||||||
Charles River Laboratories International, Inc.* | 482 | 120,433 | ||||||
Universal Health Services, Inc. — Class B | 837 | 115,088 | ||||||
Encompass Health Corp. | 1,174 | 97,078 | ||||||
Invitae Corp.*,1 | 2,200 | 91,982 | ||||||
Total Healthcare-Services | 3,184,396 | |||||||
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
HEALTH CARE FUND |
| Shares | Value | ||||||
Electronics - 3.1% | ||||||||
Agilent Technologies, Inc. | 1,727 | $ | 204,633 | |||||
Mettler-Toledo International, Inc.* | 159 | 181,209 | ||||||
PerkinElmer, Inc. | 962 | 138,047 | ||||||
Waters Corp.* | 529 | 130,885 | ||||||
Total Electronics | 654,774 | |||||||
Software - 1.8% | ||||||||
Veeva Systems, Inc. — Class A* | 792 | 215,622 | ||||||
Cerner Corp. | 2,115 | 165,985 | ||||||
Total Software | 381,607 | |||||||
Total Common Stocks | ||||||||
(Cost $8,927,999) | 20,932,512 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 85,805 | 85,805 | |||||
Barclays Capital, Inc. | 35,747 | 35,747 | ||||||
BofA Securities, Inc. | 33,100 | 33,100 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $154,652) | 154,652 | |||||||
SECURITIES LENDING COLLATERAL†,3 - 1.8% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 373,219 | $ | 373,219 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $373,219) | 373,219 | |||||||
Total Investments - 102.0% | ||||||||
(Cost $9,455,870) | $ | 21,460,383 | ||||||
Other Assets & Liabilities, net - (2.0)% | (411,840 | ) | ||||||
Total Net Assets - 100.0% | $ | 21,048,543 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 20,932,512 | $ | — | $ | — | $ | 20,932,512 | ||||||||
Repurchase Agreements | — | 154,652 | — | 154,652 | ||||||||||||
Securities Lending Collateral | 373,219 | — | — | 373,219 | ||||||||||||
Total Assets | $ | 21,305,731 | $ | 154,652 | $ | — | $ | 21,460,383 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
HEALTH CARE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $349,106 of securities loaned (cost $9,301,218) | $ | 21,305,731 | ||
Repurchase agreements, at value (cost $154,652) | 154,652 | |||
Receivables: | ||||
Fund shares sold | 501,930 | |||
Securities sold | 46,197 | |||
Dividends | 15,445 | |||
Foreign tax reclaims | 1,306 | |||
Securities lending income | 232 | |||
Total assets | 22,025,493 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 534,720 | |||
Return of securities lending collateral | 373,219 | |||
Management fees | 14,613 | |||
Transfer agent and administrative fees | 4,625 | |||
Investor service fees | 4,298 | |||
Portfolio accounting fees | 1,719 | |||
Fund shares redeemed | 567 | |||
Trustees’ fees* | 312 | |||
Miscellaneous | 42,877 | |||
Total liabilities | 976,950 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 21,048,543 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,050,207 | ||
Total distributable earnings (loss) | 11,998,336 | |||
Net assets | $ | 21,048,543 | ||
Capital shares outstanding | 243,506 | |||
Net asset value per share | $ | 86.44 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $7,599) | $ | 193,496 | ||
Interest | 440 | |||
Income from securities lending, net | 11,754 | |||
Total investment income | 205,690 | |||
Expenses: | ||||
Management fees | 157,748 | |||
Investor service fees | 46,397 | |||
Transfer agent and administrative fees | 60,687 | |||
Professional fees | 33,867 | |||
Portfolio accounting fees | 18,558 | |||
Trustees’ fees* | 4,175 | |||
Custodian fees | 2,968 | |||
Miscellaneous | 13,935 | |||
Total expenses | 338,335 | |||
Net investment loss | (132,645 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,504,759 | |||
Net realized gain | 2,504,759 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 645,362 | |||
Net change in unrealized appreciation (depreciation) | 645,362 | |||
Net realized and unrealized gain | 3,150,121 | |||
Net increase in net assets resulting from operations | $ | 3,017,476 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HEALTH CARE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (132,645 | ) | $ | (112,565 | ) | ||
Net realized gain on investments | 2,504,759 | 2,731,701 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 645,362 | 1,229,445 | ||||||
Net increase in net assets resulting from operations | 3,017,476 | 3,848,581 | ||||||
Distributions to shareholders | (517,189 | ) | (408,723 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 30,417,037 | 29,242,516 | ||||||
Distributions reinvested | 517,189 | 408,723 | ||||||
Cost of shares redeemed | (31,428,341 | ) | (34,485,945 | ) | ||||
Net decrease from capital share transactions | (494,115 | ) | (4,834,706 | ) | ||||
Net increase (decrease) in net assets | 2,006,172 | (1,394,848 | ) | |||||
Net assets: | ||||||||
Beginning of year | 19,042,371 | 20,437,219 | ||||||
End of year | $ | 21,048,543 | $ | 19,042,371 | ||||
Capital share activity: | ||||||||
Shares sold | 394,586 | 427,219 | ||||||
Shares issued from reinvestment of distributions | 6,559 | 5,979 | ||||||
Shares redeemed | (411,959 | ) | (506,488 | ) | ||||
Net decrease in shares | (10,814 | ) | (73,290 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
HEALTH CARE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 74.88 | $ | 62.38 | $ | 62.43 | $ | 52.62 | $ | 60.47 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.55 | ) | (.40 | ) | (.48 | ) | (.44 | ) | (.37 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 14.32 | 14.35 | 1.33 | c | 12.39 | (5.36 | ) | |||||||||||||
Total from investment operations | 13.77 | 13.95 | .85 | 11.95 | (5.73 | ) | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.21 | ) | (1.45 | ) | (.90 | ) | (2.14 | ) | (2.12 | ) | ||||||||||
Total distributions | (2.21 | ) | (1.45 | ) | (.90 | ) | (2.14 | ) | (2.12 | ) | ||||||||||
Net asset value, end of period | $ | 86.44 | $ | 74.88 | $ | 62.38 | $ | 62.43 | $ | 52.62 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 18.68 | % | 22.57 | % | 1.25 | % | 22.86 | % | (9.70 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 21,049 | $ | 19,042 | $ | 20,437 | $ | 22,657 | $ | 18,778 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.71 | %) | (0.58 | %) | (0.72 | %) | (0.73 | %) | (0.67 | %) | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 171 | % | 150 | % | 194 | % | 156 | % | 146 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the year because of the sales and purchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
INTERNET FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that provide products or services designed for or related to the Internet (“Internet Companies”).
For the year ended December 31, 2020, Internet Fund returned 60.21%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Information Technology Index returned 43.89%.
The internet & direct marketing retail industry contributed the most to return, followed by the interactive media & services industry and the internet services & infrastructure industry. The leading detractors were the asset management & custody banks industry, investment banking & brokerage industry, and the real estate services industry.
Amazon.com, Inc., PayPal Holdings, Inc., and Netflix, Inc. added the most to Fund performance for the year. Momo, Inc. Class A ADR, ViaSat, Inc., and Northern Trust Corp. detracted the most from the Fund’s return for the period.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 24, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Amazon.com, Inc. | 7.5% |
Alphabet, Inc. — Class A | 6.6% |
Facebook, Inc. — Class A | 5.3% |
Alibaba Group Holding Ltd. ADR | 3.3% |
PayPal Holdings, Inc. | 3.0% |
Adobe, Inc. | 2.9% |
Netflix, Inc. | 2.8% |
salesforce.com, Inc. | 2.7% |
Cisco Systems, Inc. | 2.6% |
Uber Technologies, Inc. | 1.9% |
Top Ten Total | 38.6% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 71 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Internet Fund | 60.21% | 22.18% | 16.93% |
S&P 500 Information Technology Index | 43.89% | 27.79% | 20.68% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
72 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
INTERNET FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Internet - 59.2% | ||||||||
Amazon.com, Inc.* | 326 | $ | 1,061,759 | |||||
Alphabet, Inc. — Class A* | 533 | 934,157 | ||||||
Facebook, Inc. — Class A* | 2,718 | 742,449 | ||||||
Alibaba Group Holding Ltd. ADR* | 1,990 | 463,133 | ||||||
Netflix, Inc.* | 735 | 397,437 | ||||||
Uber Technologies, Inc.* | 5,134 | 261,834 | ||||||
Booking Holdings, Inc.* | 116 | 258,363 | ||||||
Snap, Inc. — Class A* | 4,200 | 210,294 | ||||||
JD.com, Inc. ADR* | 2,283 | 200,676 | ||||||
Baidu, Inc. ADR* | 858 | 185,534 | ||||||
Shopify, Inc. — Class A* | 153 | 173,188 | ||||||
Pinduoduo, Inc. ADR* | 963 | 171,096 | ||||||
Match Group, Inc.* | 1,106 | 167,216 | ||||||
Roku, Inc.* | 490 | 162,690 | ||||||
Twitter, Inc.* | 2,979 | 161,313 | ||||||
Pinterest, Inc. — Class A* | 2,400 | 158,160 | ||||||
eBay, Inc. | 2,953 | 148,388 | ||||||
MercadoLibre, Inc.* | 87 | 145,744 | ||||||
Okta, Inc.* | 543 | 138,063 | ||||||
Spotify Technology S.A.* | 419 | 131,843 | ||||||
Chewy, Inc. — Class A* | 1,465 | 131,689 | ||||||
VeriSign, Inc.* | 585 | 126,594 | ||||||
Zillow Group, Inc. — Class C* | 955 | 123,959 | ||||||
Vipshop Holdings Ltd. ADR* | 4,407 | 123,881 | ||||||
Expedia Group, Inc. | 904 | 119,690 | ||||||
Etsy, Inc.* | 622 | 110,660 | ||||||
Trip.com Group Ltd. ADR* | 3,242 | 109,353 | ||||||
IAC* | 577 | 109,255 | ||||||
Farfetch Ltd. — Class A* | 1,618 | 103,245 | ||||||
Wayfair, Inc. — Class A* | 452 | 102,066 | ||||||
Lyft, Inc. — Class A* | 2,042 | 100,323 | ||||||
Wix.com Ltd.* | 401 | 100,234 | ||||||
JOYY, Inc. ADR | 1,194 | 95,496 | ||||||
GoDaddy, Inc. — Class A* | 1,144 | 94,895 | ||||||
Fiverr International Ltd.* | 473 | 92,282 | ||||||
F5 Networks, Inc.* | 483 | 84,979 | ||||||
Anaplan, Inc.* | 1,177 | 84,567 | ||||||
Grubhub, Inc.* | 939 | 69,740 | ||||||
TripAdvisor, Inc.* | 2,014 | 57,963 | ||||||
Stamps.com, Inc.* | 238 | 46,693 | ||||||
Stitch Fix, Inc. — Class A* | 741 | 43,511 | ||||||
Overstock.com, Inc.*,1 | 626 | 30,029 | ||||||
Total Internet | 8,334,441 | |||||||
Software - 25.7% | ||||||||
Adobe, Inc.* | 814 | 407,098 | ||||||
salesforce.com, Inc.* | 1,679 | 373,628 | ||||||
Zoom Video Communications, Inc. — Class A* | 712 | 240,172 | ||||||
Activision Blizzard, Inc. | 2,361 | 219,219 | ||||||
Workday, Inc. — Class A* | 804 | 192,646 | ||||||
Twilio, Inc. — Class A* | 507 | 171,619 | ||||||
Electronic Arts, Inc. | 1,154 | 165,714 | ||||||
Veeva Systems, Inc. — Class A* | 605 | 164,711 | ||||||
DocuSign, Inc.* | 721 | 160,278 | ||||||
Sea Ltd. ADR* | 694 | 138,141 | ||||||
NetEase, Inc. ADR | 1,436 | 137,526 | ||||||
Take-Two Interactive Software, Inc.* | 609 | 126,544 | ||||||
Coupa Software, Inc.* | 347 | 117,602 | ||||||
HubSpot, Inc.* | 283 | 112,193 | ||||||
Bilibili, Inc. ADR* | 1,293 | 110,836 | ||||||
Akamai Technologies, Inc.* | 1,030 | 108,140 | ||||||
Citrix Systems, Inc. | 810 | 105,381 | ||||||
MongoDB, Inc.* | 286 | 102,685 | ||||||
Five9, Inc.* | 483 | 84,235 | ||||||
Fastly, Inc. — Class A* | 832 | 72,692 | ||||||
Dropbox, Inc. — Class A* | 3,208 | 71,186 | ||||||
Smartsheet, Inc. — Class A* | 980 | 67,904 | ||||||
Pluralsight, Inc. — Class A* | 2,846 | 59,652 | ||||||
J2 Global, Inc.* | 565 | 55,195 | ||||||
New Relic, Inc.* | 772 | 50,489 | ||||||
Total Software | 3,615,486 | |||||||
Telecommunications - 6.9% | ||||||||
Cisco Systems, Inc. | 8,073 | 361,267 | ||||||
Motorola Solutions, Inc. | 837 | 142,340 | ||||||
Arista Networks, Inc.* | 417 | 121,168 | ||||||
GDS Holdings Ltd. ADR* | 1,055 | 98,790 | ||||||
Telefonaktiebolaget LM Ericsson ADR | 8,070 | 96,436 | ||||||
Ciena Corp.* | 1,449 | 76,580 | ||||||
Juniper Networks, Inc. | 3,199 | 72,009 | ||||||
Total Telecommunications | 968,590 | |||||||
Commercial Services - 5.7% | ||||||||
PayPal Holdings, Inc.* | 1,792 | 419,686 | ||||||
CoStar Group, Inc.* | 176 | 162,673 | ||||||
Paylocity Holding Corp.* | 433 | 89,159 | ||||||
Chegg, Inc.* | 945 | 85,362 | ||||||
2U, Inc.* | 1,078 | 43,131 | ||||||
Total Commercial Services | 800,011 | |||||||
Healthcare-Services - 1.0% | ||||||||
Teladoc Health, Inc.* | 729 | 145,771 | ||||||
Computers - 0.5% | ||||||||
Lumentum Holdings, Inc.* | 739 | 70,057 | ||||||
Real Estate - 0.4% | ||||||||
Redfin Corp.* | 792 | 54,355 | ||||||
Total Common Stocks | ||||||||
(Cost $5,859,664) | 13,988,711 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
INTERNET FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,2 - 0.8% | ||||||||
J.P. Morgan Securities LLC | $ | 60,778 | $ | 60,778 | ||||
Barclays Capital, Inc. | 25,321 | 25,321 | ||||||
BofA Securities, Inc. | 23,445 | 23,445 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $109,544) | 109,544 | |||||||
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,3 - 0.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 24,768 | 24,768 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $24,768) | 24,768 | |||||||
Total Investments - 100.4% | ||||||||
(Cost $5,993,976) | $ | 14,123,023 | ||||||
Other Assets & Liabilities, net - (0.4)% | (56,702 | ) | ||||||
Total Net Assets - 100.0% | $ | 14,066,321 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 13,988,711 | $ | — | $ | — | $ | 13,988,711 | ||||||||
Repurchase Agreements | — | 109,544 | — | 109,544 | ||||||||||||
Securities Lending Collateral | 24,768 | — | — | 24,768 | ||||||||||||
Total Assets | $ | 14,013,479 | $ | 109,544 | $ | — | $ | 14,123,023 |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INTERNET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $22,114 of securities loaned (cost $5,884,432) | $ | 14,013,479 | ||
Repurchase agreements, at value (cost $109,544) | 109,544 | |||
Cash | 3,061 | |||
Receivables: | ||||
Securities sold | 155,952 | |||
Dividends | 647 | |||
Securities lending income | 65 | |||
Total assets | 14,282,748 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 145,631 | |||
Return of securities lending collateral | 24,768 | |||
Management fees | 10,116 | |||
Transfer agent and administrative fees | 3,201 | |||
Investor service fees | 2,975 | |||
Portfolio accounting fees | 1,190 | |||
Trustees’ fees* | 207 | |||
Miscellaneous | 28,339 | |||
Total liabilities | 216,427 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 14,066,321 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,292,849 | ||
Total distributable earnings (loss) | 8,773,472 | |||
Net assets | $ | 14,066,321 | ||
Capital shares outstanding | 85,541 | |||
Net asset value per share | $ | 164.44 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $748) | $ | 28,408 | ||
Interest | 269 | |||
Income from securities lending, net | 4,593 | |||
Total investment income | 33,270 | |||
Expenses: | ||||
Management fees | 99,078 | |||
Investor service fees | 29,141 | |||
Transfer agent and administrative fees | 37,167 | |||
Professional fees | 20,751 | |||
Portfolio accounting fees | 11,656 | |||
Trustees’ fees* | 2,253 | |||
Custodian fees | 1,706 | |||
Miscellaneous | 10,452 | |||
Total expenses | 212,204 | |||
Net investment loss | (178,934 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,450,653 | |||
Net realized gain | 2,450,653 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,455,832 | |||
Net change in unrealized appreciation (depreciation) | 3,455,832 | |||
Net realized and unrealized gain | 5,906,485 | |||
Net increase in net assets resulting from operations | $ | 5,727,551 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
INTERNET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (178,934 | ) | $ | (136,787 | ) | ||
Net realized gain on investments | 2,450,653 | 905,118 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 3,455,832 | 1,132,812 | ||||||
Net increase in net assets resulting from operations | 5,727,551 | 1,901,143 | ||||||
Distributions to shareholders | (207,634 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 26,383,207 | 32,250,493 | ||||||
Distributions reinvested | 207,634 | — | ||||||
Cost of shares redeemed | (26,391,413 | ) | (33,904,028 | ) | ||||
Net increase (decrease) from capital share transactions | 199,428 | (1,653,535 | ) | |||||
Net increase in net assets | 5,719,345 | 247,608 | ||||||
Net assets: | ||||||||
Beginning of year | 8,346,976 | 8,099,368 | ||||||
End of year | $ | 14,066,321 | $ | 8,346,976 | ||||
Capital share activity: | ||||||||
Shares sold | 208,755 | 323,776 | ||||||
Shares issued from reinvestment of distributions | 1,541 | — | ||||||
Shares redeemed | (205,002 | ) | (341,225 | ) | ||||
Net increase (decrease) in shares | 5,294 | (17,449 | ) |
76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INTERNET FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 104.02 | $ | 82.90 | $ | 86.84 | $ | 65.13 | $ | 70.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (1.95 | ) | (1.41 | ) | (1.25 | ) | (.79 | ) | (.14 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 64.22 | 22.53 | (1.23 | ) | 22.88 | (3.30 | ) | |||||||||||||
Total from investment operations | 62.27 | 21.12 | (2.48 | ) | 22.09 | (3.44 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.85 | ) | — | (1.46 | ) | (.38 | ) | (2.03 | ) | |||||||||||
Total distributions | (1.85 | ) | — | (1.46 | ) | (.38 | ) | (2.03 | ) | |||||||||||
Net asset value, end of period | $ | 164.44 | $ | 104.02 | $ | 82.90 | $ | 86.84 | $ | 65.13 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 60.21 | % | 25.48 | % | (3.20 | %) | 33.96 | % | 4.44 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 14,066 | $ | 8,347 | $ | 8,099 | $ | 8,943 | $ | 8,485 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.54 | %) | (1.42 | %) | (1.29 | %) | (1.01 | %) | (0.78 | %) | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.72 | % | 1.71 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 243 | % | 319 | % | 485 | % | 365 | % | 384 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the year ended through December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 77 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
LEISURE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in leisure and entertainment businesses (“Leisure Companies”).
For the year ended December 31, 2020, Leisure Fund returned 21.01%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 33.30%.
The interactive home entertainment industry contributed the most to return, followed by the movies & entertainment industry and the leisure products industry. The hotels & cruise lines industry was the largest detractor from return, followed by the broadcasting industry and the tobacco industry.
Holdings that contributed the most to the Fund’s return were Netflix, Inc., Peloton Interactive, Inc. Class A, and Sea Ltd. ADR. Luckin Coffee, Inc. Class A ADR, Carnival Corp., and Royal Caribbean Group were the holdings detracting the most from return.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 22, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Walt Disney Co. | 4.4% |
Comcast Corp. — Class A | 4.0% |
Netflix, Inc. | 3.8% |
Charter Communications, Inc. — Class A | 3.2% |
McDonald’s Corp. | 3.2% |
Starbucks Corp. | 2.9% |
Philip Morris International, Inc. | 2.7% |
Altria Group, Inc. | 2.1% |
Activision Blizzard, Inc. | 2.1% |
Las Vegas Sands Corp. | 1.8% |
Top Ten Total | 30.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
78 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Leisure Fund | 21.01% | 12.25% | 13.02% |
S&P 500 Consumer Discretionary Index | 33.30% | 17.53% | 17.68% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Consumer Discretionary Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 79 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
LEISURE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.7% | ||||||||
Media - 22.2% | ||||||||
Walt Disney Co.* | 2,636 | $ | 477,590 | |||||
Comcast Corp. — Class A | 8,199 | 429,628 | ||||||
Charter Communications, Inc. — Class A* | 522 | 345,329 | ||||||
Liberty Broadband Corp. — Class C* | 909 | 143,958 | ||||||
ViacomCBS, Inc. — Class B | 3,617 | 134,769 | ||||||
Altice USA, Inc. — Class A* | 3,426 | 129,743 | ||||||
DISH Network Corp. — Class A* | 3,817 | 123,442 | ||||||
Discovery, Inc. — Class A*,1 | 4,019 | 120,932 | ||||||
Fox Corp. — Class A | 4,028 | 117,295 | ||||||
Cable One, Inc. | 44 | 98,020 | ||||||
News Corp. — Class A | 5,135 | 92,276 | ||||||
New York Times Co. — Class A | 1,545 | 79,985 | ||||||
Nexstar Media Group, Inc. — Class A | 585 | 63,876 | ||||||
World Wrestling Entertainment, Inc. — Class A | 1,078 | 51,798 | ||||||
Total Media | 2,408,641 | |||||||
Retail - 17.4% | ||||||||
McDonald’s Corp. | 1,602 | 343,757 | ||||||
Starbucks Corp. | 2,908 | 311,098 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 119 | 165,018 | ||||||
Yum! Brands, Inc. | 1,422 | 154,372 | ||||||
Yum China Holdings, Inc. | 1,914 | 109,270 | ||||||
Darden Restaurants, Inc. | 893 | 106,374 | ||||||
Domino’s Pizza, Inc. | 269 | 103,151 | ||||||
Restaurant Brands International, Inc. | 1,541 | 94,170 | ||||||
Texas Roadhouse, Inc. — Class A | 787 | 61,512 | ||||||
Wendy’s Co. | 2,678 | 58,702 | ||||||
Shake Shack, Inc. — Class A* | 573 | 48,579 | ||||||
Cracker Barrel Old Country Store, Inc. | 368 | 48,547 | ||||||
Wingstop, Inc. | 361 | 47,851 | ||||||
Brinker International, Inc. | 772 | 43,672 | ||||||
Papa John’s International, Inc. | 500 | 42,425 | ||||||
Jack in the Box, Inc. | 438 | 40,646 | ||||||
Cheesecake Factory, Inc.1 | 976 | 36,171 | ||||||
Bloomin’ Brands, Inc. | 1,851 | 35,946 | ||||||
Dave & Buster’s Entertainment, Inc. | 1,094 | 32,842 | ||||||
Total Retail | 1,884,103 | |||||||
Lodging - 11.5% | ||||||||
Las Vegas Sands Corp. | 3,236 | 192,866 | ||||||
Marriott International, Inc. — Class A | 1,394 | 183,896 | ||||||
Hilton Worldwide Holdings, Inc. | 1,450 | 161,327 | ||||||
MGM Resorts International | 3,428 | 108,016 | ||||||
Wynn Resorts Ltd. | 834 | 94,100 | ||||||
Melco Resorts & Entertainment Ltd. ADR | 4,572 | 84,811 | ||||||
Huazhu Group Ltd. ADR | 1,859 | 83,711 | ||||||
Hyatt Hotels Corp. — Class A | 1,037 | 76,997 | ||||||
Choice Hotels International, Inc. | 650 | 69,374 | ||||||
Wyndham Hotels & Resorts, Inc. | 1,147 | 68,178 | ||||||
Boyd Gaming Corp.* | 1,381 | 59,273 | ||||||
Wyndham Destinations, Inc. | 1,280 | 57,421 | ||||||
Total Lodging | 1,239,970 | |||||||
Software - 9.3% | ||||||||
Activision Blizzard, Inc. | 2,448 | 227,297 | ||||||
Electronic Arts, Inc. | 1,196 | 171,746 | ||||||
Sea Ltd. ADR* | 742 | 147,695 | ||||||
NetEase, Inc. ADR | 1,503 | 143,942 | ||||||
Take-Two Interactive Software, Inc.* | 633 | 131,531 | ||||||
Bilibili, Inc. ADR* | 1,232 | 105,607 | ||||||
HUYA, Inc. ADR*,1 | 4,036 | 80,437 | ||||||
Total Software | 1,008,255 | |||||||
Internet - 8.8% | ||||||||
Netflix, Inc.* | 763 | 412,577 | ||||||
Roku, Inc.* | 510 | 169,330 | ||||||
Spotify Technology S.A.* | 449 | 141,282 | ||||||
Tencent Music Entertainment Group ADR* | 6,319 | 121,578 | ||||||
iQIYI, Inc. ADR* | 6,004 | 104,950 | ||||||
Total Internet | 949,717 | |||||||
Leisure Time - 8.1% | ||||||||
Peloton Interactive, Inc. — Class A* | 1,159 | 175,844 | ||||||
Carnival Corp. | 6,323 | 136,956 | ||||||
Royal Caribbean Cruises Ltd. | 1,596 | 119,205 | ||||||
Norwegian Cruise Line Holdings Ltd.*,1 | 3,105 | 78,960 | ||||||
Planet Fitness, Inc. — Class A* | 935 | 72,584 | ||||||
Harley-Davidson, Inc. | 1,854 | 68,042 | ||||||
Polaris, Inc. | 691 | 65,838 | ||||||
Brunswick Corp. | 846 | 64,499 | ||||||
YETI Holdings, Inc.* | 890 | 60,938 | ||||||
Callaway Golf Co. | 1,657 | 39,785 | ||||||
Total Leisure Time | 882,651 | |||||||
Entertainment - 8.0% | ||||||||
Live Nation Entertainment, Inc.* | 1,444 | 106,105 | ||||||
Caesars Entertainment, Inc.* | 1,393 | 103,458 | ||||||
DraftKings, Inc. — Class A* | 2,179 | 101,454 | ||||||
Vail Resorts, Inc.* | 332 | 92,615 | ||||||
Penn National Gaming, Inc.* | 992 | 85,679 | ||||||
Churchill Downs, Inc. | 358 | 69,735 | ||||||
Marriott Vacations Worldwide Corp. | 501 | 68,747 | ||||||
Madison Square Garden Sports Corp. — Class A* | 318 | 58,544 | ||||||
Scientific Games Corp. — Class A* | 1,264 | 52,443 | ||||||
Six Flags Entertainment Corp. | 1,373 | 46,819 | ||||||
SeaWorld Entertainment, Inc.* | 1,379 | 43,563 | ||||||
Cinemark Holdings, Inc.1 | 2,146 | 37,362 | ||||||
Total Entertainment | 866,524 | |||||||
Beverages - 6.5% | ||||||||
Constellation Brands, Inc. — Class A | 809 | 177,212 | ||||||
Brown-Forman Corp. — Class B | 2,116 | 168,074 | ||||||
Boston Beer Company, Inc. — Class A* | 96 | 95,452 | ||||||
Anheuser-Busch InBev S.A. ADR | 1,252 | 87,527 | ||||||
Molson Coors Beverage Co. — Class B | 1,918 | 86,674 | ||||||
Diageo plc ADR | 515 | 81,787 | ||||||
Total Beverages | 696,726 | |||||||
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
LEISURE FUND |
| Shares | Value | ||||||
Agriculture - 5.6% | ||||||||
Philip Morris International, Inc. | 3,584 | $ | 296,720 | |||||
Altria Group, Inc. | 5,583 | 228,903 | ||||||
British American Tobacco plc ADR | 2,190 | 82,103 | ||||||
Total Agriculture | 607,726 | |||||||
Toys, Games & Hobbies - 1.5% | ||||||||
Hasbro, Inc. | 1,038 | 97,095 | ||||||
Mattel, Inc.* | 3,540 | 61,773 | ||||||
Total Toys, Games & Hobbies | 158,868 | |||||||
Food Service - 0.8% | ||||||||
Aramark | 2,247 | 86,465 | ||||||
Total Common Stocks | ||||||||
(Cost $7,415,792) | 10,789,646 | |||||||
RIGHTS††† - 0.0% | ||||||||
Media - 0.0% | ||||||||
Nexstar Media Group, Inc.* | 1,910 | — | ||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
| Face | |||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 44,583 | 44,583 | |||||
Barclays Capital, Inc. | 18,574 | 18,574 | ||||||
BofA Securities, Inc. | 17,198 | 17,198 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $80,355) | 80,355 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 2.4% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 258,462 | 258,462 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $258,462) | 258,462 | |||||||
Total Investments - 102.8% | ||||||||
(Cost $7,754,609) | $ | 11,128,463 | ||||||
Other Assets & Liabilities, net - (2.8)% | (306,952 | ) | ||||||
Total Net Assets - 100.0% | $ | 10,821,511 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
LEISURE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 10,789,646 | $ | — | $ | — | $ | 10,789,646 | ||||||||
Rights | — | — | — | * | — | |||||||||||
Repurchase Agreements | — | 80,355 | — | 80,355 | ||||||||||||
Securities Lending Collateral | 258,462 | — | — | 258,462 | ||||||||||||
Total Assets | $ | 11,048,108 | $ | 80,355 | $ | — | $ | 11,128,463 |
* | Security has a market value of $0. |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LEISURE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $251,393 of securities loaned (cost $7,674,254) | $ | 11,048,108 | ||
Repurchase agreements, at value (cost $80,355) | 80,355 | |||
Receivables: | ||||
Dividends | 12,700 | |||
Securities lending income | 174 | |||
Total assets | 11,141,337 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 258,462 | |||
Fund shares redeemed | 30,235 | |||
Management fees | 7,056 | |||
Transfer agent and administrative fees | 2,233 | |||
Investor service fees | 2,075 | |||
Portfolio accounting fees | 830 | |||
Trustees’ fees* | 138 | |||
Miscellaneous | 18,797 | |||
Total liabilities | 319,826 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 10,821,511 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,857,258 | ||
Total distributable earnings (loss) | 2,964,253 | |||
Net assets | $ | 10,821,511 | ||
Capital shares outstanding | 88,318 | |||
Net asset value per share | $ | 122.53 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $638) | $ | 65,911 | ||
Interest | 127 | |||
Income from securities lending, net | 1,035 | |||
Total investment income | 67,073 | |||
Expenses: | ||||
Management fees | 45,146 | |||
Investor service fees | 13,278 | |||
Transfer agent and administrative fees | 17,109 | |||
Professional fees | 9,409 | |||
Portfolio accounting fees | 5,311 | |||
Trustees’ fees* | 1,125 | |||
Custodian fees | 973 | |||
Line of credit fees | 71 | |||
Miscellaneous | 4,382 | |||
Total expenses | 96,804 | |||
Net investment loss | (29,731 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 195,092 | |||
Net realized gain | 195,092 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,149,796 | |||
Net change in unrealized appreciation (depreciation) | 1,149,796 | |||
Net realized and unrealized gain | 1,344,888 | |||
Net increase in net assets resulting from operations | $ | 1,315,157 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
LEISURE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (29,731 | ) | $ | (5,480 | ) | ||
Net realized gain on investments | 195,092 | 694,051 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,149,796 | 789,745 | ||||||
Net increase in net assets resulting from operations | 1,315,157 | 1,478,316 | ||||||
Distributions to shareholders | (176,407 | ) | (66,975 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 16,088,209 | 14,129,615 | ||||||
Distributions reinvested | 176,407 | 66,975 | ||||||
Cost of shares redeemed | (13,117,425 | ) | (12,636,946 | ) | ||||
Net increase from capital share transactions | 3,147,191 | 1,559,644 | ||||||
Net increase in net assets | 4,285,941 | 2,970,985 | ||||||
Net assets: | ||||||||
Beginning of year | 6,535,570 | 3,564,585 | ||||||
End of year | $ | 10,821,511 | $ | 6,535,570 | ||||
Capital share activity: | ||||||||
Shares sold | 156,638 | 145,839 | ||||||
Shares issued from reinvestment of distributions | 1,891 | 664 | ||||||
Shares redeemed | (131,847 | ) | (127,808 | ) | ||||
Net increase in shares | 26,682 | 18,695 |
84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
LEISURE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 106.03 | $ | 83.01 | $ | 98.33 | $ | 82.21 | $ | 76.44 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.56 | ) | (.09 | ) | .23 | .24 | .18 | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | 21.48 | 24.33 | (13.07 | ) | 16.28 | 7.07 | ||||||||||||||
Total from investment operations | 20.92 | 24.24 | (12.84 | ) | 16.52 | 7.25 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.24 | ) | (.26 | ) | (.22 | ) | (.37 | ) | |||||||||||
Net realized gains | (4.42 | ) | (.98 | ) | (2.22 | ) | (.18 | ) | (1.11 | ) | ||||||||||
Total distributions | (4.42 | ) | (1.22 | ) | (2.48 | ) | (.40 | ) | (1.48 | ) | ||||||||||
Net asset value, end of period | $ | 122.53 | $ | 106.03 | $ | 83.01 | $ | 98.33 | $ | 82.21 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 21.01 | % | 29.28 | % | (13.44 | %) | 20.11 | % | 9.56 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,822 | $ | 6,536 | $ | 3,565 | $ | 9,427 | $ | 8,791 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.56 | %) | (0.09 | %) | 0.24 | % | 0.26 | % | 0.23 | % | ||||||||||
Total expenses | 1.82 | % | 1.83 | % | 1.71 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 257 | % | 224 | % | 239 | % | 303 | % | 530 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
PRECIOUS METALS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in U.S. and foreign companies that are involved in the precious metals sector, including exploration, mining, production and development, and other precious metals-related services (“Precious Metals Companies”).
For the year ended December 31, 2020, Precious Metals Fund returned 34.30%, compared with the 18.40% return of the S&P 500 Index. The S&P 500 Materials Index returned 20.73%.
The gold, silver, and copper industries contributed the most to return. No industry detracted from return.
The top-performing holdings were Newmont Corp., Barrick Gold Corp., and Freeport-McMoRan, Inc. The worst-performing holdings included Gold Resource Corp., Pretium Resources, Inc., and Royal Gold, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 29, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Newmont Corp. | 7.6% |
Freeport-McMoRan, Inc. | 7.2% |
Barrick Gold Corp. | 7.1% |
Franco-Nevada Corp. | 5.2% |
Wheaton Precious Metals Corp. | 4.6% |
Agnico Eagle Mines Ltd. | 4.5% |
VanEck Vectors Junior Gold Miners ETF | 4.0% |
Sibanye Stillwater Ltd. ADR | 3.7% |
Kirkland Lake Gold Ltd. | 3.7% |
AngloGold Ashanti Ltd. ADR | 3.3% |
Top Ten Total | 50.9% |
“Ten Largest Holdings” excludes any temporary cash investments. |
86 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Precious Metals Fund | 34.30% | 24.75% | (3.76%) |
S&P 500 Materials Index | 20.73% | 13.14% | 9.00% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Materials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 87 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
PRECIOUS METALS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 95.7% | ||||||||
Mining - 95.7% | ||||||||
Newmont Corp. | 29,449 | $ | 1,763,701 | |||||
Freeport-McMoRan, Inc. | 64,123 | 1,668,480 | ||||||
Barrick Gold Corp. | 71,984 | 1,639,796 | ||||||
Franco-Nevada Corp. | 9,596 | 1,202,667 | ||||||
Wheaton Precious Metals Corp. | 25,885 | 1,080,440 | ||||||
Agnico Eagle Mines Ltd. | 14,745 | 1,039,670 | ||||||
Sibanye Stillwater Ltd. ADR | 54,853 | 871,614 | ||||||
Kirkland Lake Gold Ltd. | 20,806 | 858,664 | ||||||
AngloGold Ashanti Ltd. ADR | 34,193 | 773,446 | ||||||
Kinross Gold Corp. | 105,147 | 771,779 | ||||||
Gold Fields Ltd. ADR | 74,539 | 690,977 | ||||||
Pan American Silver Corp. | 19,545 | 674,498 | ||||||
Royal Gold, Inc. | 6,123 | 651,242 | ||||||
B2Gold Corp. | 109,440 | 612,864 | ||||||
Yamana Gold, Inc. | 102,442 | 584,944 | ||||||
SSR Mining, Inc.*,1 | 26,847 | 539,893 | ||||||
Hecla Mining Co. | 68,071 | 441,100 | ||||||
First Majestic Silver Corp.*,1 | 32,337 | 434,609 | ||||||
Alamos Gold, Inc. — Class A | 49,535 | 433,431 | ||||||
Novagold Resources, Inc.* | 43,915 | 424,658 | ||||||
Harmony Gold Mining Company Ltd. ADR* | 88,306 | 413,272 | ||||||
Equinox Gold Corp.* | 38,689 | 400,044 | ||||||
Eldorado Gold Corp.* | 29,450 | 390,801 | ||||||
Pretium Resources, Inc.* | 32,342 | 371,286 | ||||||
MAG Silver Corp.* | 17,931 | 367,944 | ||||||
Osisko Gold Royalties Ltd. | 28,880 | 366,198 | ||||||
Coeur Mining, Inc.* | 33,141 | 343,009 | ||||||
IAMGOLD Corp.* | 88,358 | 324,274 | ||||||
Fortuna Silver Mines, Inc.*,1 | 38,841 | 320,050 | ||||||
SilverCrest Metals, Inc.* | 27,672 | 309,373 | ||||||
Seabridge Gold, Inc.*,1 | 14,031 | 295,633 | ||||||
Sandstorm Gold Ltd.* | 40,803 | 292,557 | ||||||
New Gold, Inc.* | 129,530 | 283,671 | ||||||
Silvercorp Metals, Inc. | 40,613 | 271,701 | ||||||
Endeavour Silver Corp.* | 43,864 | 221,075 | ||||||
Gold Resource Corp. | 37,568 | 109,323 | ||||||
Fortitude Gold Corp.†††,* | 10,391 | 10,911 | ||||||
Total Mining | 22,249,595 | |||||||
Total Common Stocks | ||||||||
(Cost $7,968,411) | 22,249,595 | |||||||
EXCHANGE-TRADED FUNDS† - 4.0% | ||||||||
VanEck Vectors Junior Gold Miners ETF | 17,019 | 923,111 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $354,718) | 923,111 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 1.1% | ||||||||
J.P. Morgan Securities LLC | $ | 144,551 | 144,551 | |||||
Barclays Capital, Inc. | 60,222 | 60,222 | ||||||
BofA Securities, Inc. | 55,761 | 55,761 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $260,534) | 260,534 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 4.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 961,110 | 961,110 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $961,110) | 961,110 | |||||||
Total Investments - 104.9% | ||||||||
(Cost $9,544,773) | $ | 24,394,350 | ||||||
Other Assets & Liabilities, net - (4.9)% | (1,148,370 | ) | ||||||
Total Net Assets - 100.0% | $ | 23,245,980 |
88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
PRECIOUS METALS FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 22,238,684 | $ | — | $ | 10,911 | $ | 22,249,595 | ||||||||
Exchange-Traded Funds | 923,111 | — | — | 923,111 | ||||||||||||
Repurchase Agreements | — | 260,534 | — | 260,534 | ||||||||||||
Securities Lending Collateral | 961,110 | — | — | 961,110 | ||||||||||||
Total Assets | $ | 24,122,905 | $ | 260,534 | $ | 10,911 | $ | 24,394,350 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
PRECIOUS METALS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $924,536 of securities loaned (cost $9,284,239) | $ | 24,133,816 | ||
Repurchase agreements, at value (cost $260,534) | 260,534 | |||
Receivables: | ||||
Dividends | 6,435 | |||
Fund shares sold | 2,555 | |||
Foreign tax reclaims | 1,197 | |||
Securities lending income | 113 | |||
Total assets | 24,404,650 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 961,110 | |||
Deferred foreign capital gain taxes | 86,192 | |||
Fund shares redeemed | 37,528 | |||
Management fees | 14,317 | |||
Transfer agent and administrative fees | 5,135 | |||
Investor service fees | 4,772 | |||
Portfolio accounting fees | 1,909 | |||
Trustees’ fees* | 344 | |||
Miscellaneous | 47,363 | |||
Total liabilities | 1,158,670 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 23,245,980 | ||
Net assets consist of: | ||||
Paid in capital | $ | 30,308,711 | ||
Total distributable earnings (loss) | (7,062,731 | ) | ||
Net assets | $ | 23,245,980 | ||
Capital shares outstanding | 491,790 | |||
Net asset value per share | $ | 47.27 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $22,712) | $ | 186,182 | ||
Interest | 940 | |||
Income from securities lending, net | 8,900 | |||
Total investment income | 196,022 | |||
Expenses: | ||||
Management fees | 175,395 | |||
Investor service fees | 58,465 | |||
Transfer agent and administrative fees | 74,901 | |||
Professional fees | 43,310 | |||
Portfolio accounting fees | 23,386 | |||
Trustees’ fees* | 4,610 | |||
Custodian fees | 3,614 | |||
Line of credit fees | 23 | |||
Miscellaneous | 18,889 | |||
Total expenses | 402,593 | |||
Net investment loss | (206,571 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,497,954 | |||
Foreign currency transactions | (3 | ) | ||
Net realized gain | 2,497,951 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,611,552 | |||
Net change in unrealized appreciation (depreciation) | 1,611,552 | |||
Net realized and unrealized gain | 4,109,503 | |||
Net increase in net assets resulting from operations | $ | 3,902,932 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PRECIOUS METALS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (206,571 | ) | $ | (127,420 | ) | ||
Net realized gain on investments | 2,497,951 | 1,970,211 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,611,552 | 6,254,702 | ||||||
Net increase in net assets resulting from operations | 3,902,932 | 8,097,493 | ||||||
Distributions to shareholders | (1,145,954 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 47,951,986 | 40,583,255 | ||||||
Distributions reinvested | 1,145,954 | — | ||||||
Cost of shares redeemed | (53,491,041 | ) | (40,430,808 | ) | ||||
Net increase (decrease) from capital share transactions | (4,393,101 | ) | 152,447 | |||||
Net increase (decrease) in net assets | (1,636,123 | ) | 8,249,940 | |||||
Net assets: | ||||||||
Beginning of year | 24,882,103 | 16,632,163 | ||||||
End of year | $ | 23,245,980 | $ | 24,882,103 | ||||
Capital share activity: | ||||||||
Shares sold | 1,176,724 | 1,383,313 | ||||||
Shares issued from reinvestment of distributions | 23,545 | — | ||||||
Shares redeemed | (1,385,622 | ) | (1,395,240 | ) | ||||
Net decrease in shares | (185,353 | ) | (11,927 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
PRECIOUS METALS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 36.75 | $ | 24.14 | $ | 30.30 | $ | 29.72 | $ | 17.95 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.37 | ) | (.20 | ) | (.23 | ) | (.29 | ) | (.29 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 13.03 | 12.81 | (4.68 | ) | 2.29 | 12.06 | ||||||||||||||
Total from investment operations | 12.66 | 12.61 | (4.91 | ) | 2.00 | 11.77 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (2.14 | ) | — | (1.25 | ) | (1.42 | ) | — | ||||||||||||
Total distributions | (2.14 | ) | — | (1.25 | ) | (1.42 | ) | — | ||||||||||||
Net asset value, end of period | $ | 47.27 | $ | 36.75 | $ | 24.14 | $ | 30.30 | $ | 29.72 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 34.30 | % | 52.24 | % | (16.61 | %) | 7.08 | % | 65.52 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 23,246 | $ | 24,882 | $ | 16,632 | $ | 30,201 | $ | 22,672 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.88 | %) | (0.69 | %) | (0.87 | %) | (0.93 | %) | (0.90 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.72 | % | 1.67 | % | 1.61 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 163 | % | 180 | % | 639 | % | 691 | % | 298 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
REAL ESTATE FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the real estate industry, including real estate investment trusts (“REITs”) (collectively, “Real Estate Companies”).
For the year ended December 31, 2020, Real Estate Fund returned -5.82%, compared to a return of 18.40% for the S&P 500 Index. The MSCI U.S. REIT Index returned -7.57%.
Specialized REITs were the leading contributor to return, followed by industrial REITs and real estate services industry. The largest detractors from return were retail REITs, office REITs, and residential REITs.
Prologis, Inc. Redfin Corp., and Equinix, Inc. were the best-performing holdings in the Fund for the year. The worst-performing holdings for the period were Simon Property Group, Inc., Two Harbors Investment Corp., and Equity Residential.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
American Tower Corp. — Class A | 3.3% |
Crown Castle International Corp. | 2.8% |
Prologis, Inc. | 2.8% |
Equinix, Inc. | 2.7% |
Digital Realty Trust, Inc. | 2.1% |
Public Storage | 2.0% |
SBA Communications Corp. | 1.9% |
Simon Property Group, Inc. | 1.8% |
Welltower, Inc. | 1.7% |
Equity Residential | 1.6% |
Top Ten Total | 22.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 93 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Real Estate Fund | (5.82%) | 4.99% | 6.59% |
MSCI U.S. REIT Index | (7.57%) | 4.84% | 8.30% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the MSCI U.S. REIT Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
94 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
REAL ESTATE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.2% | ||||||||
REITs - 94.8% | ||||||||
REITs-Diversified - 25.5% | ||||||||
American Tower Corp. — Class A | 972 | $ | 218,175 | |||||
Crown Castle International Corp. | 1,153 | 183,546 | ||||||
Equinix, Inc. | 246 | 175,688 | ||||||
Digital Realty Trust, Inc. | 997 | 139,091 | ||||||
SBA Communications Corp. | 432 | 121,880 | ||||||
Weyerhaeuser Co. | 2,981 | 99,953 | ||||||
Duke Realty Corp. | 2,006 | 80,180 | ||||||
VICI Properties, Inc. | 3,008 | 76,704 | ||||||
WP Carey, Inc. | 1,058 | 74,674 | ||||||
Gaming and Leisure Properties, Inc. | 1,541 | 65,327 | ||||||
Lamar Advertising Co. — Class A | 723 | 60,168 | ||||||
CoreSite Realty Corp. | 428 | 53,620 | ||||||
Apartment Income REIT Corp.* | 1,385 | 53,198 | ||||||
New Residential Investment Corp. | 4,301 | 42,752 | ||||||
PS Business Parks, Inc. | 320 | 42,518 | ||||||
PotlatchDeltic Corp. | 740 | 37,015 | ||||||
Outfront Media, Inc. | 1,814 | 35,482 | ||||||
Uniti Group, Inc. | 2,990 | 35,073 | ||||||
Lexington Realty Trust | 3,290 | 34,940 | ||||||
EPR Properties | 1,022 | 33,215 | ||||||
Total REITs-Diversified | 1,663,199 | |||||||
REITs-Apartments - 11.1% | ||||||||
Equity Residential | 1,745 | 103,444 | ||||||
AvalonBay Communities, Inc. | 643 | 103,156 | ||||||
Invitation Homes, Inc. | 3,018 | 89,635 | ||||||
Essex Property Trust, Inc. | 364 | 86,421 | ||||||
Mid-America Apartment Communities, Inc. | 646 | 81,842 | ||||||
UDR, Inc. | 1,939 | 74,516 | ||||||
Camden Property Trust | 677 | 67,646 | ||||||
American Homes 4 Rent — Class A | 2,200 | 66,000 | ||||||
American Campus Communities, Inc. | 1,191 | 50,939 | ||||||
Total REITs-Apartments | 723,599 | |||||||
REITs-Office Property - 10.8% | ||||||||
Alexandria Real Estate Equities, Inc. | 580 | 103,368 | ||||||
Boston Properties, Inc. | 863 | 81,579 | ||||||
Vornado Realty Trust | 1,581 | 59,035 | ||||||
Kilroy Realty Corp. | 968 | 55,563 | ||||||
Douglas Emmett, Inc. | 1,659 | 48,410 | ||||||
SL Green Realty Corp. | 772 | 45,996 | ||||||
Cousins Properties, Inc. | 1,358 | 45,493 | ||||||
JBG SMITH Properties | 1,400 | 43,778 | ||||||
Highwoods Properties, Inc. | 1,094 | 43,355 | ||||||
Hudson Pacific Properties, Inc. | 1,731 | 41,579 | ||||||
Equity Commonwealth | 1,454 | 39,665 | ||||||
Corporate Office Properties Trust | 1,400 | 36,512 | ||||||
Piedmont Office Realty Trust, Inc. — Class A | 1,860 | 30,188 | ||||||
Brandywine Realty Trust | 2,487 | 29,620 | ||||||
Total REITs-Office Property | 704,141 | |||||||
REITs-Warehouse/Industries - 9.7% | ||||||||
Prologis, Inc. | 1,817 | 181,082 | ||||||
CyrusOne, Inc. | 870 | 63,640 | ||||||
Americold Realty Trust | 1,650 | 61,594 | ||||||
Rexford Industrial Realty, Inc. | 1,081 | 53,088 | ||||||
First Industrial Realty Trust, Inc. | 1,180 | 49,713 | ||||||
EastGroup Properties, Inc. | 359 | 49,564 | ||||||
STAG Industrial, Inc. | 1,489 | 46,635 | ||||||
QTS Realty Trust, Inc. — Class A | 701 | 43,378 | ||||||
Terreno Realty Corp. | 740 | 43,297 | ||||||
Innovative Industrial Properties, Inc. | 211 | 38,640 | ||||||
Total REITs-Warehouse/Industries | 630,631 | |||||||
REITs-Health Care - 9.6% | ||||||||
Welltower, Inc. | 1,684 | 108,820 | ||||||
Ventas, Inc. | 1,794 | 87,978 | ||||||
Healthpeak Properties, Inc. | 2,860 | 86,458 | ||||||
Medical Properties Trust, Inc. | 3,365 | 73,323 | ||||||
Omega Healthcare Investors, Inc. | 1,658 | 60,219 | ||||||
Healthcare Trust of America, Inc. — Class A | 1,855 | 51,087 | ||||||
Healthcare Realty Trust, Inc. | 1,444 | 42,742 | ||||||
Sabra Health Care REIT, Inc. | 2,335 | 40,559 | ||||||
Physicians Realty Trust | 2,254 | 40,121 | ||||||
National Health Investors, Inc. | 530 | 36,660 | ||||||
Total REITs-Health Care | 627,967 | |||||||
REITs-Storage - 6.5% | ||||||||
Public Storage | 578 | 133,478 | ||||||
Extra Space Storage, Inc. | 723 | 83,767 | ||||||
Iron Mountain, Inc. | 2,104 | 62,026 | ||||||
CubeSmart | 1,623 | 54,549 | ||||||
Life Storage, Inc. | 421 | 50,263 | ||||||
National Storage Affiliates Trust | 1,120 | 40,354 | ||||||
Total REITs-Storage | 424,437 | |||||||
REITs-Hotels - 5.1% | ||||||||
Host Hotels & Resorts, Inc. | 4,987 | 72,960 | ||||||
MGM Growth Properties LLC — Class A | 2,142 | 67,045 | ||||||
Park Hotels & Resorts, Inc. | 2,575 | 44,161 | ||||||
Ryman Hospitality Properties, Inc. | 651 | 44,112 | ||||||
Apple Hospitality REIT, Inc. | 2,826 | 36,484 | ||||||
Pebblebrook Hotel Trust | 1,857 | 34,912 | ||||||
Sunstone Hotel Investors, Inc. | 3,010 | 34,103 | ||||||
Total REITs-Hotels | 333,777 | |||||||
REITs-Single Tenant - 4.8% | ||||||||
Realty Income Corp. | 1,634 | 101,586 | ||||||
STORE Capital Corp. | 1,888 | 64,154 | ||||||
National Retail Properties, Inc. | 1,381 | 56,510 | ||||||
Spirit Realty Capital, Inc. | 1,085 | 43,584 | ||||||
Agree Realty Corp. | 616 | 41,013 | ||||||
Total REITs-Single Tenant | 306,847 | |||||||
REITs-Shopping Centers - 4.2% | ||||||||
Regency Centers Corp. | 1,307 | 59,586 | ||||||
Kimco Realty Corp. | 3,700 | 55,537 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
REAL ESTATE FUND |
| Shares | Value | ||||||
Federal Realty Investment Trust | 628 | $ | 53,455 | |||||
Brixmor Property Group, Inc. | 2,852 | 47,201 | ||||||
Weingarten Realty Investors | 1,607 | 34,824 | ||||||
Retail Opportunity Investments Corp. | 2,032 | 27,208 | ||||||
Total REITs-Shopping Centers | 277,811 | |||||||
REITs-Mortgage - 2.9% | ||||||||
AGNC Investment Corp. | 4,041 | 63,040 | ||||||
Starwood Property Trust, Inc. | 2,574 | 49,678 | ||||||
Blackstone Mortgage Trust, Inc. — Class A | 1,523 | 41,928 | ||||||
Chimera Investment Corp. | 3,185 | 32,646 | ||||||
Total REITs-Mortgage | 187,292 | |||||||
REITs-Manufactured Homes - 2.4% | ||||||||
Sun Communities, Inc. | 565 | 85,852 | ||||||
Equity LifeStyle Properties, Inc. | 1,129 | 71,533 | ||||||
Total REITs-Manufactured Homes | 157,385 | |||||||
REITs-Regional Malls - 2.2% | ||||||||
Simon Property Group, Inc. | 1,340 | 114,275 | ||||||
Macerich Co.1 | 2,563 | 27,347 | ||||||
Total REITs-Regional Malls | 141,622 | |||||||
Total REITs | 6,178,708 | |||||||
Real Estate - 3.7% | ||||||||
Real Estate Management/Services - 3.1% | ||||||||
CBRE Group, Inc. — Class A* | 1,562 | 97,969 | ||||||
Jones Lang LaSalle, Inc.* | 393 | 58,309 | ||||||
Redfin Corp.* | 642 | 44,060 | ||||||
Total Real Estate Management/Services | 200,338 | |||||||
Real Estate Operations/Development - 0.6% | ||||||||
Howard Hughes Corp.* | 544 | 42,938 | ||||||
Total Real Estate | 243,276 | |||||||
Diversified Financial Services - 0.7% | ||||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc. | 720 | 45,670 | ||||||
Total Common Stocks | ||||||||
(Cost $2,868,792) | 6,467,654 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
J.P. Morgan Securities LLC | $ | 20,704 | 20,704 | |||||
Barclays Capital, Inc. | 8,625 | 8,625 | ||||||
BofA Securities, Inc. | 7,986 | 7,986 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $37,315) | 37,315 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 21,806 | 21,806 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $21,806) | 21,806 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $2,927,913) | $ | 6,526,775 | ||||||
Other Assets & Liabilities, net - (0.1)% | (8,304 | ) | ||||||
Total Net Assets - 100.0% | $ | 6,518,471 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
REAL ESTATE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,467,654 | $ | — | $ | — | $ | 6,467,654 | ||||||||
Repurchase Agreements | — | 37,315 | — | 37,315 | ||||||||||||
Securities Lending Collateral | 21,806 | — | — | 21,806 | ||||||||||||
Total Assets | $ | 6,489,460 | $ | 37,315 | $ | — | $ | 6,526,775 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 97 |
REAL ESTATE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $21,063 of securities loaned (cost $2,890,598) | $ | 6,489,460 | ||
Repurchase agreements, at value (cost $37,315) | 37,315 | |||
Receivables: | ||||
Securities sold | 178,678 | |||
Dividends | 33,451 | |||
Securities lending income | 640 | |||
Total assets | 6,739,544 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 176,573 | |||
Return of securities lending collateral | 21,806 | |||
Management fees | 4,837 | |||
Transfer agent and administrative fees | 1,531 | |||
Investor service fees | 1,423 | |||
Portfolio accounting fees | 569 | |||
Trustees’ fees* | 103 | |||
Miscellaneous | 14,231 | |||
Total liabilities | 221,073 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 6,518,471 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,262,134 | ||
Total distributable earnings (loss) | 2,256,337 | |||
Net assets | $ | 6,518,471 | ||
Capital shares outstanding | 170,163 | |||
Net asset value per share | $ | 38.31 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends | $ | 194,138 | ||
Interest | 251 | |||
Income from securities lending, net | 2,861 | |||
Total investment income | 197,250 | |||
Expenses: | ||||
Management fees | 65,041 | |||
Investor service fees | 19,130 | |||
Transfer agent and administrative fees | 26,834 | |||
Professional fees | 14,510 | |||
Portfolio accounting fees | 7,652 | |||
Trustees’ fees* | 2,539 | |||
Custodian fees | 1,234 | |||
Miscellaneous | 2,417 | |||
Total expenses | 139,357 | |||
Net investment income | 57,893 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 818,939 | |||
Net realized gain | 818,939 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (2,195,987 | ) | ||
Net change in unrealized appreciation (depreciation) | (2,195,987 | ) | ||
Net realized and unrealized loss | (1,377,048 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,319,155 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
98 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
REAL ESTATE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 57,893 | $ | 233,633 | ||||
Net realized gain on investments | 818,939 | 364,242 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (2,195,987 | ) | 2,250,263 | |||||
Net increase (decrease) in net assets resulting from operations | (1,319,155 | ) | 2,848,138 | |||||
Distributions to shareholders | (437,926 | ) | (392,655 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 13,784,485 | 36,309,780 | ||||||
Distributions reinvested | 437,926 | 392,655 | ||||||
Cost of shares redeemed | (18,195,801 | ) | (39,616,537 | ) | ||||
Net decrease from capital share transactions | (3,973,390 | ) | (2,914,102 | ) | ||||
Net decrease in net assets | (5,730,471 | ) | (458,619 | ) | ||||
Net assets: | ||||||||
Beginning of year | 12,248,942 | 12,707,561 | ||||||
End of year | $ | 6,518,471 | $ | 12,248,942 | ||||
Capital share activity: | ||||||||
Shares sold | 373,617 | 875,959 | ||||||
Shares issued from reinvestment of distributions | 13,417 | 9,631 | ||||||
Shares redeemed | (498,726 | ) | (956,810 | ) | ||||
Net decrease in shares | (111,692 | ) | (71,220 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 99 |
REAL ESTATE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 43.46 | $ | 35.99 | $ | 39.22 | $ | 37.72 | $ | 34.50 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .28 | .68 | .64 | .36 | .63 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (3.19 | ) | 8.03 | (3.48 | ) | 2.11 | 2.88 | |||||||||||||
Total from investment operations | (2.91 | ) | 8.71 | (2.84 | ) | 2.47 | 3.51 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.16 | ) | (.83 | ) | (.39 | ) | (.97 | ) | (.29 | ) | ||||||||||
Net realized gains | (1.08 | ) | (.41 | ) | — | — | — | |||||||||||||
Total distributions | (2.24 | ) | (1.24 | ) | (.39 | ) | (.97 | ) | (.29 | ) | ||||||||||
Net asset value, end of period | $ | 38.31 | $ | 43.46 | $ | 35.99 | $ | 39.22 | $ | 37.72 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (5.82 | %) | 24.43 | % | (7.33 | %) | 6.65 | % | 10.15 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,518 | $ | 12,249 | $ | 12,708 | $ | 10,261 | $ | 11,509 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.76 | % | 1.62 | % | 1.67 | % | 0.93 | % | 1.73 | % | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.73 | % | 1.70 | % | 1.65 | % | ||||||||||
Portfolio turnover rate | 173 | % | 225 | % | 313 | % | 331 | % | 279 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
RETAILING FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in merchandising finished goods and services, including department stores, mail order operations, and other companies involved in selling products to consumers (“Retailing Companies”).
For the year ended December 31, 2020, Retailing Fund returned 43.68%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Consumer Discretionary Index returned 33.30%.
The Internet & direct marketing retail industry contributed the most to the Fund’s return for the period, followed by the hypermarkets & super centers industry and the general merchandise stores industry. The department stores industry, drug retail industry, and apparel retail industry detracted the most from return.
Fund performance for the year benefited most from Amazon.com, Inc., Pinduoduo, Inc. ADR, and Chewy, Inc. Class A. Walgreen’s Boots Alliance, Inc., Macy’s, Inc., and Bed Bath & Beyond, Inc. were the largest detractors from the Fund’s performance for the period.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 23, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Amazon.com, Inc. | 10.4% |
Walmart, Inc. | 6.3% |
Home Depot, Inc. | 5.1% |
Costco Wholesale Corp. | 4.1% |
Lowe’s Companies, Inc. | 3.2% |
Booking Holdings, Inc. | 3.1% |
Target Corp. | 3.0% |
Alibaba Group Holding Ltd. ADR | 3.0% |
TJX Companies, Inc. | 2.8% |
Dollar General Corp. | 2.2% |
Top Ten Total | 43.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 101 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Retailing Fund | 43.68% | 14.39% | 13.36% |
S&P 500 Consumer Discretionary Index | 33.30% | 17.53% | 17.68% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Consumer Discretionary Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
102 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
RETAILING FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.7% | ||||||||
Retail - 60.6% | ||||||||
Walmart, Inc. | 3,160 | $ | 455,514 | |||||
Home Depot, Inc. | 1,383 | 367,352 | ||||||
Costco Wholesale Corp. | 777 | 292,758 | ||||||
Lowe’s Companies, Inc. | 1,442 | 231,455 | ||||||
Target Corp. | 1,230 | 217,132 | ||||||
TJX Companies, Inc. | 2,980 | 203,504 | ||||||
Dollar General Corp. | 765 | 160,880 | ||||||
Ross Stores, Inc. | 1,232 | 151,302 | ||||||
Walgreens Boots Alliance, Inc. | 3,365 | 134,196 | ||||||
O’Reilly Automotive, Inc.* | 283 | 128,077 | ||||||
AutoZone, Inc.* | 100 | 118,544 | ||||||
Best Buy Company, Inc. | 1,149 | 114,659 | ||||||
Dollar Tree, Inc.* | 1,022 | 110,417 | ||||||
Carvana Co.* | 399 | 95,576 | ||||||
Ulta Beauty, Inc.* | 328 | 94,189 | ||||||
Burlington Stores, Inc.* | 359 | 93,896 | ||||||
Tiffany & Co. | 684 | 89,912 | ||||||
Genuine Parts Co. | 874 | 87,776 | ||||||
Tractor Supply Co. | 611 | 85,894 | ||||||
CarMax, Inc.* | 895 | 84,542 | ||||||
Five Below, Inc.* | 413 | 72,267 | ||||||
Advance Auto Parts, Inc. | 451 | 71,037 | ||||||
L Brands, Inc. | 1,871 | 69,583 | ||||||
RH* | 153 | 68,471 | ||||||
Floor & Decor Holdings, Inc. — Class A* | 676 | 62,767 | ||||||
Lithia Motors, Inc. — Class A | 212 | 62,046 | ||||||
Gap, Inc. | 3,064 | 61,862 | ||||||
Kohl’s Corp. | 1,466 | 59,652 | ||||||
Williams-Sonoma, Inc. | 581 | 59,169 | ||||||
AutoNation, Inc.* | 814 | 56,809 | ||||||
Dick’s Sporting Goods, Inc. | 956 | 53,737 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 1,361 | 50,738 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 620 | 50,697 | ||||||
Nordstrom, Inc.* | 1,591 | 49,655 | ||||||
Macy’s, Inc.*,1 | 4,117 | 46,316 | ||||||
Foot Locker, Inc. | 1,141 | 46,142 | ||||||
American Eagle Outfitters, Inc. | 2,041 | 40,963 | ||||||
Bed Bath & Beyond, Inc.1 | 1,790 | 31,790 | ||||||
Big Lots, Inc. | 648 | 27,819 | ||||||
Total Retail | 4,359,095 | |||||||
Internet - 35.9% | ||||||||
Amazon.com, Inc.* | 230 | 749,094 | ||||||
Booking Holdings, Inc.* | 99 | 220,500 | ||||||
Alibaba Group Holding Ltd. ADR* | 916 | 213,181 | ||||||
JD.com, Inc. ADR* | 1,673 | 147,057 | ||||||
Pinduoduo, Inc. ADR* | 724 | 128,633 | ||||||
eBay, Inc. | 2,507 | 125,977 | ||||||
Chewy, Inc. — Class A* | 1,246 | 112,003 | ||||||
MercadoLibre, Inc.* | 65 | 108,889 | ||||||
Expedia Group, Inc. | 768 | 101,683 | ||||||
Vipshop Holdings Ltd. ADR* | 3,445 | 96,839 | ||||||
Etsy, Inc.* | 527 | 93,758 | ||||||
Wayfair, Inc. — Class A* | 384 | 86,711 | ||||||
Trip.com Group Ltd. ADR* | 2,522 | 85,067 | ||||||
Farfetch Ltd. — Class A* | 1,281 | 81,741 | ||||||
Fiverr International Ltd.* | 378 | 73,748 | ||||||
Grubhub, Inc.* | 797 | 59,193 | ||||||
Stamps.com, Inc.* | 202 | 39,630 | ||||||
Stitch Fix, Inc. — Class A* | 629 | 36,935 | ||||||
Overstock.com, Inc.*,1 | 531 | 25,472 | ||||||
Total Internet | 2,586,111 | |||||||
Distribution & Wholesale - 2.1% | ||||||||
Pool Corp. | 228 | 84,930 | ||||||
LKQ Corp.* | 2,029 | 71,502 | ||||||
Total Distribution & Wholesale | 156,432 | |||||||
Oil & Gas - 0.6% | ||||||||
Murphy USA, Inc. | 320 | 41,878 | ||||||
Apparel - 0.5% | ||||||||
Urban Outfitters, Inc.* | 1,395 | 35,712 | ||||||
Total Common Stocks | ||||||||
(Cost $4,343,284) | 7,179,228 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.5% | ||||||||
J.P. Morgan Securities LLC | $ | 19,129 | 19,129 | |||||
Barclays Capital, Inc. | 7,969 | 7,969 | ||||||
BofA Securities, Inc. | 7,379 | 7,379 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $34,477) | 34,477 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 86,076 | 86,076 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $86,076) | 86,076 | |||||||
Total Investments - 101.4% | ||||||||
(Cost $4,463,837) | $ | 7,299,781 | ||||||
Other Assets & Liabilities, net - (1.4)% | (104,192 | ) | ||||||
Total Net Assets - 100.0% | $ | 7,195,589 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 103 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
RETAILING FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 7,179,228 | $ | — | $ | — | $ | 7,179,228 | ||||||||
Repurchase Agreements | — | 34,477 | — | 34,477 | ||||||||||||
Securities Lending Collateral | 86,076 | — | — | 86,076 | ||||||||||||
Total Assets | $ | 7,265,304 | $ | 34,477 | $ | — | $ | 7,299,781 |
104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RETAILING FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $77,655 of securities loaned (cost $4,429,360) | $ | 7,265,304 | ||
Repurchase agreements, at value (cost $34,477) | 34,477 | |||
Receivables: | ||||
Fund shares sold | 5,964 | |||
Dividends | 2,645 | |||
Securities lending income | 47 | |||
Total assets | 7,308,437 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 295 | |||
Payable for: | ||||
Return of securities lending collateral | 86,076 | |||
Management fees | 5,095 | |||
Fund shares redeemed | 2,342 | |||
Transfer agent and administrative fees | 1,613 | |||
Investor service fees | 1,499 | |||
Portfolio accounting fees | 599 | |||
Trustees’ fees* | 111 | |||
Miscellaneous | 15,218 | |||
Total liabilities | 112,848 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 7,195,589 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,435,559 | ||
Total distributable earnings (loss) | 2,760,030 | |||
Net assets | $ | 7,195,589 | ||
Capital shares outstanding | 55,916 | |||
Net asset value per share | $ | 128.69 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $212) | $ | 49,727 | ||
Interest | 99 | |||
Income from securities lending, net | 918 | |||
Total investment income | 50,744 | |||
Expenses: | ||||
Management fees | 47,284 | |||
Investor service fees | 13,907 | |||
Transfer agent and administrative fees | 17,573 | |||
Professional fees | 9,573 | |||
Portfolio accounting fees | 5,563 | |||
Trustees’ fees* | 1,044 | |||
Custodian fees | 812 | |||
Miscellaneous | 5,439 | |||
Total expenses | 101,195 | |||
Net investment loss | (50,451 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 872,016 | |||
Net realized gain | 872,016 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,371,724 | |||
Net change in unrealized appreciation (depreciation) | 1,371,724 | |||
Net realized and unrealized gain | 2,243,740 | |||
Net increase in net assets resulting from operations | $ | 2,193,289 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 105 |
RETAILING FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (50,451 | ) | $ | (27,909 | ) | ||
Net realized gain on investments | 872,016 | 739,136 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,371,724 | 364,817 | ||||||
Net increase in net assets resulting from operations | 2,193,289 | 1,076,044 | ||||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 14,568,819 | 8,919,934 | ||||||
Cost of shares redeemed | (13,191,711 | ) | (13,159,008 | ) | ||||
Net increase (decrease) from capital share transactions | 1,377,108 | (4,239,074 | ) | |||||
Net increase (decrease) in net assets | 3,570,397 | (3,163,030 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,625,192 | 6,788,222 | ||||||
End of year | $ | 7,195,589 | $ | 3,625,192 | ||||
Capital share activity: | ||||||||
Shares sold | 135,334 | 105,149 | ||||||
Shares redeemed | (119,893 | ) | (159,017 | ) | ||||
Net increase (decrease) in shares | 15,441 | (53,868 | ) |
106 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RETAILING FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 89.57 | $ | 71.95 | $ | 74.37 | $ | 65.91 | $ | 69.96 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.95 | ) | (.45 | ) | (.30 | ) | .02 | (.05 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | 40.07 | 18.07 | (2.11 | ) | 8.44 | (2.93 | ) | |||||||||||||
Total from investment operations | 39.12 | 17.62 | (2.41 | ) | 8.46 | (2.98 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | — | (.01 | ) | — | — | ||||||||||||||
Net realized gains | — | — | — | — | (1.07 | ) | ||||||||||||||
Total distributions | — | — | (.01 | ) | — | (1.07 | ) | |||||||||||||
Net asset value, end of period | $ | 128.69 | $ | 89.57 | $ | 71.95 | $ | 74.37 | $ | 65.91 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 43.68 | % | 24.49 | % | (3.23 | %) | 12.82 | % | 0.30 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,196 | $ | 3,625 | $ | 6,788 | $ | 7,849 | $ | 5,278 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.91 | %) | (0.54 | %) | (0.37 | %) | 0.03 | % | (0.25 | %) | ||||||||||
Total expenses | 1.82 | % | 1.83 | % | 1.72 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 250 | % | 173 | % | 260 | % | 447 | % | 668 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the year ended December 1, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
TECHNOLOGY FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the technology sector, including computer software and service companies, semiconductor manufacturers, networking and telecommunications equipment manufacturers, PC hardware, and peripherals companies (“Technology Companies”).
For the year ended December 31, 2020, Technology Fund returned 49.25%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Information Technology Index returned 43.89%.
The application software industry contributed the most to the Fund’s performance for the period, followed by the semiconductors industry and the systems software industry. The technology distributors industry was the only detractor from performance for the period.
Top-contributing holdings were Apple, Inc., Zoom Video Communications, Inc. Class A, and Microsoft Corp., Momo, Inc. Class A ADR, Hewlett Packard Enterprise Co., and DXC Technology Co. were the weakest-performing technology holdings for the period.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 5.0% |
Microsoft Corp. | 4.3% |
Alphabet, Inc. — Class A | 3.8% |
Facebook, Inc. — Class A | 3.0% |
Visa, Inc. — Class A | 2.5% |
Mastercard, Inc. — Class A | 2.1% |
NVIDIA Corp. | 1.9% |
PayPal Holdings, Inc. | 1.7% |
Adobe, Inc. | 1.6% |
Intel Corp. | 1.5% |
Top Ten Total | 27.4% |
“Ten Largest Holdings” excludes any temporary cash investments. |
108 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Technology Fund | 49.25% | 24.79% | 16.60% |
S&P 500 Information Technology Index | 43.89% | 27.79% | 20.68% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Information Technology Index are unmanaged indices and, unlike the Fund, has no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 109 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
TECHNOLOGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.8% | ||||||||
Software - 33.0% | ||||||||
Microsoft Corp. | 4,928 | $ | 1,096,086 | |||||
Adobe, Inc.* | 828 | 414,099 | ||||||
salesforce.com, Inc.* | 1,711 | 380,749 | ||||||
Oracle Corp. | 5,676 | 367,180 | ||||||
ServiceNow, Inc.* | 492 | 270,812 | ||||||
Intuit, Inc. | 695 | 263,996 | ||||||
Fidelity National Information Services, Inc. | 1,776 | 251,233 | ||||||
Zoom Video Communications, Inc. — Class A* | 725 | 244,557 | ||||||
Fiserv, Inc.* | 2,077 | 236,487 | ||||||
Activision Blizzard, Inc. | 2,400 | 222,840 | ||||||
Autodesk, Inc.* | 707 | 215,875 | ||||||
Workday, Inc. — Class A* | 818 | 196,001 | ||||||
VMware, Inc. — Class A*,1 | 1,392 | 195,242 | ||||||
Twilio, Inc. — Class A* | 517 | 175,004 | ||||||
Electronic Arts, Inc. | 1,174 | 168,586 | ||||||
Synopsys, Inc.* | 645 | 167,210 | ||||||
NetEase, Inc. ADR | 1,733 | 165,969 | ||||||
Cadence Design Systems, Inc.* | 1,211 | 165,217 | ||||||
Sea Ltd. ADR* | 825 | 164,216 | ||||||
DocuSign, Inc.* | 732 | 162,724 | ||||||
ANSYS, Inc.* | 421 | 153,160 | ||||||
Paychex, Inc. | 1,638 | 152,629 | ||||||
Atlassian Corporation plc — Class A* | 642 | 150,144 | ||||||
Bilibili, Inc. ADR* | 1,680 | 144,010 | ||||||
RingCentral, Inc. — Class A* | 379 | 143,630 | ||||||
Splunk, Inc.* | 820 | 139,310 | ||||||
Datadog, Inc. — Class A* | 1,374 | 135,257 | ||||||
Slack Technologies, Inc. — Class A* | 3,138 | 132,549 | ||||||
Take-Two Interactive Software, Inc.* | 620 | 128,830 | ||||||
Cloudflare, Inc. — Class A* | 1,600 | 121,584 | ||||||
Coupa Software, Inc.* | 354 | 119,974 | ||||||
HubSpot, Inc.* | 288 | 114,175 | ||||||
Broadridge Financial Solutions, Inc. | 740 | 113,368 | ||||||
Ceridian HCM Holding, Inc.* | 1,046 | 111,462 | ||||||
Akamai Technologies, Inc.* | 1,048 | 110,029 | ||||||
Citrix Systems, Inc. | 823 | 107,072 | ||||||
Tyler Technologies, Inc.* | 243 | 106,074 | ||||||
MongoDB, Inc.* | 291 | 104,481 | ||||||
Fair Isaac Corp.* | 193 | 98,631 | ||||||
Nuance Communications, Inc.* | 2,144 | 94,529 | ||||||
Jack Henry & Associates, Inc. | 574 | 92,982 | ||||||
Fastly, Inc. — Class A* | 845 | 73,828 | ||||||
Dropbox, Inc. — Class A* | 3,263 | 72,406 | ||||||
Alteryx, Inc. — Class A* | 589 | 71,734 | ||||||
Total Software | 8,315,931 | |||||||
Semiconductors - 20.1% | ||||||||
NVIDIA Corp. | 923 | 481,991 | ||||||
Intel Corp. | 7,743 | 385,756 | ||||||
QUALCOMM, Inc. | 2,398 | 365,311 | ||||||
Broadcom, Inc. | 813 | 355,972 | ||||||
Texas Instruments, Inc. | 2,042 | 335,153 | ||||||
Advanced Micro Devices, Inc.* | 2,950 | 270,544 | ||||||
Micron Technology, Inc.* | 3,366 | 253,056 | ||||||
Applied Materials, Inc. | 2,766 | 238,706 | ||||||
Lam Research Corp. | 469 | 221,495 | ||||||
Taiwan Semiconductor Manufacturing Company Ltd. ADR | 1,911 | 208,375 | ||||||
Analog Devices, Inc. | 1,362 | 201,208 | ||||||
KLA Corp. | 660 | 170,881 | ||||||
NXP Semiconductor N.V. | 1,068 | 169,823 | ||||||
Microchip Technology, Inc. | 1,179 | 162,832 | ||||||
ASML Holding N.V. — Class G | 321 | 156,558 | ||||||
Xilinx, Inc. | 1,066 | 151,127 | ||||||
Marvell Technology Group Ltd. | 3,080 | 146,423 | ||||||
Skyworks Solutions, Inc. | 923 | 141,108 | ||||||
Maxim Integrated Products, Inc. | 1,505 | 133,418 | ||||||
Qorvo, Inc.* | 730 | 121,377 | ||||||
Teradyne, Inc. | 988 | 118,451 | ||||||
Monolithic Power Systems, Inc. | 298 | 109,137 | ||||||
ON Semiconductor Corp.* | 2,982 | 97,601 | ||||||
Inphi Corp.* | 474 | 76,063 | ||||||
Total Semiconductors | 5,072,366 | |||||||
Internet - 16.6% | ||||||||
Alphabet, Inc. — Class A* | 542 | 949,931 | ||||||
Facebook, Inc. — Class A* | 2,764 | 755,014 | ||||||
Snap, Inc. — Class A* | 4,271 | 213,849 | ||||||
Baidu, Inc. ADR* | 968 | 209,320 | ||||||
Shopify, Inc. — Class A* | 168 | 190,168 | ||||||
Match Group, Inc.* | 1,126 | 170,240 | ||||||
Twitter, Inc.* | 3,030 | 164,074 | ||||||
Pinterest, Inc. — Class A* | 2,440 | 160,796 | ||||||
Palo Alto Networks, Inc.* | 436 | 154,950 | ||||||
Okta, Inc.* | 552 | 140,352 | ||||||
Wix.com Ltd.* | 517 | 129,229 | ||||||
VeriSign, Inc.* | 594 | 128,542 | ||||||
Zillow Group, Inc. — Class C* | 971 | 126,036 | ||||||
CDW Corp. | 868 | 114,394 | ||||||
IAC* | 587 | 111,148 | ||||||
Zendesk, Inc.* | 762 | 109,057 | ||||||
GoDaddy, Inc. — Class A* | 1,164 | 96,554 | ||||||
NortonLifeLock, Inc. | 4,414 | 91,723 | ||||||
F5 Networks, Inc.* | 492 | 86,562 | ||||||
Anaplan, Inc.* | 1,196 | 85,933 | ||||||
Total Internet | 4,187,872 | |||||||
Computers - 13.3% | ||||||||
Apple, Inc. | 9,518 | 1,262,943 | ||||||
International Business Machines Corp. | 2,277 | 286,629 | ||||||
Accenture plc — Class A | 813 | 212,364 | ||||||
Dell Technologies, Inc. — Class C* | 2,639 | 193,412 | ||||||
Crowdstrike Holdings, Inc. — Class A* | 883 | 187,037 | ||||||
Cognizant Technology Solutions Corp. — Class A | 2,164 | 177,340 | ||||||
Check Point Software Technologies Ltd.* | 1,181 | 156,967 | ||||||
HP, Inc. | 6,340 | 155,901 | ||||||
Infosys Ltd. ADR | 8,540 | 144,753 | ||||||
Zscaler, Inc.* | 705 | 140,795 | ||||||
Fortinet, Inc.* | 898 | 133,380 |
110 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
TECHNOLOGY FUND |
| Shares | Value | ||||||
Western Digital Corp. | 1,994 | $ | 110,448 | |||||
Seagate Technology plc | 1,645 | 102,253 | ||||||
NetApp, Inc. | 1,535 | 101,678 | ||||||
Total Computers | 3,365,900 | |||||||
Commercial Services - 5.4% | ||||||||
PayPal Holdings, Inc.* | 1,823 | 426,947 | ||||||
Square, Inc. — Class A* | 1,129 | 245,716 | ||||||
Automatic Data Processing, Inc. | 1,312 | 231,174 | ||||||
Global Payments, Inc. | 1,063 | 228,991 | ||||||
FleetCor Technologies, Inc.* | 451 | 123,046 | ||||||
Booz Allen Hamilton Holding Corp. | 1,053 | 91,801 | ||||||
Total Commercial Services | 1,347,675 | |||||||
Diversified Financial Services - 4.6% | ||||||||
Visa, Inc. — Class A | 2,882 | 630,380 | ||||||
Mastercard, Inc. — Class A | 1,477 | 527,200 | ||||||
Total Diversified Financial Services | 1,157,580 | |||||||
Telecommunications - 3.1% | ||||||||
Cisco Systems, Inc. | 8,209 | 367,353 | ||||||
Motorola Solutions, Inc. | 850 | 144,551 | ||||||
Arista Networks, Inc.* | 426 | 123,783 | ||||||
Ciena Corp.* | 1,475 | 77,954 | ||||||
Juniper Networks, Inc. | 3,253 | 73,225 | ||||||
Total Telecommunications | 786,866 | |||||||
Energy-Alternate Sources - 1.4% | ||||||||
SolarEdge Technologies, Inc.* | 474 | 151,263 | ||||||
Enphase Energy, Inc.* | 667 | 117,039 | ||||||
First Solar, Inc.* | 895 | 88,533 | ||||||
Total Energy-Alternate Sources | 356,835 | |||||||
Electronics - 1.2% | ||||||||
Amphenol Corp. — Class A | 1,282 | 167,647 | ||||||
TE Connectivity Ltd. | 1,184 | 143,347 | ||||||
Total Electronics | 310,994 | |||||||
Advertising - 0.6% | ||||||||
Trade Desk, Inc. — Class A* | 186 | 148,986 | ||||||
Office & Business Equipment - 0.5% | ||||||||
Zebra Technologies Corp. — Class A* | 321 | 123,370 | ||||||
Total Common Stocks | ||||||||
(Cost $9,140,593) | 25,174,375 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.9% | ||||||||
J.P. Morgan Securities LLC | $ | 125,760 | 125,760 | |||||
Barclays Capital, Inc. | 52,393 | 52,393 | ||||||
BofA Securities, Inc. | 48,512 | 48,512 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $226,665) | 226,665 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 146,977 | 146,977 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $146,977) | 146,977 | |||||||
Total Investments - 101.3% | ||||||||
(Cost $9,514,235) | $ | 25,548,017 | ||||||
Other Assets & Liabilities, net - (1.3)% | (315,413 | ) | ||||||
Total Net Assets - 100.0% | $ | 25,232,604 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 111 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
TECHNOLOGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 25,174,375 | $ | — | $ | — | $ | 25,174,375 | ||||||||
Repurchase Agreements | — | 226,665 | — | 226,665 | ||||||||||||
Securities Lending Collateral | 146,977 | — | — | 146,977 | ||||||||||||
Total Assets | $ | 25,321,352 | $ | 226,665 | $ | — | $ | 25,548,017 |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TECHNOLOGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $145,590 of securities loaned (cost $9,287,570) | $ | 25,321,352 | ||
Repurchase agreements, at value (cost $226,665) | 226,665 | |||
Receivables: | ||||
Dividends | 7,555 | |||
Foreign tax reclaims | 496 | |||
Securities lending income | 23 | |||
Total assets | 25,556,091 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 146,977 | |||
Fund shares redeemed | 93,271 | |||
Management fees | 17,963 | |||
Transfer agent and administrative fees | 5,685 | |||
Investor service fees | 5,283 | |||
Portfolio accounting fees | 2,113 | |||
Trustees’ fees* | 378 | |||
Miscellaneous | 51,817 | |||
Total liabilities | 323,487 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 25,232,604 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,591,038 | ||
Total distributable earnings (loss) | 16,641,566 | |||
Net assets | $ | 25,232,604 | ||
Capital shares outstanding | 137,129 | |||
Net asset value per share | $ | 184.01 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $442) | $ | 230,915 | ||
Interest | 539 | |||
Income from securities lending, net | 2,749 | |||
Total investment income | 234,203 | |||
Expenses: | ||||
Management fees | 176,605 | |||
Investor service fees | 51,943 | |||
Transfer agent and administrative fees | 67,659 | |||
Professional fees | 38,010 | |||
Portfolio accounting fees | 20,777 | |||
Trustees’ fees* | 4,612 | |||
Custodian fees | 3,290 | |||
Line of credit fees | 28 | |||
Miscellaneous | 15,384 | |||
Total expenses | 378,308 | |||
Net investment loss | (144,105 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 3,996,314 | |||
Net realized gain | 3,996,314 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,553,034 | |||
Net change in unrealized appreciation (depreciation) | 3,553,034 | |||
Net realized and unrealized gain | 7,549,348 | |||
Net increase in net assets resulting from operations | $ | 7,405,243 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
TECHNOLOGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (144,105 | ) | $ | (172,906 | ) | ||
Net realized gain on investments | 3,996,314 | 1,446,636 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 3,553,034 | 5,145,477 | ||||||
Net increase in net assets resulting from operations | 7,405,243 | 6,419,207 | ||||||
Distributions to shareholders | (456,120 | ) | (782,667 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 45,224,648 | 42,992,140 | ||||||
Distributions reinvested | 456,120 | 782,667 | ||||||
Cost of shares redeemed | (49,836,080 | ) | (43,033,120 | ) | ||||
Net increase (decrease) from capital share transactions | (4,155,312 | ) | 741,687 | |||||
Net increase in net assets | 2,793,811 | 6,378,227 | ||||||
Net assets: | ||||||||
Beginning of year | 22,438,793 | 16,060,566 | ||||||
End of year | $ | 25,232,604 | $ | 22,438,793 | ||||
Capital share activity: | ||||||||
Shares sold | 321,700 | 379,634 | ||||||
Shares issued from reinvestment of distributions | 3,116 | 6,598 | ||||||
Shares redeemed | (365,942 | ) | (380,533 | ) | ||||
Net increase (decrease) in shares | (41,126 | ) | 5,699 |
114 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TECHNOLOGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 125.88 | $ | 93.07 | $ | 96.71 | $ | 74.88 | $ | 71.70 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.99 | ) | (.90 | ) | (.63 | ) | (.56 | ) | (.21 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 62.21 | 37.66 | (.43 | ) | 24.71 | 7.78 | ||||||||||||||
Total from investment operations | 61.22 | 36.76 | (1.06 | ) | 24.15 | 7.57 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (3.09 | ) | (3.95 | ) | (2.58 | ) | (2.32 | ) | (4.39 | ) | ||||||||||
Total distributions | (3.09 | ) | (3.95 | ) | (2.58 | ) | (2.32 | ) | (4.39 | ) | ||||||||||
Net asset value, end of period | $ | 184.01 | $ | 125.88 | $ | 93.07 | $ | 96.71 | $ | 74.88 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 49.25 | % | 39.75 | % | (1.49 | %) | 32.63 | % | 11.07 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 25,233 | $ | 22,439 | $ | 16,061 | $ | 22,940 | $ | 18,156 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.69 | %) | (0.79 | %) | (0.60 | %) | (0.64 | %) | (0.29 | %) | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.72 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 192 | % | 188 | % | 178 | % | 200 | % | 321 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
TELECOMMUNICATIONS FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in the development, manufacture, or sale of communications services or communications equipment (“Telecommunications Companies”).
For the year ended December 31, 2020, Telecommunications Fund returned 9.49%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Telecommunications Services Index returned 23.61%.
The industries contributing the most were the wireless telecommunication services industry, the communications equipment industry, and the alternative carriers industry. The integrated telecommunication services industry was the only detractor from return for the period.
T-Mobile US, Inc., Sprint Corp., and Ubiquiti, Inc., were the strongest performers for the year. AT&T, Inc., ViaSat, Inc., and EchoStar Corp. Class A detracted the most from performance during the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 27, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Verizon Communications, Inc. | 10.4% |
AT&T, Inc. | 9.3% |
Cisco Systems, Inc. | 9.1% |
T-Mobile US, Inc. | 8.8% |
Comcast Corp. — Class A | 5.2% |
Charter Communications, Inc. — Class A | 4.2% |
Motorola Solutions, Inc. | 3.6% |
Arista Networks, Inc. | 3.1% |
Ubiquiti, Inc. | 2.8% |
Liberty Broadband Corp. — Class C | 2.7% |
Top Ten Total | 59.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
116 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Telecommunications Fund | 9.49% | 7.85% | 3.94% |
S&P 500 Telecommunication Services Index | 23.61% | 11.84% | 10.07% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Telecommunication Services Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 117 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
TELECOMMUNICATIONS FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.7% | ||||||||
Telecommunications - 73.7% | ||||||||
Verizon Communications, Inc. | 5,775 | $ | 339,281 | |||||
AT&T, Inc. | 10,578 | 304,223 | ||||||
Cisco Systems, Inc. | 6,598 | 295,261 | ||||||
T-Mobile US, Inc.* | 2,124 | 286,421 | ||||||
Motorola Solutions, Inc. | 688 | 117,001 | ||||||
Arista Networks, Inc.* | 344 | 99,956 | ||||||
Ubiquiti, Inc. | 328 | 91,351 | ||||||
CenturyLink, Inc. | 7,171 | 69,917 | ||||||
Ciena Corp.* | 1,191 | 62,944 | ||||||
Juniper Networks, Inc. | 2,615 | 58,864 | ||||||
Iridium Communications, Inc.* | 1,290 | 50,729 | ||||||
America Movil SAB de CV — Class L ADR | 2,857 | 41,541 | ||||||
Viavi Solutions, Inc.* | 2,730 | 40,882 | ||||||
BCE, Inc. | 939 | 40,189 | ||||||
Vodafone Group plc ADR | 2,413 | 39,766 | ||||||
Acacia Communications, Inc.* | 528 | 38,523 | ||||||
Vonage Holdings Corp.* | 2,956 | 38,059 | ||||||
Rogers Communications, Inc. — Class B | 811 | 37,785 | ||||||
TELUS Corp. | 1,902 | 37,660 | ||||||
CommScope Holding Company, Inc.* | 2,632 | 35,269 | ||||||
ViaSat, Inc.* | 1,041 | 33,989 | ||||||
Telephone & Data Systems, Inc. | 1,711 | 31,773 | ||||||
Shenandoah Telecommunications Co. | 733 | 31,702 | ||||||
InterDigital, Inc. | 477 | 28,944 | ||||||
Infinera Corp.* | 2,739 | 28,705 | ||||||
Calix, Inc.* | 869 | 25,862 | ||||||
Plantronics, Inc. | 930 | 25,138 | ||||||
Inseego Corp.*,1 | 1,587 | 24,551 | ||||||
NETGEAR, Inc.* | 575 | 23,362 | ||||||
Cincinnati Bell, Inc.* | 1,247 | 19,054 | ||||||
Total Telecommunications | 2,398,702 | |||||||
Media - 18.9% | ||||||||
Comcast Corp. — Class A | 3,233 | 169,409 | ||||||
Charter Communications, Inc. — Class A* | 206 | 136,279 | ||||||
Liberty Broadband Corp. — Class C* | 556 | 88,054 | ||||||
Altice USA, Inc. — Class A* | 1,359 | 51,465 | ||||||
DISH Network Corp. — Class A* | 1,505 | 48,672 | ||||||
Liberty Global plc — Class C* | 1,939 | 45,857 | ||||||
Cable One, Inc. | 18 | 40,099 | ||||||
Liberty Latin America Ltd. — Class C* | 3,151 | 34,945 | ||||||
Total Media | 614,780 | |||||||
Internet - 3.3% | ||||||||
F5 Networks, Inc.* | 398 | 70,024 | ||||||
Cogent Communications Holdings, Inc. | 594 | 35,563 | ||||||
Total Internet | 105,587 | |||||||
Computers - 2.7% | ||||||||
Lumentum Holdings, Inc.* | 608 | 57,638 | ||||||
NetScout Systems, Inc.* | 1,101 | 30,190 | ||||||
Total Computers | 87,828 | |||||||
Software - 1.1% | ||||||||
Bandwidth, Inc. — Class A* | 240 | 36,881 | ||||||
Total Common Stocks | ||||||||
(Cost $2,258,525) | 3,243,778 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.5% | ||||||||
J.P. Morgan Securities LLC | $ | 9,567 | 9,567 | |||||
Barclays Capital, Inc. | 3,986 | 3,986 | ||||||
BofA Securities, Inc. | 3,690 | 3,690 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $17,243) | 17,243 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 19,419 | 19,419 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $19,419) | 19,419 | |||||||
Total Investments - 100.8% | ||||||||
(Cost $2,295,187) | $ | 3,280,440 | ||||||
Other Assets & Liabilities, net - (0.8)% | (26,299 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,254,141 |
118 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
TELECOMMUNICATIONS FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,243,778 | $ | — | $ | — | $ | 3,243,778 | ||||||||
Repurchase Agreements | — | 17,243 | — | 17,243 | ||||||||||||
Securities Lending Collateral | 19,419 | — | — | 19,419 | ||||||||||||
Total Assets | $ | 3,263,197 | $ | 17,243 | $ | — | $ | 3,280,440 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 119 |
TELECOMMUNICATIONS FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $18,409 of securities loaned (cost $2,277,944) | $ | 3,263,197 | ||
Repurchase agreements, at value (cost $17,243) | 17,243 | |||
Cash | 811 | |||
Receivables: | ||||
Dividends | 4,086 | |||
Securities lending income | 37 | |||
Total assets | 3,285,374 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 19,419 | |||
Professional fees | 3,547 | |||
Management fees | 2,304 | |||
Fund shares redeemed | 1,202 | |||
Transfer agent and administrative fees | 729 | |||
Investor service fees | 678 | |||
Portfolio accounting fees | 271 | |||
Trustees’ fees* | 48 | |||
Miscellaneous | 3,035 | |||
Total liabilities | 31,233 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 3,254,141 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,083,549 | ||
Total distributable earnings (loss) | 170,592 | |||
Net assets | $ | 3,254,141 | ||
Capital shares outstanding | 49,283 | |||
Net asset value per share | $ | 66.03 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $813) | $ | 71,452 | ||
Interest | 68 | |||
Income from securities lending, net | 54 | |||
Total investment income | 71,574 | |||
Expenses: | ||||
Management fees | 23,142 | |||
Investor service fees | 6,806 | |||
Transfer agent and administrative fees | 9,066 | |||
Professional fees | 5,071 | |||
Portfolio accounting fees | 2,723 | |||
Trustees’ fees* | 679 | |||
Custodian fees | 415 | |||
Line of credit fees | 19 | |||
Miscellaneous | 1,713 | |||
Total expenses | 49,634 | |||
Net investment income | 21,940 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (148,445 | ) | ||
Net realized loss | (148,445 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 104,851 | |||
Net change in unrealized appreciation (depreciation) | 104,851 | |||
Net realized and unrealized loss | (43,594 | ) | ||
Net decrease in net assets resulting from operations | $ | (21,654 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
120 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TELECOMMUNICATIONS FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 21,940 | $ | 20,214 | ||||
Net realized loss on investments | (148,445 | ) | (59,780 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 104,851 | 402,401 | ||||||
Net increase (decrease) in net assets resulting from operations | (21,654 | ) | 362,835 | |||||
Distributions to shareholders | (20,039 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 6,222,410 | 8,496,767 | ||||||
Distributions reinvested | 20,039 | — | ||||||
Cost of shares redeemed | (6,196,659 | ) | (8,839,102 | ) | ||||
Net increase (decrease) from capital share transactions | 45,790 | (342,335 | ) | |||||
Net increase in net assets | 4,097 | 20,500 | ||||||
Net assets: | ||||||||
Beginning of year | 3,250,044 | 3,229,544 | ||||||
End of year | $ | 3,254,141 | $ | 3,250,044 | ||||
Capital share activity: | ||||||||
Shares sold | 102,385 | 143,164 | ||||||
Shares issued from reinvestment of distributions | 328 | — | ||||||
Shares redeemed | (106,843 | ) | (149,841 | ) | ||||
Net decrease in shares | (4,130 | ) | (6,677 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
TELECOMMUNICATIONS FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 60.85 | $ | 53.75 | $ | 58.48 | $ | 57.03 | $ | 48.71 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .48 | .37 | .57 | .37 | .45 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 5.27 | c | 6.73 | (3.51 | ) | 2.86 | 8.03 | |||||||||||||
Total from investment operations | 5.75 | 7.10 | (2.94 | ) | 3.23 | 8.48 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.57 | ) | — | (.47 | ) | (.77 | ) | (.16 | ) | |||||||||||
Net realized gains | — | — | (1.32 | ) | (1.01 | ) | — | |||||||||||||
Total distributions | (.57 | ) | — | (1.79 | ) | (1.78 | ) | (.16 | ) | |||||||||||
Net asset value, end of period | $ | 66.03 | $ | 60.85 | $ | 53.75 | $ | 58.48 | $ | 57.03 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 9.49 | % | 13.21 | % | (5.29 | %) | 5.85 | % | 17.40 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,254 | $ | 3,250 | $ | 3,230 | $ | 3,514 | $ | 5,384 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.81 | % | 0.63 | % | 0.97 | % | 0.65 | % | 0.86 | % | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.73 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 258 | % | 263 | % | 365 | % | 372 | % | 410 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of investments of the Fund. |
122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
TRANSPORTATION FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies engaged in providing transportation services or companies engaged in the design, manufacture, distribution, or sale of transportation equipment (“Transportation Companies”).
For the year ended December 31, 2020, Transportation Fund returned 40.62%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Industrials Index returned 11.06%.
The automobile manufacturers industry was the largest contributor to the Fund’s return for the period, followed by the air freight & logistics industry and the trucking industry. The largest detractors from return were the airlines industry, marine industry, and tires & rubber industry.
Tesla, Inc., United Parcel Services, Inc. Class B, and Uber Technologies, Inc. were the biggest contributors to performance for the year. Delta Air Lines, Inc., Ford Motor Co., and United Airlines Holdings, Inc. detracted the most from performance during the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 11, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Tesla, Inc. | 9.6% |
Union Pacific Corp. | 5.7% |
United Parcel Service, Inc. — Class B | 5.4% |
Uber Technologies, Inc. | 4.3% |
CSX Corp. | 3.9% |
Norfolk Southern Corp. | 3.7% |
General Motors Co. | 3.7% |
FedEx Corp. | 3.6% |
Southwest Airlines Co. | 2.5% |
Delta Air Lines, Inc. | 2.4% |
Top Ten Total | 44.8% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 123 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Transportation Fund | 40.62% | 14.12% | 12.39% |
S&P 500 Industrials Index | 11.06% | 12.38% | 11.96% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Industrials Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
124 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
TRANSPORTATION FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Transportation - 43.5% | ||||||||
Union Pacific Corp. | 2,144 | $ | 446,424 | |||||
United Parcel Service, Inc. — Class B | 2,520 | 424,368 | ||||||
CSX Corp. | 3,395 | 308,096 | ||||||
Norfolk Southern Corp. | 1,245 | 295,824 | ||||||
FedEx Corp. | 1,104 | 286,621 | ||||||
Old Dominion Freight Line, Inc. | 931 | 181,713 | ||||||
Kansas City Southern | 804 | 164,121 | ||||||
Expeditors International of Washington, Inc. | 1,520 | 144,567 | ||||||
J.B. Hunt Transport Services, Inc. | 1,005 | 137,333 | ||||||
CH Robinson Worldwide, Inc. | 1,416 | 132,920 | ||||||
XPO Logistics, Inc.* | 1,021 | 121,703 | ||||||
ZTO Express Cayman, Inc. ADR | 3,508 | 102,293 | ||||||
Knight-Swift Transportation Holdings, Inc. | 2,349 | 98,235 | ||||||
Canadian Pacific Railway Ltd. | 278 | 96,380 | ||||||
Canadian National Railway Co. | 857 | 94,141 | ||||||
Landstar System, Inc. | 613 | 82,547 | ||||||
Saia, Inc.* | 436 | 78,829 | ||||||
Kirby Corp.* | 1,323 | 68,571 | ||||||
Ryder System, Inc. | 1,068 | 65,960 | ||||||
Werner Enterprises, Inc. | 1,528 | 59,928 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 810 | 44,177 | ||||||
Total Transportation | 3,434,751 | |||||||
Auto Manufacturers - 19.5% | ||||||||
Tesla, Inc.* | 1,070 | 755,067 | ||||||
General Motors Co. | 6,948 | 289,315 | ||||||
NIO, Inc. ADR* | 3,600 | 175,464 | ||||||
Fiat Chrysler Automobiles N.V. | 4,919 | 88,985 | ||||||
Ferrari N.V. | 387 | 88,824 | ||||||
Nikola Corp.*,1 | 5,730 | 87,440 | ||||||
Workhorse Group, Inc.*,1 | 2,820 | 55,779 | ||||||
Total Auto Manufacturers | 1,540,874 | |||||||
Airlines - 13.9% | ||||||||
Southwest Airlines Co. | 4,184 | 195,016 | ||||||
Delta Air Lines, Inc. | 4,634 | 186,333 | ||||||
United Airlines Holdings, Inc.* | 3,045 | 131,696 | ||||||
American Airlines Group, Inc.1 | 6,867 | 108,293 | ||||||
Alaska Air Group, Inc. | 1,869 | 97,188 | ||||||
Ryanair Holdings plc ADR* | 819 | 90,074 | ||||||
Copa Holdings S.A. — Class A | 1,117 | 86,266 | ||||||
JetBlue Airways Corp.* | 5,686 | 82,674 | ||||||
Allegiant Travel Co. — Class A | 360 | 68,126 | ||||||
Spirit Airlines, Inc.*,1 | 2,193 | 53,619 | ||||||
Total Airlines | 1,099,285 | |||||||
Auto Parts & Equipment - 12.2% | ||||||||
Aptiv plc | 915 | 119,215 | ||||||
BorgWarner, Inc. | 2,929 | 113,177 | ||||||
Lear Corp. | 681 | 108,299 | ||||||
Gentex Corp. | 3,133 | 106,303 | ||||||
Magna International, Inc. | 1,380 | 97,704 | ||||||
Autoliv, Inc. | 970 | 89,337 | ||||||
Fox Factory Holding Corp.* | 716 | 75,688 | ||||||
Visteon Corp.* | 530 | 66,526 | ||||||
Adient plc* | 1,878 | 65,298 | ||||||
Dana, Inc. | 3,069 | 59,907 | ||||||
Goodyear Tire & Rubber Co. | 5,468 | 59,656 | ||||||
Total Auto Parts & Equipment | 961,110 | |||||||
Internet - 6.1% | ||||||||
Uber Technologies, Inc.* | 6,666 | 339,966 | ||||||
Lyft, Inc. — Class A* | 2,832 | 139,136 | ||||||
Total Internet | 479,102 | |||||||
Home Builders - 2.5% | ||||||||
Thor Industries, Inc. | 903 | 83,970 | ||||||
LCI Industries | 490 | 63,543 | ||||||
Winnebago Industries, Inc. | 870 | 52,148 | ||||||
Total Home Builders | 199,661 | |||||||
Leisure Time - 1.1% | ||||||||
Harley-Davidson, Inc. | 2,476 | 90,869 | ||||||
Commercial Services - 0.8% | ||||||||
Avis Budget Group, Inc.* | 1,626 | 60,650 | ||||||
Total Common Stocks | ||||||||
(Cost $4,132,343) | 7,866,302 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
J.P. Morgan Securities LLC | $ | 19,692 | 19,692 | |||||
Barclays Capital, Inc. | 8,204 | 8,204 | ||||||
BofA Securities, Inc. | 7,596 | 7,596 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $35,492) | 35,492 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 2.7% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 214,937 | 214,937 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $214,937) | 214,937 | |||||||
Total Investments - 102.7% | ||||||||
(Cost $4,382,772) | $ | 8,116,731 | ||||||
Other Assets & Liabilities, net - (2.7)% | (216,855 | ) | ||||||
Total Net Assets - 100.0% | $ | 7,899,876 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
TRANSPORTATION FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 7,866,302 | $ | — | $ | — | $ | 7,866,302 | ||||||||
Repurchase Agreements | — | 35,492 | — | 35,492 | ||||||||||||
Securities Lending Collateral | 214,937 | — | — | 214,937 | ||||||||||||
Total Assets | $ | 8,081,239 | $ | 35,492 | $ | — | $ | 8,116,731 |
126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TRANSPORTATION FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $200,373 of securities loaned (cost $4,347,280) | $ | 8,081,239 | ||
Repurchase agreements, at value (cost $35,492) | 35,492 | |||
Cash | 282 | |||
Receivables: | ||||
Securities sold | 78,870 | |||
Dividends | 1,662 | |||
Securities lending income | 205 | |||
Foreign tax reclaims | 46 | |||
Fund shares sold | 12 | |||
Total assets | 8,197,808 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 214,937 | |||
Fund shares redeemed | 56,188 | |||
Management fees | 5,704 | |||
Transfer agent and administrative fees | 1,805 | |||
Investor service fees | 1,678 | |||
Portfolio accounting fees | 671 | |||
Trustees’ fees* | 123 | |||
Miscellaneous | 16,826 | |||
Total liabilities | 297,932 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 7,899,876 | ||
Net assets consist of: | ||||
Paid in capital | $ | 4,228,766 | ||
Total distributable earnings (loss) | 3,671,110 | |||
Net assets | $ | 7,899,876 | ||
Capital shares outstanding | 72,233 | |||
Net asset value per share | $ | 109.37 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $599) | $ | 45,129 | ||
Interest | 129 | |||
Income from securities lending, net | 896 | |||
Total investment income | 46,154 | |||
Expenses: | ||||
Management fees | 40,781 | |||
Investor service fees | 11,994 | |||
Transfer agent and administrative fees | 15,160 | |||
Professional fees | 8,513 | |||
Portfolio accounting fees | 4,798 | |||
Trustees’ fees* | 887 | |||
Custodian fees | 697 | |||
Line of credit fees | 28 | |||
Miscellaneous | 4,450 | |||
Total expenses | 87,308 | |||
Net investment loss | (41,154 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 648,487 | |||
Net realized gain | 648,487 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,396,690 | |||
Net change in unrealized appreciation (depreciation) | 1,396,690 | |||
Net realized and unrealized gain | 2,045,177 | |||
Net increase in net assets resulting from operations | $ | 2,004,023 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 127 |
TRANSPORTATION FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (41,154 | ) | $ | 4,820 | |||
Net realized gain on investments | 648,487 | 609,353 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,396,690 | 55,879 | ||||||
Net increase in net assets resulting from operations | 2,004,023 | 670,052 | ||||||
Distributions to shareholders | (136,588 | ) | (2,551 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 16,952,118 | 11,677,900 | ||||||
Distributions reinvested | 136,588 | 2,551 | ||||||
Cost of shares redeemed | (15,779,384 | ) | (11,792,273 | ) | ||||
Net increase (decrease) from capital share transactions | 1,309,322 | (111,822 | ) | |||||
Net increase in net assets | 3,176,757 | 555,679 | ||||||
Net assets: | ||||||||
Beginning of year | 4,723,119 | 4,167,440 | ||||||
End of year | $ | 7,899,876 | $ | 4,723,119 | ||||
Capital share activity: | ||||||||
Shares sold | 197,784 | 151,678 | ||||||
Shares issued from reinvestment of distributions | 1,768 | 33 | ||||||
Shares redeemed | (185,869 | ) | (156,293 | ) | ||||
Net increase (decrease) in shares | 13,683 | (4,582 | ) |
128 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
TRANSPORTATION FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 80.67 | $ | 66.01 | $ | 86.15 | $ | 70.81 | $ | 100.87 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.72 | ) | .09 | (.16 | ) | (.43 | ) | .16 | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 32.30 | 14.60 | (16.55 | ) | 15.99 | (20.23 | ) | |||||||||||||
Total from investment operations | 31.58 | 14.69 | (16.71 | ) | 15.56 | (20.07 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.14 | ) | — | — | (.22 | ) | — | |||||||||||||
Net realized gains | (2.74 | ) | (.03 | ) | (3.43 | ) | — | (9.99 | ) | |||||||||||
Total distributions | (2.88 | ) | (.03 | ) | (3.43 | ) | (.22 | ) | (9.99 | ) | ||||||||||
Net asset value, end of period | $ | 109.37 | $ | 80.67 | $ | 66.01 | $ | 86.15 | $ | 70.81 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 40.62 | % | 22.24 | % | (20.05 | %) | 22.02 | % | 15.43 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,900 | $ | 4,723 | $ | 4,167 | $ | 11,739 | $ | 12,883 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.86 | %) | 0.11 | % | (0.19 | %) | (0.56 | %) | 0.73 | % | ||||||||||
Total expenses | 1.82 | % | 1.83 | % | 1.72 | % | 1.70 | % | 1.66 | % | ||||||||||
Portfolio turnover rate | 373 | % | 277 | % | 237 | % | 308 | % | 174 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 129 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
UTILITIES FUND
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that operate public utilities (“Utilities Companies”).
For the year ended December 31, 2020, Utilities Fund returned -5.13%, compared with a return of 18.40% for the S&P 500 Index. The S&P 500 Utilities Index returned 0.48%.
The water utilities industry was the largest contributor to return for the period, followed by the independent power producers & energy traders industry and the renewable electricity industry. The multi-utilities industry, electric utilities industry, and gas utilities industry were the largest detractors from return.
NextEra Energy, Inc., AES Corp., and American Water Works Co., Inc. were the best-performing holdings over the one-year period. First Energy Corp., Consolidated Edison, Inc., and American Electric Power Company, Inc. were the main detractors.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 2, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
NextEra Energy, Inc. | 6.3% |
Duke Energy Corp. | 4.2% |
Southern Co. | 4.2% |
Dominion Energy, Inc. | 4.0% |
American Electric Power Company, Inc. | 3.3% |
Exelon Corp. | 3.2% |
Sempra Energy | 3.0% |
Xcel Energy, Inc. | 3.0% |
Public Service Enterprise Group, Inc. | 2.8% |
Eversource Energy | 2.8% |
Top Ten Total | 36.8% |
“Ten Largest Holdings” excludes any temporary cash investments. |
130 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Utilities Fund | (5.13%) | 8.64% | 8.70% |
S&P 500 Utilities Index | 0.48% | 11.50% | 11.27% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Utilities Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 131 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
UTILITIES FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.6% | ||||||||
Electric - 83.6% | ||||||||
NextEra Energy, Inc. | 9,686 | $ | 747,275 | |||||
Duke Energy Corp. | 5,456 | 499,551 | ||||||
Southern Co. | 8,057 | 494,942 | ||||||
Dominion Energy, Inc. | 6,321 | 475,339 | ||||||
American Electric Power Company, Inc. | 4,682 | 389,870 | ||||||
Exelon Corp. | 9,033 | 381,373 | ||||||
Sempra Energy | 2,819 | 359,169 | ||||||
Xcel Energy, Inc. | 5,353 | 356,885 | ||||||
Public Service Enterprise Group, Inc. | 5,758 | 335,691 | ||||||
Eversource Energy | 3,849 | 332,977 | ||||||
WEC Energy Group, Inc. | 3,592 | 330,572 | ||||||
Consolidated Edison, Inc. | 4,329 | 312,857 | ||||||
PG&E Corp.* | 24,820 | 309,257 | ||||||
PPL Corp. | 10,464 | 295,085 | ||||||
Edison International | 4,691 | 294,689 | ||||||
DTE Energy Co. | 2,426 | 294,541 | ||||||
Entergy Corp. | 2,807 | 280,251 | ||||||
Ameren Corp. | 3,379 | 263,765 | ||||||
CMS Energy Corp. | 4,244 | 258,926 | ||||||
AES Corp. | 10,337 | 242,920 | ||||||
FirstEnergy Corp. | 7,931 | 242,768 | ||||||
Avangrid, Inc. | 5,029 | 228,568 | ||||||
Evergy, Inc. | 3,989 | 221,429 | ||||||
Alliant Energy Corp. | 4,287 | 220,909 | ||||||
CenterPoint Energy, Inc. | 9,843 | 213,003 | ||||||
Vistra Corp. | 10,414 | 204,739 | ||||||
NRG Energy, Inc. | 5,279 | 198,226 | ||||||
Pinnacle West Capital Corp. | 2,345 | 187,483 | ||||||
OGE Energy Corp. | 4,970 | 158,344 | ||||||
Ormat Technologies, Inc. | 1,530 | 138,128 | ||||||
IDACORP, Inc. | 1,355 | 130,121 | ||||||
Black Hills Corp. | 1,945 | 119,520 | ||||||
PNM Resources, Inc. | 2,462 | 119,481 | ||||||
Portland General Electric Co. | 2,779 | 118,858 | ||||||
NorthWestern Corp. | 1,856 | 108,223 | ||||||
Total Electric | 9,865,735 | |||||||
Gas - 9.2% | ||||||||
Atmos Energy Corp. | 2,159 | 206,033 | ||||||
NiSource, Inc. | 8,109 | 186,020 | ||||||
UGI Corp. | 4,647 | 162,459 | ||||||
ONE Gas, Inc. | 1,539 | 118,149 | ||||||
National Fuel Gas Co. | 2,752 | 113,190 | ||||||
Southwest Gas Holdings, Inc. | 1,854 | 112,631 | ||||||
Spire, Inc. | 1,690 | 108,228 | ||||||
South Jersey Industries, Inc. | 4,040 | 87,062 | ||||||
Total Gas | 1,093,772 | |||||||
Water - 4.5% | ||||||||
American Water Works Company, Inc. | 2,088 | 320,445 | ||||||
Essential Utilities, Inc. | 4,448 | 210,346 | ||||||
Total Water | 530,791 | |||||||
Building Materials - 1.2% | ||||||||
MDU Resources Group, Inc. | 5,228 | 137,705 | ||||||
Energy-Alternate Sources - 1.1% | ||||||||
Sunnova Energy International, Inc.* | 2,870 | 129,523 | ||||||
Total Common Stocks | ||||||||
(Cost $5,504,072) | 11,757,526 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.5% | ||||||||
J.P. Morgan Securities LLC | $ | 30,600 | 30,600 | |||||
Barclays Capital, Inc. | 12,749 | 12,749 | ||||||
BofA Securities, Inc. | 11,804 | 11,804 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $55,153) | 55,153 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $5,559,225) | $ | 11,812,679 | ||||||
Other Assets & Liabilities, net - (0.1)% | (11,223 | ) | ||||||
Total Net Assets - 100.0% | $ | 11,801,456 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
132 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
UTILITIES FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 11,757,526 | $ | — | $ | — | $ | 11,757,526 | ||||||||
Repurchase Agreements | — | 55,153 | — | 55,153 | ||||||||||||
Total Assets | $ | 11,757,526 | $ | 55,153 | $ | — | $ | 11,812,679 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 133 |
UTILITIES FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value (cost $5,504,072) | $ | 11,757,526 | ||
Repurchase agreements, at value (cost $55,153) | 55,153 | |||
Receivables: | ||||
Dividends | 24,707 | |||
Fund shares sold | 4,172 | |||
Total assets | 11,841,558 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 18,189 | |||
Management fees | 8,436 | |||
Transfer agent and administrative fees | 2,670 | |||
Investor service fees | 2,481 | |||
Portfolio accounting fees | 992 | |||
Fund shares redeemed | 222 | |||
Trustees’ fees* | 183 | |||
Miscellaneous | 6,929 | |||
Total liabilities | 40,102 | |||
Commitments and contingent liabilities (Note 10) | — | |||
Net assets | $ | 11,801,456 | ||
Net assets consist of: | ||||
Paid in capital | $ | 6,873,518 | ||
Total distributable earnings (loss) | 4,927,938 | |||
Net assets | $ | 11,801,456 | ||
Capital shares outstanding | 381,550 | |||
Net asset value per share | $ | 30.93 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $2) | $ | 441,258 | ||
Interest | 455 | |||
Total investment income | 441,713 | |||
Expenses: | ||||
Management fees | 118,680 | |||
Investor service fees | 34,906 | |||
Transfer agent and administrative fees | 47,669 | |||
Professional fees | 26,137 | |||
Portfolio accounting fees | 13,962 | |||
Trustees’ fees* | 4,013 | |||
Custodian fees | 2,188 | |||
Line of credit fees | 29 | |||
Miscellaneous | 6,722 | |||
Total expenses | 254,306 | |||
Net investment income | 187,407 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (77,867 | ) | ||
Net realized loss | (77,867 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,747,746 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,747,746 | ) | ||
Net realized and unrealized loss | (1,825,613 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,638,206 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
UTILITIES FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 187,407 | $ | 252,875 | ||||
Net realized gain (loss) on investments | (77,867 | ) | 700,342 | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,747,746 | ) | 2,213,251 | |||||
Net increase (decrease) in net assets resulting from operations | (1,638,206 | ) | 3,166,468 | |||||
Distributions to shareholders | (476,044 | ) | (49,561 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 22,322,981 | 37,710,438 | ||||||
Distributions reinvested | 476,044 | 49,561 | ||||||
Cost of shares redeemed | (24,918,248 | ) | (44,162,382 | ) | ||||
Net decrease from capital share transactions | (2,119,223 | ) | (6,402,383 | ) | ||||
Net decrease in net assets | (4,233,473 | ) | (3,285,476 | ) | ||||
Net assets: | ||||||||
Beginning of year | 16,034,929 | 19,320,405 | ||||||
End of year | $ | 11,801,456 | $ | 16,034,929 | ||||
Capital share activity: | ||||||||
Shares sold | 689,994 | 1,193,047 | ||||||
Shares issued from reinvestment of distributions | 16,275 | 1,558 | ||||||
Shares redeemed | (799,726 | ) | (1,399,094 | ) | ||||
Net decrease in shares | (93,457 | ) | (204,489 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 135 |
UTILITIES FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 33.76 | $ | 28.43 | $ | 27.97 | $ | 26.24 | $ | 22.86 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .41 | .39 | .43 | .42 | .36 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (2.20 | ) | 5.01 | .62 | c | 2.42 | 3.38 | |||||||||||||
Total from investment operations | (1.79 | ) | 5.40 | 1.05 | 2.84 | 3.74 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.55 | ) | (.07 | ) | (.46 | ) | (.55 | ) | (.17 | ) | ||||||||||
Net realized gains | (.49 | ) | — | (.13 | ) | (.56 | ) | (.19 | ) | |||||||||||
Total distributions | (1.04 | ) | (.07 | ) | (.59 | ) | (1.11 | ) | (.36 | ) | ||||||||||
Net asset value, end of period | $ | 30.93 | $ | 33.76 | $ | 28.43 | $ | 27.97 | $ | 26.24 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (5.13 | %) | 19.01 | % | 3.78 | % | 11.02 | % | 16.34 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,801 | $ | 16,035 | $ | 19,320 | $ | 14,670 | $ | 15,242 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.34 | % | 1.22 | % | 1.54 | % | 1.48 | % | 1.39 | % | ||||||||||
Total expenses | 1.82 | % | 1.82 | % | 1.73 | % | 1.70 | % | 1.65 | % | ||||||||||
Portfolio turnover rate | 151 | % | 144 | % | 299 | % | 183 | % | 234 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the year because of the sale and repurchase of fund shares in relation to fluctuating market value of investments of the Fund. |
136 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust may issue an unlimited number of authorized shares. The Trust accounts for the assets of each Fund separately. At December 31, 2020, the Trust consisted of forty-nine funds. The Trust offers shares of the funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment |
Banking Fund | Diversified |
Basic Materials Fund | Diversified |
Biotechnology Fund | Non-diversified |
Consumer Products Fund | Diversified |
Electronics Fund | Non-diversified |
Energy Fund | Diversified |
Energy Services Fund | Non-diversified |
Financial Services Fund | Diversified |
Health Care Fund | Diversified |
Internet Fund | Diversified |
Leisure Fund | Diversified |
Precious Metals Fund | Non-diversified |
Real Estate Fund | Diversified |
Retailing Fund | Diversified |
Technology Fund | Diversified |
Telecommunications Fund | Non-diversified |
Transportation Fund | Diversified |
Utilities Fund | Diversified |
The Funds invest in a specific industry sector. To the extent that investments are concentrated in a single sector, the Funds are subject to legislative or regulatory changes, adverse market conditions and/or increased competition affecting such sector.
The Funds seek capital appreciation and invest substantially all of their assets in equity securities of companies involved in their sector.
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
THE RYDEX FUNDS ANNUAL REPORT | 137 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds are valued at the last quoted sale price.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis.
(b) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain or loss and unrealized appreciation or depreciation on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized appreciation and depreciation arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(c) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statement of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2020, if any, are disclosed in the Funds’ Statement of Assets and Liabilities.
(d) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
138 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
(e) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(f) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.09% at December 31, 2020.
(g) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees | |||
Banking Fund | 0.85 | % | ||
Basic Materials Fund | 0.85 | % | ||
Biotechnology Fund | 0.85 | % | ||
Consumer Products Fund | 0.85 | % | ||
Electronics Fund | 0.85 | % | ||
Energy Fund | 0.85 | % | ||
Energy Services Fund | 0.85 | % | ||
Financial Services Fund | 0.85 | % | ||
Health Care Fund | 0.85 | % | ||
Internet Fund | 0.85 | % | ||
Leisure Fund | 0.85 | % | ||
Precious Metals Fund | 0.75 | % | ||
Real Estate Fund | 0.85 | % | ||
Retailing Fund | 0.85 | % | ||
Technology Fund | 0.85 | % | ||
Telecommunications Fund | 0.85 | % | ||
Transportation Fund | 0.85 | % | ||
Utilities Fund | 0.85 | % |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs.
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
THE RYDEX FUNDS ANNUAL REPORT | 139 |
NOTES TO FINANCIAL STATEMENTS (continued) |
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
Note 3 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2020 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Banking Fund | $ | 50,080 | $ | — | $ | 50,080 | ||||||
Basic Materials Fund | 118,312 | 4,970 | 123,282 | |||||||||
Biotechnology Fund | 497,628 | 1,317,400 | 1,815,028 | |||||||||
Consumer Products Fund | 361,621 | 23,338 | 384,959 | |||||||||
Electronics Fund | 143,071 | — | 143,071 | |||||||||
Energy Fund | 99,610 | — | 99,610 | |||||||||
Energy Services Fund | 20,199 | — | 20,199 | |||||||||
Financial Services Fund | 273,816 | 74,202 | 348,018 | |||||||||
Health Care Fund | — | 517,189 | 517,189 | |||||||||
Internet Fund | 3,907 | 203,727 | 207,634 | |||||||||
Leisure Fund | 176,143 | 264 | 176,407 | |||||||||
Precious Metals Fund | 1,145,954 | — | 1,145,954 | |||||||||
Real Estate Fund | 437,926 | — | 437,926 | |||||||||
Technology Fund | 299,686 | 156,434 | 456,120 | |||||||||
Telecommunications Fund | 20,039 | — | 20,039 | |||||||||
Transportation Fund | 6,788 | 129,800 | 136,588 | |||||||||
Utilities Fund | 252,875 | 223,169 | 476,044 |
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Banking Fund | $ | 40,316 | $ | — | $ | 40,316 | ||||||
Basic Materials Fund | 15,290 | 284,073 | 299,363 | |||||||||
Biotechnology Fund | — | 553,949 | 553,949 | |||||||||
Consumer Products Fund | 154,589 | 37,342 | 191,931 | |||||||||
Electronics Fund | — | 94,380 | 94,380 | |||||||||
Energy Fund | 18,218 | — | 18,218 | |||||||||
Financial Services Fund | 89,472 | 418,140 | 507,612 | |||||||||
Health Care Fund | — | 408,723 | 408,723 | |||||||||
Leisure Fund | 23,728 | 43,247 | 66,975 | |||||||||
Real Estate Fund | 262,927 | 129,728 | 392,655 | |||||||||
Technology Fund | — | 782,667 | 782,667 | |||||||||
Transportation Fund | — | 2,551 | 2,551 | |||||||||
Utilities Fund | 49,561 | — | 49,561 |
140 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2020 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Other | Total | ||||||||||||||||||
Banking Fund | $ | 53,477 | $ | — | $ | 904,411 | $ | (447,456 | ) | $ | — | $ | 510,432 | |||||||||||
Basic Materials Fund | 317,591 | — | 3,126,879 | — | — | 3,444,470 | ||||||||||||||||||
Biotechnology Fund | 1,075,198 | 945,154 | 11,740,514 | — | — | 13,760,866 | ||||||||||||||||||
Consumer Products Fund | 128,528 | — | 6,143,496 | — | — | 6,272,024 | ||||||||||||||||||
Electronics Fund | 362,868 | 335,106 | 7,460,757 | — | — | 8,158,731 | ||||||||||||||||||
Energy Fund | 142,921 | — | 558,191 | (8,543,957 | ) | — | (7,842,845 | ) | ||||||||||||||||
Energy Services Fund | 13,358 | — | (1,198,115 | ) | (9,269,563 | ) | — | (10,454,320 | ) | |||||||||||||||
Financial Services Fund | 98,835 | 294,131 | 2,498,235 | — | 7,202 | 2,898,403 | ||||||||||||||||||
Health Care Fund | 399,429 | 793,860 | 10,805,047 | — | — | 11,998,336 | ||||||||||||||||||
Internet Fund | 932,998 | 409,954 | 7,430,520 | — | — | 8,773,472 | ||||||||||||||||||
Leisure Fund | 176,688 | 4,784 | 2,782,781 | — | — | 2,964,253 | ||||||||||||||||||
Precious Metals Fund | 831,432 | — | 6,899,946 | (14,707,917 | ) | (86,192 | ) | (7,062,731 | ) | |||||||||||||||
Real Estate Fund | 72,170 | — | 2,259,011 | (74,844 | ) | — | 2,256,337 | |||||||||||||||||
Retailing Fund | 443,462 | 9,031 | 2,307,537 | — | — | 2,760,030 | ||||||||||||||||||
Technology Fund | 796,319 | 842,469 | 15,002,778 | — | — | 16,641,566 | ||||||||||||||||||
Telecommunications Fund | 22,833 | — | 446,147 | (298,388 | ) | — | 170,592 | |||||||||||||||||
Transportation Fund | 355,469 | — | 3,315,641 | — | — | 3,671,110 | ||||||||||||||||||
Utilities Fund | 187,407 | — | 4,867,865 | (127,334 | ) | — | 4,927,938 |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. The Funds are permitted to carry forward capital losses for an unlimited period and such capital loss carryforwards retain their character as either short-term or long-term capital losses. As of December 31, 2020, capital loss carryforwards for the Funds were as follows:
Unlimited | Total | |||||||||||
Fund | Short-Term | Long-Term | Carryforward | |||||||||
Banking Fund | $ | (447,456 | ) | $ | — | $ | (447,456 | ) | ||||
Energy Fund | (757,782 | ) | (7,786,175 | ) | (8,543,957 | ) | ||||||
Energy Services Fund | (1,084,054 | ) | (8,185,509 | ) | (9,269,563 | ) | ||||||
Precious Metals Fund | (3,466,421 | ) | (11,241,496 | ) | (14,707,917 | ) | ||||||
Real Estate Fund | (74,844 | ) | — | (74,844 | ) | |||||||
Telecommunications Fund | (111,392 | ) | (186,996 | ) | (298,388 | ) | ||||||
Utilities Fund | (127,334 | ) | — | (127,334 | ) |
For the year ended December 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
Banking Fund | $ | 127,234 | ||
Precious Metals Fund | 304,306 | |||
Retailing Fund | 110,758 |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, foreign currency gains and losses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, and the “mark-to-market,” recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result
THE RYDEX FUNDS ANNUAL REPORT | 141 |
NOTES TO FINANCIAL STATEMENTS (continued) |
from the tax treatment of net operating losses, foreign capital gains taxes, and corporate actions. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2020 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Basic Materials Fund | $ | 171,325 | $ | (171,325 | ) | |||
Biotechnology Fund | 1,408,525 | (1,408,525 | ) | |||||
Consumer Products Fund | 245,123 | (245,123 | ) | |||||
Electronics Fund | 426,742 | (426,742 | ) | |||||
Financial Services Fund | 607 | (607 | ) | |||||
Health Care Fund | 924,917 | (924,917 | ) | |||||
Internet Fund | 823,106 | (823,106 | ) | |||||
Leisure Fund | 202,060 | (202,060 | ) | |||||
Retailing Fund | 218,069 | (218,069 | ) | |||||
Technology Fund | 1,930,567 | (1,930,567 | ) | |||||
Telecommunications Fund | 847 | (847 | ) | |||||
Transportation Fund | 348,800 | (348,800 | ) |
At December 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net Tax Unrealized | ||||||||||||
Banking Fund | $ | 3,368,091 | $ | 905,614 | $ | (1,203 | ) | $ | 904,411 | |||||||
Basic Materials Fund | 5,459,003 | 3,128,062 | (1,183 | ) | 3,126,879 | |||||||||||
Biotechnology Fund | 13,765,701 | 12,159,639 | (419,125 | ) | 11,740,514 | |||||||||||
Consumer Products Fund | 9,700,358 | 6,145,583 | (2,087 | ) | 6,143,496 | |||||||||||
Electronics Fund | 4,817,588 | 7,460,757 | — | 7,460,757 | ||||||||||||
Energy Fund | 5,668,592 | 568,815 | (10,624 | ) | 558,191 | |||||||||||
Energy Services Fund | 5,035,393 | — | (1,198,115 | ) | (1,198,115 | ) | ||||||||||
Financial Services Fund | 7,933,400 | 2,508,476 | (10,241 | ) | 2,498,235 | |||||||||||
Health Care Fund | 10,655,336 | 10,926,309 | (121,262 | ) | 10,805,047 | |||||||||||
Internet Fund | 6,692,503 | 7,539,135 | (108,615 | ) | 7,430,520 | |||||||||||
Leisure Fund | 8,345,682 | 2,806,138 | (23,357 | ) | 2,782,781 | |||||||||||
Precious Metals Fund | 17,494,404 | 6,923,883 | (23,937 | ) | 6,899,946 | |||||||||||
Real Estate Fund | 4,267,764 | 2,279,794 | (20,783 | ) | 2,259,011 | |||||||||||
Retailing Fund | 4,992,244 | 2,325,928 | (18,391 | ) | 2,307,537 | |||||||||||
Technology Fund | 10,545,239 | 15,069,105 | (66,327 | ) | 15,002,778 | |||||||||||
Telecommunications Fund | 2,834,293 | 459,918 | (13,771 | ) | 446,147 | |||||||||||
Transportation Fund | 4,801,090 | 3,336,992 | (21,351 | ) | 3,315,641 | |||||||||||
Utilities Fund | 6,944,814 | 4,893,455 | (25,590 | ) | 4,867,865 |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
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NOTES TO FINANCIAL STATEMENTS (continued) |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Securities Transactions
For the year ended December 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
Banking Fund | $ | 17,930,873 | $ | 19,062,974 | ||||
Basic Materials Fund | 11,958,527 | 11,620,849 | ||||||
Biotechnology Fund | 35,596,245 | 37,274,049 | ||||||
Consumer Products Fund | 23,003,370 | 26,451,947 | ||||||
Electronics Fund | 14,856,869 | 18,002,721 | ||||||
Energy Fund | 20,429,595 | 21,418,719 | ||||||
Energy Services Fund | 25,128,304 | 23,243,473 | ||||||
Financial Services Fund | 25,531,828 | 25,977,453 | ||||||
Health Care Fund | 31,731,334 | 32,895,755 | ||||||
Internet Fund | 27,775,972 | 27,984,063 | ||||||
Leisure Fund | 16,591,985 | 13,647,653 | ||||||
Precious Metals Fund | 37,620,565 | 43,330,190 | ||||||
Real Estate Fund | 13,386,654 | 17,464,080 | ||||||
Retailing Fund | 15,220,045 | 13,822,899 | ||||||
Technology Fund | 40,035,289 | 44,697,282 | ||||||
Telecommunications Fund | 7,035,750 | 6,984,062 | ||||||
Transportation Fund | 18,757,009 | 17,634,995 | ||||||
Utilities Fund | 21,011,171 | 23,401,408 |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common
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NOTES TO FINANCIAL STATEMENTS (continued) |
trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized | |||||||||
Banking Fund | $ | 2,123,601 | $ | 2,370,893 | $ | 11,043 | ||||||
Basic Materials Fund | 1,273,256 | 1,417,904 | (18,129 | ) | ||||||||
Biotechnology Fund | 2,865,903 | 4,887,976 | 85,940 | |||||||||
Consumer Products Fund | 3,765,172 | 2,838,728 | 73,079 | |||||||||
Electronics Fund | 2,813,303 | 3,048,704 | 126,270 | |||||||||
Energy Fund | 3,969,463 | 3,076,055 | (344,106 | ) | ||||||||
Energy Services Fund | 4,122,897 | 3,980,806 | (89,575 | ) | ||||||||
Financial Services Fund | 5,691,968 | 6,696,878 | (55,298 | ) | ||||||||
Health Care Fund | 4,631,555 | 5,010,297 | 156,914 | |||||||||
Internet Fund | 4,482,417 | 5,766,846 | 294,282 | |||||||||
Leisure Fund | 2,727,920 | 1,173,395 | 22,421 | |||||||||
Precious Metals Fund | 7,919,437 | 9,586,125 | 1,070,520 | |||||||||
Real Estate Fund | 2,234,128 | 1,774,396 | 109,892 | |||||||||
Retailing Fund | 2,928,781 | 2,320,399 | 101,346 | |||||||||
Technology Fund | 10,651,914 | 9,734,585 | 229,063 | |||||||||
Telecommunications Fund | 1,245,923 | 1,026,102 | (30,501 | ) | ||||||||
Transportation Fund | 2,007,822 | 3,986,012 | 266,716 | |||||||||
Utilities Fund | 3,648,480 | 5,468,253 | (173,163 | ) |
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At December 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Note | |||||||||||||||||
0.06% | 2.13% | |||||||||||||||||
Due 01/04/21 | $ | 52,863,147 | $ | 52,863,499 | 02/29/24 | $ | 50,484,000 | $ | 53,920,527 | |||||||||
Barclays Capital, Inc. | U.S. Treasury Note | |||||||||||||||||
0.06% | 1.63% | |||||||||||||||||
Due 01/04/21 | 22,023,354 | 22,023,501 | 11/15/22 | 21,811,900 | 22,463,921 | |||||||||||||
BofA Securities, Inc. | U.S. Treasury Bond | |||||||||||||||||
0.06% | 5.25% | |||||||||||||||||
Due 01/04/21 | 20,391,995 | 20,392,131 | 11/15/28 | 15,370,000 | 20,799,887 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
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NOTES TO FINANCIAL STATEMENTS (continued) |
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
At December 31, 2020, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
Banking Fund | $ | 35,600 | $ | (35,600 | ) | $ | — | $ | 36,565 | $ | — | $ | 36,565 | ||||||||||||
Basic Materials Fund | 292,808 | (292,808 | ) | — | 300,671 | — | 300,671 | ||||||||||||||||||
Biotechnology Fund | 754,067 | (754,067 | ) | — | 810,720 | — | 810,720 | ||||||||||||||||||
Consumer Products Fund | 115,875 | (115,875 | ) | — | 120,321 | — | 120,321 | ||||||||||||||||||
Electronics Fund | 75,305 | (75,305 | ) | — | 78,160 | — | 78,160 | ||||||||||||||||||
Financial Services Fund | 62,183 | (62,183 | ) | — | 63,433 | — | 63,433 | ||||||||||||||||||
Health Care Fund | 349,106 | (349,106 | ) | — | 373,219 | — | 373,219 | ||||||||||||||||||
Internet Fund | 22,114 | (22,114 | ) | — | 24,768 | — | 24,768 | ||||||||||||||||||
Leisure Fund | 251,393 | (251,393 | ) | — | 258,462 | — | 258,462 | ||||||||||||||||||
Precious Metals Fund | 924,536 | (924,536 | ) | — | 961,110 | — | 961,110 | ||||||||||||||||||
Real Estate Fund | 21,063 | (21,063 | ) | — | 21,806 | — | 21,806 | ||||||||||||||||||
Retailing Fund | 77,655 | (77,655 | ) | — | 86,076 | — | 86,076 | ||||||||||||||||||
Technology Fund | 145,590 | (145,590 | ) | — | 146,977 | — | 146,977 | ||||||||||||||||||
Telecommunications Fund | 18,409 | (18,409 | ) | — | 19,419 | — | 19,419 | ||||||||||||||||||
Transportation Fund | 200,373 | (200,373 | ) | — | 214,937 | — | 214,937 |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expired June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. On June 8, 2020, the line of credit agreement was renewed at the increased $150,000,000 amount and expires on June 7, 2021. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 1.54% for the year ended December 31, 2020. The Funds did not have any borrowings outstanding under this agreement at December 31, 2020.
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NOTES TO FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended December 31, 2020, were as follows:
Fund | Average Daily Balance | |||
Banking Fund | $ | 956 | ||
Basic Materials Fund | 486 | |||
Biotechnology Fund | 4,762 | |||
Consumer Products Fund | 2,710 | |||
Electronics Fund | 3,596 | |||
Energy Fund | 2,962 | |||
Energy Services Fund | 566 | |||
Financial Services Fund | 276 | |||
Health Care Fund | 525 | |||
Internet Fund | 57 | |||
Leisure Fund | 2,694 | |||
Precious Metals Fund | 820 | |||
Real Estate Fund | 448 | |||
Retailing Fund | 544 | |||
Technology Fund | 2,131 | |||
Telecommunications Fund | 751 | |||
Transportation Fund | 1,036 | |||
Utilities Fund | 2,281 |
Note 9 – Reverse Share Splits
Effective on August 24th, 2020, reverse share splits occurred for the following Funds:
Fund | Split Type | |||
Energy Fund | One-for-Three Reverse Share Split | |||
Energy Services Fund | One-for-Ten Reverse Share Split |
The effect of these transactions was to divide the number of outstanding shares of the Energy Fund and the Energy Services Fund by their respective reverse split ratios, resulting in a corresponding increase in the NAV. The share transactions presented in the Statements of Changes in Net Assets and the Per Share Data in the Financial Highlights for each of the periods presented prior to the effective date, have been restated to reflect these respective share splits. There were no changes in net assets, results of operations or total return as a result of these transactions.
Note 10 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
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NOTES TO FINANCIAL STATEMENTS (continued) |
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020. On July 6, 2020, plaintiffs filed a new petition for a writ of certiorari in the U.S. Supreme Court. In that petition, plaintiffs stated that “[t]o make it more likely that there will be a quorum for this petition,” they have “abandon[ed] the case and let the judgment below stand” with respect to certain defendants. That list did not include Rydex Variable Trust. Defendants filed an opposition to the petition for certiorari on August 26, 2020, and plaintiffs filed a reply in support of the petition for certiorari on September 8, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
THE RYDEX FUNDS ANNUAL REPORT | 147 |
NOTES TO FINANCIAL STATEMENTS (concluded) |
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020. Plaintiff filed a reply brief on May 18, 2020. The Court held oral argument on August 24, 2020.
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 11 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 12 – Subsequent Events
On February 10, 2021, the Trust, along with other affiliated trusts, increased the line of credit agreement with U.S. Bank, N.A. from $150,000,000 to $200,000,000.
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events, other than disclosed above, that would require adjustment to or disclosure in the Funds’ financial statements.
148 | THE RYDEX FUNDS ANNUAL REPORT |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Banking Fund, Basic Materials Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund, Precious Metals Fund, Real Estate Fund, Retailing Fund, Technology Fund, Telecommunications Fund, Transportation Fund and Utilities Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Banking Fund, Basic Materials Fund, Biotechnology Fund, Consumer Products Fund, Electronics Fund, Energy Fund, Energy Services Fund, Financial Services Fund, Health Care Fund, Internet Fund, Leisure Fund, Precious Metals Fund, Real Estate Fund, Retailing Fund, Technology Fund, Telecommunications Fund, Transportation Fund and Utilities Fund (collectively referred to as the “Funds”), (eighteen of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2020, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (eighteen of the funds constituting Rydex Variable Trust) at December 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 26, 2021
THE RYDEX FUNDS ANNUAL REPORT | 149 |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2020, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
Banking Fund | 100.00 | % | ||
Basic Materials Fund | 61.27 | % | ||
Biotechnology Fund | 34.85 | % | ||
Consumer Products Fund | 100.00 | % | ||
Electronics Fund | 66.43 | % | ||
Energy Fund | 100.00 | % | ||
Energy Services Fund | 100.00 | % | ||
Financial Services Fund | 46.62 | % | ||
Internet Fund | 100.00 | % | ||
Leisure Fund | 43.54 | % | ||
Precious Metals Fund | 6.80 | % | ||
Real Estate Fund | 0.27 | % | ||
Technology Fund | 62.43 | % | ||
Telecommunications Fund | 100.00 | % | ||
Transportation Fund | 100.00 | % | ||
Utilities Fund | 100.00 | % |
With respect to the taxable year ended December 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term | From long-term capital | ||||||
Basic Materials Fund | $ | 4,970 | $ | 128,482 | ||||
Biotechnology Fund | 1,317,400 | 1,408,525 | ||||||
Consumer Products Fund | 23,338 | 70,344 | ||||||
Electronics Fund | — | 426,742 | ||||||
Financial Services Fund | 74,202 | — | ||||||
Health Care Fund | 517,189 | 924,917 | ||||||
Internet Fund | 203,727 | 823,106 | ||||||
Leisure Fund | 264 | 202,060 | ||||||
Retailing Fund | — | 194,355 | ||||||
Technology Fund | 156,434 | 1,930,567 | ||||||
Transportation Fund | 129,800 | 302,318 | ||||||
Utilities Fund | 223,169 | — |
Delivery of Shareholder Reports
Paper copies of the Funds’ annual and semi-annual shareholder reports are not sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract or from your financial intermediary. Instead, the reports are made available on a website, and you are notified by mail each time a report is posted and provided with a website address to access the report.
150 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited)(concluded) |
You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper may apply to all portfolio companies available under your contract.
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
THE RYDEX FUNDS ANNUAL REPORT | 151 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 (Trustee) | Current: Private Investor (2001-present). | 157 | Current: Purpose Investments Funds (2013-present). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present). | 156 | Current: Bowhead Insurance GP, LLC (2020-present); Hunt Companies, Inc. (2019-present). |
Donald A. Chubb, Jr. (1946)1 | Trustee | Since 2019 | Current: Retired. | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946)1 | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present). |
Roman Friedrich III (1946)1 | Trustee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Chair of the Contracts Review Committee | Since 2005 | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present). |
152 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Of Counsel, Momkus LLP (2016-present). | 157 | Current: PPM Funds (3) (2018-present); Edward-Elmhurst Healthcare System (2012-present). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee) | Current: Retired. | 156 | Current: SPDR Series Trust (81) (2018-present); SPDR Index Shares Funds (30) (2018-present); SSGA Active Trust (14) (2018-present). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
THE RYDEX FUNDS ANNUAL REPORT | 153 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INTERESTED TRUSTEE |
|
|
|
| |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2019 | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. |
*** | Each Trustee also serves on the Boards of Trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the Board of Trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
1 | Under the Funds’ Independent Trustees Retirement Policy, Messrs. Chubb, Farley and Friedrich are expected to retire in 2021. |
154 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
THE RYDEX FUNDS ANNUAL REPORT | 155 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
156 | THE RYDEX FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
THE RYDEX FUNDS ANNUAL REPORT | 157 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
158 | THE RYDEX FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
THE RYDEX FUNDS ANNUAL REPORT | 159 |
LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited) |
In compliance with SEC Rule 22e-4 under the U.S. Investment Company Act of 1940 (the “Liquidity Rule”), the Rydex Variable Trust (the “Trust”) has adopted and implemented a written liquidity risk management program (the “Program”) for each series of the Trust (each, a “Fund” and, collectively, the “Funds”). The Trust’s Board of Trustees (the “Board”) previously approved the designation of a Program administrator (the “Administrator”).
The Liquidity Rule requires that the Program be reasonably designed to assess and manage each Fund’s liquidity risk. A Fund’s “liquidity risk” is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of the remaining investors’ interests in the Fund. The Program includes a number of elements that support the assessment, management and review of liquidity risk. In accordance with the Program, each Fund’s liquidity risk is assessed no less frequently than annually taking into consideration a variety of factors, including, as applicable, the Fund’s investment strategy and liquidity of portfolio investments, cash flow projections, and holdings of cash and cash equivalents, as well as borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions. There is no guarantee that the Program will achieve its objective under all circumstances.
Under the Program, each Fund portfolio investment is classified into one of four liquidity categories based on a determination of the number of days it is reasonably expected to take to convert the investment to cash, or sell or dispose of the investment, in current market conditions without significantly changing the investment’s market value. The Program is reasonably designed to meet Liquidity Rule requirements relating to “highly liquid investment minimums” (i.e., the minimum amount of Fund net assets to be invested in highly liquid investments that are assets) and to monitor compliance with the Liquidity Rule’s limitations on a Fund’s investments in illiquid investments. Under the Liquidity Rule, a Fund is prohibited from acquiring any illiquid investment if, immediately after the acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments that are assets.
During the period covered by this shareholder report, the Board received a written report (the “Report”) prepared by the Administrator addressing the Program’s operation and assessing the adequacy and effectiveness of its implementation for the period from December 1, 2018, through March 31, 2020. The Report concluded that the Program operated effectively, the Program had been and continued to be reasonably designed to assess and manage each Fund’s liquidity risk and the Program has been adequately and effectively implemented to monitor and respond to the Funds’ liquidity developments, as applicable.
Please refer to your Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
160 | THE RYDEX FUNDS ANNUAL REPORT |
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12.31.2020
Rydex Variable Trust Funds Annual Report
Domestic Equity Funds |
Nova Fund |
Inverse S&P 500® Strategy Fund |
NASDAQ-100® Fund |
Inverse NASDAQ-100® Strategy Fund |
S&P 500® 2x Strategy Fund |
NASDAQ-100® 2x Strategy Fund |
Mid-Cap 1.5x Strategy Fund |
Inverse Mid-Cap Strategy Fund |
Russell 2000® 2x Strategy Fund |
Russell 2000® 1.5x Strategy Fund |
Inverse Russell 2000® Strategy Fund |
Dow 2x Strategy Fund |
Inverse Dow 2x Strategy Fund |
Fixed Income Funds |
Government Long Bond 1.2x Strategy Fund |
Inverse Government Long Bond Strategy Fund |
High Yield Strategy Fund |
Money Market Fund |
U.S. Government Money Market Fund |
GuggenheimInvestments.com | RVATB1-ANN-2-1220x1221 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
NOVA FUND | 9 |
INVERSE S&P 500® STRATEGY FUND | 21 |
NASDAQ-100® FUND | 29 |
INVERSE NASDAQ-100® STRATEGY FUND | 38 |
S&P 500® 2x STRATEGY FUND | 45 |
NASDAQ-100® 2x STRATEGY FUND | 57 |
MID-CAP 1.5x STRATEGY FUND | 66 |
INVERSE MID-CAP STRATEGY FUND | 77 |
RUSSELL 2000® 2x STRATEGY FUND | 84 |
RUSSELL 2000® 1.5x STRATEGY FUND | 91 |
INVERSE RUSSELL 2000® STRATEGY FUND | 99 |
DOW 2x STRATEGY FUND | 106 |
INVERSE DOW 2x STRATEGY FUND | 114 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND | 121 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND | 128 |
HIGH YIELD STRATEGY FUND | 135 |
U.S. GOVERNMENT MONEY MARKET FUND | 143 |
NOTES TO FINANCIAL STATEMENTS | 149 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 169 |
OTHER INFORMATION | 170 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 172 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 177 |
LIQUIDITY RISK MANAGEMENT PROGRAM | 180 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2020 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for a selection of our Funds (the “Fund” or “Funds”) that are part of the Rydex Variable Trust. This report covers performance of the Funds for the annual period ended December 31, 2020.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2021
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Inverse and leveraged Funds are not suitable for all investors. ● These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● Inverse Funds involve certain risks, which include increased volatility due to the Funds’ possible use of short sales of securities and derivatives, such as options and futures. ● The Funds’ use of derivatives, such as futures, options and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Short-selling involves increased risks and costs. You risk paying more for a security than you received from its sale. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the Funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those Funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those Funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The Funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the prospectus.
2 | THE RYDEX FUNDS ANNUAL REPORT |
| December 31, 2020 |
The Nasdaq-100® Fund may not be suitable for all investors. ● Investing in Rydex NASDAQ-100® Fund involves certain risks, which may include increased volatility due to the use of futures and the possibility that companies in which the Fund invests may not be commercially successful or may become obsolete more quickly. ● There are no assurances that any Rydex Fund will achieve its objective and/or strategy. This Fund is subject to active trading and tracking error risks, which may increase volatility, impact the Fund’s ability to achieve its investment objective and may decrease the Fund’s performance. ● This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. ● For more on these and other risks, please read the prospectus.
The Government Long Bond 1.2x Strategy and Inverse Government Long Bond Strategy funds are not suitable for all investors. ● These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, and (c) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Funds’ use of derivatives, such as futures, options and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the Funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those Funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those Funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The Funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged Funds’ holdings consistent with their strategies, as frequently as daily. ● In general, bond prices rise when interest rates fall, and vice versa. Moreover, while securities with longer maturities tend to produce higher yields, the price of longer maturity securities is also subject to greater fluctuations as a result of changes in interest rates. ● It is important to note that the funds are not guaranteed by the U.S. government. ● There are no assurances that any Guggenheim fund will achieve its objective and/or strategy. These Funds are subject to active trading and tracking error risks, which may increase volatility, impact the fund’s ability to achieve its investment objective, and may decrease the Fund’s performance. ● For more on these and other risks, please read the prospectus.
The High Yield Strategy Fund may not be suitable for all investors. ● The Fund’s use of derivatives such as futures, options, and swap agreements will expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● A highly liquid secondary market may not exist for the credit default swaps the Fund invests in, and there can be no assurance that a highly liquid secondary market will develop. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. ● You may have a gain or loss when you sell your shares. ● In general, bond prices rise when interest rates fall, and vice versa. ● The Fund’s exposure to the high yield bond market may subject the Fund to greater volatility because (i) it will be affected by the ability of high yield security issuers’ ability to make principal and interest payments and (ii) the prices of derivatives linked to high yield bonds may fluctuate unpredictably and not necessarily in relation to interest rates. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● The Fund is subject to active trading risks that may increase volatility and impact its ability to achieve its investment objective.
The U.S. Government Money Market Fund may not be suitable for all investors. ● You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2020 |
In what could have been one of the worst years on record for equity investors due to the devastating human and economic cost of the COVID-19 pandemic combined with political unrest in the U.S., the 12-month period ended December 31, 2020, witnessed the Standard & Poor’s 500® (“S&P 500®”) Index reach a record high of 3,756.07 from 3,234.85 at the start of the year. This was despite plummeting to 2,237.40 on March 23, 2020 as the effects of the pandemic caused the U.S. economy to stall. This dramatic change in fortune for equity markets was due in large part by a swift, sweeping response to the economic shutdown in March 2020 by the U.S. Federal Reserve (the “Fed”), which has continued to signal its intention to use ultra-accommodative monetary policy to strive toward full employment and 2% inflation via unprecedented measures. The central bank’s commitment to keeping interest rates near zero and its bond-buying program to lessen the risk of corporate defaults resulted in bountiful debt issuance by corporate borrowers and a growing confidence among equity investors that the investment environment would remain benign for the foreseeable future.
As such, our economic outlook for the coming year is positive, owing to another round of COVID-19 relief and more planned by the new administration, plus the expectation for a successful vaccine distribution. The new package, titled the Coronavirus Response and Relief Supplemental Appropriations Act, delivers a $900 billion injection into the economy, bringing total COVID-related aid to over $3.5 trillion including the 2020 bill, or roughly 8.5% of 2020–2021 gross domestic product (“GDP”). On this measure, it is already 3.5x more than the stimulus delivered in the five years following the financial crisis.
The latest round of fiscal stimulus should cause a surge in personal income during the first quarter, and a significant percentage of the population should be vaccinated or immune from prior infection by mid-2021. It is likely that local governments will be able to begin to relax restrictions even before herd immunity is reached since hospitalizations should fall once the elderly are vaccinated. As we move through the year, consumer spending growth should start to accelerate, spurred on by elevated personal savings and strong gains in household net worth. Elsewhere, the housing market will continue to benefit from tight supply and low interest rates, and business investment should rebound as corporations look to put to work record levels of precautionary cash. As a result, we expect real GDP growth to be well above potential for the year.
If the unemployment rate continues to fall at its recent pace and inflation picks up with its usual six-quarter lag behind economic activity, the experience of prior cycles would suggest that the Fed could start its hiking cycle as early as late-2022. However, the change in the Fed’s playbook will keep it sidelined for years as it looks to make up for shortfalls related to its 2% inflation target and no longer worries about an overly tight labor market.
This means the Fed is likely to keep rates at zero for several years beyond the late-2023 liftoff currently priced into the bond market. Similarly, the odds are low of a tapering of the Fed’s bond purchases in 2021. While we believe the government response to the pandemic was necessary and appropriate, investors are already paying some price with more elevated valuations due in part to the Fed’s aggressive relaunch of quantitative easing. Under these circumstances, investors will likely continue to take on more risk as long as more fiscal support is underway and while the Fed remains willing to backstop credit markets to support financial conditions.
For the 12-month period ended December 31, 2020, the S&P 500® Index* returned 18.40%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 7.82%. The return of the MSCI Emerging Markets Index* was 15.84%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 7.51% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.11%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.67% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2020 |
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays Long U.S. Treasury Index includes all publicly issued, U.S. Treasury securities that have a remaining maturity of 10 or more years, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and nonconvertible. The Long U.S. Treasury Index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
Dow Jones Industrial Average® is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow in 1896.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
NASDAQ-100® Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
Russell 2000® Index measures the performance of the small-cap value segment of the U.S. equity universe.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P MidCap 400® Index provides investors with a benchmark for mid-sized companies. The index covers approximately 7% of the U.S. equity market, and seeks to remain an accurate measure of mid-sized companies, reflecting the risk and return characteristics of the broader mid-cap universe on an on-going basis.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) |
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Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in-line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period on a cumulative basis. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods.
An Example of Compounding
For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6.0% gain and an expectation that the fund will rise by 9.0%. On the same day, the fund’s net asset value per share (“NAV”) increases from $10.00 to $10.90 for a gain of 9.0% — in line with its benchmark.
On day two, assume the index falls from 106 to 99 for a loss of about 6.6%. The fund, as expected, falls 9.9% to a price of $9.82. On each day, the fund performed exactly in line with its benchmark, but for the two-day period, the fund was down 1.8%, while the index was down only 1.0%. Without taking into account the daily compounding of returns, one would expect the fund to lose 1.5% and would see the fund as trailing by 0.3% when in fact it had performed perfectly. This example is summarized in the table below.
| Index | Index | Fund | Fund | Fund | Assessment |
Start | 100 |
|
| $ 10.00 |
|
|
Day 1 | 106 | 6.0% | 9.0% | $ 10.90 | 9.0% | In line |
Day 2 | 99 | -6.6% | -9.9% | $ 9.82 | -9.9% | In line |
Cumulative |
| -1.0% | -1.5% |
| -1.8% | -0.3% |
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
6 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
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All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2020 and ending December 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
|
| Expense | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Nova Fund | 1.67% | 33.55% | $ 1,000.00 | $ 1,335.50 | $ 9.83 |
Inverse S&P 500® Strategy Fund | 1.81% | (19.21%) | 1,000.00 | 807.90 | 8.25 |
NASDAQ-100® Fund | 1.72% | 26.73% | 1,000.00 | 1,267.30 | 9.83 |
Inverse NASDAQ-100® Strategy Fund | 1.86% | (19.58%) | 1,000.00 | 804.20 | 8.46 |
S&P 500® 2x Strategy Fund | 1.82% | 45.40% | 1,000.00 | 1,454.00 | 11.26 |
NASDAQ-100® 2x Strategy Fund | 1.87% | 55.77% | 1,000.00 | 1,557.70 | 12.06 |
Mid-Cap 1.5x Strategy Fund | 1.81% | 46.65% | 1,000.00 | 1,466.50 | 11.25 |
Inverse Mid-Cap Strategy Fund | 1.80% | (24.87%) | 1,000.00 | 751.30 | 7.95 |
Russell 2000® 2x Strategy Fund | 1.86% | 84.35% | 1,000.00 | 1,843.50 | 13.33 |
Russell 2000® 1.5x Strategy Fund | 1.85% | 59.80% | 1,000.00 | 1,598.00 | 12.11 |
Inverse Russell 2000® Strategy Fund | 1.84% | (29.58%) | 1,000.00 | 704.20 | 7.90 |
Dow 2x Strategy Fund | 1.85% | 40.83% | 1,000.00 | 1,408.30 | 11.23 |
Inverse Dow 2x Strategy Fund | 1.85% | (33.25%) | 1,000.00 | 667.50 | 7.78 |
Government Long Bond 1.2x Strategy Fund | 1.38% | (5.56%) | 1,000.00 | 944.40 | 6.76 |
Inverse Government Long Bond Strategy Fund | 2.94% | 3.46% | 1,000.00 | 1,034.60 | 15.08 |
High Yield Strategy Fund | 1.67% | 9.91% | 1,000.00 | 1,099.10 | 8.84 |
U.S. Government Money Market Fund | 0.16% | 0.01% | 1,000.00 | 1,000.10 | 0.81 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Nova Fund | 1.67% | 5.00% | $ 1,000.00 | $ 1,016.79 | $ 8.49 |
Inverse S&P 500® Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
NASDAQ-100® Fund | 1.72% | 5.00% | 1,000.00 | 1,016.53 | 8.74 |
Inverse NASDAQ-100® Strategy Fund | 1.86% | 5.00% | 1,000.00 | 1,015.83 | 9.45 |
S&P 500® 2x Strategy Fund | 1.82% | 5.00% | 1,000.00 | 1,016.03 | 9.25 |
NASDAQ-100® 2x Strategy Fund | 1.87% | 5.00% | 1,000.00 | 1,015.78 | 9.50 |
Mid-Cap 1.5x Strategy Fund | 1.81% | 5.00% | 1,000.00 | 1,016.08 | 9.20 |
Inverse Mid-Cap Strategy Fund | 1.80% | 5.00% | 1,000.00 | 1,016.13 | 9.15 |
Russell 2000® 2x Strategy Fund | 1.86% | 5.00% | 1,000.00 | 1,015.83 | 9.45 |
Russell 2000® 1.5x Strategy Fund | 1.85% | 5.00% | 1,000.00 | 1,015.88 | 9.40 |
Inverse Russell 2000® Strategy Fund | 1.84% | 5.00% | 1,000.00 | 1,015.93 | 9.35 |
Dow 2x Strategy Fund | 1.85% | 5.00% | 1,000.00 | 1,015.88 | 9.40 |
Inverse Dow 2x Strategy Fund | 1.85% | 5.00% | 1,000.00 | 1,015.88 | 9.40 |
Government Long Bond 1.2x Strategy Fund | 1.38% | 5.00% | 1,000.00 | 1,018.25 | 7.02 |
Inverse Government Long Bond Strategy Fund | 2.94% | 5.00% | 1,000.00 | 1,010.38 | 14.90 |
High Yield Strategy Fund | 1.67% | 5.00% | 1,000.00 | 1,016.79 | 8.49 |
U.S. Government Money Market Fund | 0.16% | 5.00% | 1,000.00 | 1,024.40 | 0.82 |
1 | This ratio represents annualized net expenses, which includes interest expense related to securities sold short. Excluding short interest expense, the operating expense ratio of the Inverse Government Long Bond Strategy Fund would be 1.83%. Excludes expenses of the underlying funds in which the Funds invest. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2020 to December 31, 2020. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
NOVA FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Nova Fund maintained a daily correlation of over 99% to its benchmark of 150% of the daily price movement of the S&P 500 Index. Nova Fund returned 20.03%, while the S&P 500 Index returned 18.40% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Communications Services. The sectors detracting the most from return of the underlying index for the period were Energy, Financials, and Real Estate.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2020. ExxonMobil Corp., Wells Fargo & Co., and AT&T, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 7, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 13.9% |
Guggenheim Strategy Fund II | 12.0% |
Apple, Inc. | 4.1% |
Microsoft Corp. | 3.3% |
Amazon.com, Inc. | 2.7% |
Facebook, Inc. — Class A | 1.3% |
Tesla, Inc. | 1.0% |
Alphabet, Inc. — Class A | 1.0% |
Alphabet, Inc. — Class C | 1.0% |
Berkshire Hathaway, Inc. — Class B | 0.9% |
Top Ten Total | 41.2% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Nova Fund | 20.03% | 18.95% | 17.57% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
NOVA FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 61.8% | ||||||||
Technology - 14.4% | ||||||||
Apple, Inc. | 14,252 | $ | 1,891,098 | |||||
Microsoft Corp. | 6,742 | 1,499,556 | ||||||
NVIDIA Corp. | 552 | 288,254 | ||||||
Adobe, Inc.* | 428 | 214,051 | ||||||
Intel Corp. | 3,655 | 182,092 | ||||||
salesforce.com, Inc.* | 816 | 181,585 | ||||||
Broadcom, Inc. | 361 | 158,064 | ||||||
QUALCOMM, Inc. | 1,009 | 153,711 | ||||||
Accenture plc — Class A | 565 | 147,584 | ||||||
Texas Instruments, Inc. | 819 | 134,422 | ||||||
Oracle Corp. | 1,692 | 109,455 | ||||||
International Business Machines Corp. | 795 | 100,074 | ||||||
Advanced Micro Devices, Inc.* | 1,071 | 98,221 | ||||||
ServiceNow, Inc.* | 174 | 95,775 | ||||||
Intuit, Inc. | 234 | 88,885 | ||||||
Fidelity National Information Services, Inc. | 553 | 78,227 | ||||||
Micron Technology, Inc.* | 993 | 74,654 | ||||||
Applied Materials, Inc. | 814 | 70,248 | ||||||
Activision Blizzard, Inc. | 689 | 63,974 | ||||||
Lam Research Corp. | 128 | 60,451 | ||||||
Autodesk, Inc.* | 196 | 59,847 | ||||||
Fiserv, Inc.* | 513 | 58,410 | ||||||
Analog Devices, Inc. | 330 | 48,751 | ||||||
Cognizant Technology Solutions Corp. — Class A | 477 | 39,090 | ||||||
Electronic Arts, Inc. | 259 | 37,192 | ||||||
KLA Corp. | 138 | 35,730 | ||||||
Synopsys, Inc.* | 136 | 35,257 | ||||||
Cadence Design Systems, Inc.* | 249 | 33,971 | ||||||
MSCI, Inc. — Class A | 74 | 33,043 | ||||||
Microchip Technology, Inc. | 231 | 31,903 | ||||||
Xilinx, Inc. | 219 | 31,048 | ||||||
HP, Inc. | 1,225 | 30,123 | ||||||
ANSYS, Inc.* | 77 | 28,013 | ||||||
Paychex, Inc. | 285 | 26,556 | ||||||
Skyworks Solutions, Inc. | 148 | 22,626 | ||||||
Cerner Corp. | 273 | 21,425 | ||||||
Take-Two Interactive Software, Inc.* | 103 | 21,402 | ||||||
Maxim Integrated Products, Inc. | 238 | 21,099 | ||||||
Paycom Software, Inc.* | 44 | 19,899 | ||||||
Zebra Technologies Corp. — Class A* | 48 | 18,448 | ||||||
Fortinet, Inc.* | 120 | 17,823 | ||||||
Teradyne, Inc. | 148 | 17,744 | ||||||
Qorvo, Inc.* | 102 | 16,960 | ||||||
Broadridge Financial Solutions, Inc. | 103 | 15,780 | ||||||
Tyler Technologies, Inc.* | 36 | 15,715 | ||||||
Akamai Technologies, Inc.* | 145 | 15,224 | ||||||
Western Digital Corp. | 271 | 15,011 | ||||||
Citrix Systems, Inc. | 110 | 14,311 | ||||||
Hewlett Packard Enterprise Co. | 1,148 | 13,604 | ||||||
NetApp, Inc. | 199 | 13,182 | ||||||
Leidos Holdings, Inc. | 119 | 12,509 | ||||||
Seagate Technology plc | 199 | 12,370 | ||||||
Jack Henry & Associates, Inc. | 68 | 11,015 | ||||||
IPG Photonics Corp.* | 31 | 6,937 | ||||||
DXC Technology Co. | 227 | 5,845 | ||||||
Xerox Holdings Corp. | 149 | 3,455 | ||||||
Total Technology | 6,551,699 | |||||||
Consumer, Non-cyclical - 12.9% | ||||||||
Johnson & Johnson | 2,348 | 369,528 | ||||||
Procter & Gamble Co. | 2,211 | 307,639 | ||||||
UnitedHealth Group, Inc. | 846 | 296,675 | ||||||
PayPal Holdings, Inc.* | 1,045 | 244,739 | ||||||
Coca-Cola Co. | 3,449 | 189,143 | ||||||
Merck & Company, Inc. | 2,256 | 184,541 | ||||||
PepsiCo, Inc. | 1,232 | 182,706 | ||||||
Pfizer, Inc. | 4,957 | 182,467 | ||||||
Abbott Laboratories | 1,581 | 173,104 | ||||||
AbbVie, Inc. | 1,574 | 168,654 | ||||||
Thermo Fisher Scientific, Inc. | 353 | 164,420 | ||||||
Medtronic plc | 1,200 | 140,568 | ||||||
Danaher Corp. | 564 | 125,287 | ||||||
Bristol-Myers Squibb Co. | 2,015 | 124,990 | ||||||
Eli Lilly & Co. | 708 | 119,539 | ||||||
Amgen, Inc. | 519 | 119,328 | ||||||
Philip Morris International, Inc. | 1,389 | 114,995 | ||||||
Intuitive Surgical, Inc.* | 105 | 85,901 | ||||||
CVS Health Corp. | 1,167 | 79,706 | ||||||
Mondelez International, Inc. — Class A | 1,275 | 74,549 | ||||||
Stryker Corp. | 292 | 71,552 | ||||||
Anthem, Inc. | 222 | 71,282 | ||||||
S&P Global, Inc. | 215 | 70,677 | ||||||
Zoetis, Inc. | 424 | 70,172 | ||||||
Altria Group, Inc. | 1,657 | 67,937 | ||||||
Automatic Data Processing, Inc. | 382 | 67,308 | ||||||
Cigna Corp. | 322 | 67,034 | ||||||
Colgate-Palmolive Co. | 764 | 65,330 | ||||||
Gilead Sciences, Inc. | 1,118 | 65,135 | ||||||
Becton Dickinson and Co. | 259 | 64,807 | ||||||
Global Payments, Inc. | 267 | 57,517 | ||||||
Vertex Pharmaceuticals, Inc.* | 232 | 54,831 | ||||||
Estee Lauder Companies, Inc. — Class A | 202 | 53,770 | ||||||
Edwards Lifesciences Corp.* | 556 | 50,724 | ||||||
Humana, Inc. | 118 | 48,412 | ||||||
Illumina, Inc.* | 130 | 48,100 | ||||||
Boston Scientific Corp.* | 1,277 | 45,908 | ||||||
Regeneron Pharmaceuticals, Inc.* | 94 | 45,412 | ||||||
Moody’s Corp. | 144 | 41,795 | ||||||
Kimberly-Clark Corp. | 303 | 40,854 | ||||||
HCA Healthcare, Inc. | 235 | 38,648 | ||||||
IDEXX Laboratories, Inc.* | 76 | 37,990 | ||||||
Baxter International, Inc. | 456 | 36,589 | ||||||
Align Technology, Inc.* | 64 | 34,200 | ||||||
Sysco Corp. | 454 | 33,714 | ||||||
Biogen, Inc.* | 137 | 33,546 | ||||||
Constellation Brands, Inc. — Class A | 150 | 32,858 | ||||||
General Mills, Inc. | 545 | 32,046 | ||||||
DexCom, Inc.* | 85 | 31,426 | ||||||
Centene Corp.* | 517 | 31,036 | ||||||
IQVIA Holdings, Inc.* | 171 | 30,638 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NOVA FUND |
| Shares | Value | ||||||
Monster Beverage Corp.* | 330 | $ | 30,518 | |||||
Alexion Pharmaceuticals, Inc.* | 195 | 30,467 | ||||||
Verisk Analytics, Inc. — Class A | 145 | 30,101 | ||||||
IHS Markit Ltd. | 332 | 29,824 | ||||||
Zimmer Biomet Holdings, Inc. | 184 | 28,353 | ||||||
Cintas Corp. | 78 | 27,570 | ||||||
ResMed, Inc. | 129 | 27,420 | ||||||
Corteva, Inc. | 664 | 25,710 | ||||||
Archer-Daniels-Midland Co. | 496 | 25,004 | ||||||
McKesson Corp. | 143 | 24,871 | ||||||
Clorox Co. | 112 | 22,615 | ||||||
Kroger Co. | 691 | 21,946 | ||||||
McCormick & Company, Inc. | 222 | 21,223 | ||||||
Equifax, Inc. | 108 | 20,827 | ||||||
FleetCor Technologies, Inc.* | 74 | 20,189 | ||||||
Viatris, Inc.* | 1,076 | 20,164 | ||||||
Hershey Co. | 132 | 20,108 | ||||||
Kraft Heinz Co. | 578 | 20,034 | ||||||
MarketAxess Holdings, Inc. | 34 | 19,399 | ||||||
Church & Dwight Company, Inc. | 222 | 19,365 | ||||||
West Pharmaceutical Services, Inc. | 66 | 18,698 | ||||||
Laboratory Corporation of America Holdings* | 87 | 17,709 | ||||||
Teleflex, Inc. | 42 | 17,286 | ||||||
Tyson Foods, Inc. — Class A | 262 | 16,883 | ||||||
Hologic, Inc.* | 229 | 16,678 | ||||||
Cooper Companies, Inc. | 44 | 15,986 | ||||||
Conagra Brands, Inc. | 436 | 15,809 | ||||||
Catalent, Inc.* | 147 | 15,298 | ||||||
United Rentals, Inc.* | 63 | 14,610 | ||||||
Incyte Corp.* | 166 | 14,439 | ||||||
STERIS plc | 76 | 14,405 | ||||||
Quest Diagnostics, Inc. | 120 | 14,300 | ||||||
Varian Medical Systems, Inc.* | 81 | 14,176 | ||||||
Kellogg Co. | 227 | 14,126 | ||||||
Cardinal Health, Inc. | 262 | 14,033 | ||||||
ABIOMED, Inc.* | 40 | 12,968 | ||||||
Brown-Forman Corp. — Class B | 163 | 12,947 | ||||||
Gartner, Inc.* | 80 | 12,815 | ||||||
AmerisourceBergen Corp. — Class A | 131 | 12,807 | ||||||
J M Smucker Co. | 102 | 11,791 | ||||||
Hormel Foods Corp. | 250 | 11,653 | ||||||
Avery Dennison Corp. | 74 | 11,478 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 19 | 11,076 | ||||||
Lamb Weston Holdings, Inc. | 131 | 10,315 | ||||||
Dentsply Sirona, Inc. | 195 | 10,210 | ||||||
Universal Health Services, Inc. — Class B | 69 | 9,488 | ||||||
Quanta Services, Inc. | 124 | 8,930 | ||||||
Campbell Soup Co. | 181 | 8,751 | ||||||
Henry Schein, Inc.* | 127 | 8,491 | ||||||
DaVita, Inc.* | 66 | 7,748 | ||||||
Rollins, Inc. | 198 | 7,716 | ||||||
Molson Coors Beverage Co. — Class B | 168 | 7,592 | ||||||
Nielsen Holdings plc | 318 | 6,637 | ||||||
Robert Half International, Inc. | 102 | 6,373 | ||||||
Perrigo Company plc | 121 | 5,411 | ||||||
Total Consumer, Non-cyclical | 5,905,068 | |||||||
Communications - 10.1% | ||||||||
Amazon.com, Inc.* | 380 | 1,237,633 | ||||||
Facebook, Inc. — Class A* | 2,144 | 585,655 | ||||||
Alphabet, Inc. — Class A* | 268 | 469,708 | ||||||
Alphabet, Inc. — Class C* | 259 | 453,737 | ||||||
Walt Disney Co.* | 1,615 | 292,606 | ||||||
Verizon Communications, Inc. | 3,690 | 216,787 | ||||||
Comcast Corp. — Class A | 4,072 | 213,373 | ||||||
Netflix, Inc.* | 394 | 213,048 | ||||||
AT&T, Inc. | 6,355 | 182,770 | ||||||
Cisco Systems, Inc. | 3,768 | 168,618 | ||||||
Charter Communications, Inc. — Class A* | 130 | 86,001 | ||||||
Booking Holdings, Inc.* | 37 | 82,409 | ||||||
T-Mobile US, Inc.* | 520 | 70,122 | ||||||
Twitter, Inc.* | 709 | 38,392 | ||||||
eBay, Inc. | 584 | 29,346 | ||||||
Motorola Solutions, Inc. | 150 | 25,509 | ||||||
Corning, Inc. | 681 | 24,516 | ||||||
Etsy, Inc.* | 111 | 19,748 | ||||||
VeriSign, Inc.* | 90 | 19,476 | ||||||
ViacomCBS, Inc. — Class B | 504 | 18,779 | ||||||
CDW Corp. | 127 | 16,737 | ||||||
Expedia Group, Inc. | 121 | 16,020 | ||||||
Arista Networks, Inc.* | 48 | 13,947 | ||||||
Omnicom Group, Inc. | 192 | 11,975 | ||||||
NortonLifeLock, Inc. | 528 | 10,972 | ||||||
F5 Networks, Inc.* | 55 | 9,677 | ||||||
Fox Corp. — Class A | 301 | 8,765 | ||||||
Lumen Technologies, Inc. | 881 | 8,590 | ||||||
Interpublic Group of Companies, Inc. | 348 | 8,185 | ||||||
DISH Network Corp. — Class A* | 221 | 7,147 | ||||||
Discovery, Inc. — Class C* | 263 | 6,888 | ||||||
Juniper Networks, Inc. | 294 | 6,618 | ||||||
News Corp. — Class A | 349 | 6,272 | ||||||
Discovery, Inc. — Class A* | 143 | 4,303 | ||||||
Fox Corp. — Class B | 138 | 3,985 | ||||||
News Corp. — Class B | 109 | 1,937 | ||||||
Total Communications | 4,590,251 | |||||||
Financial - 8.9% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 1,736 | 402,526 | ||||||
JPMorgan Chase & Co. | 2,718 | 345,376 | ||||||
Visa, Inc. — Class A | 1,512 | 330,720 | ||||||
Mastercard, Inc. — Class A | 785 | 280,198 | ||||||
Bank of America Corp. | 6,789 | 205,775 | ||||||
Citigroup, Inc. | 1,857 | 114,503 | ||||||
Wells Fargo & Co. | 3,687 | 111,274 | ||||||
BlackRock, Inc. — Class A | 126 | 90,914 | ||||||
American Tower Corp. — Class A REIT | 396 | 88,886 | ||||||
Morgan Stanley | 1,275 | 87,376 | ||||||
Goldman Sachs Group, Inc. | 307 | 80,959 | ||||||
Charles Schwab Corp. | 1,330 | 70,543 | ||||||
American Express Co. | 582 | 70,370 | ||||||
Prologis, Inc. REIT | 659 | 65,676 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NOVA FUND |
| Shares | Value | ||||||
Chubb Ltd. | 403 | $ | 62,030 | |||||
Crown Castle International Corp. REIT | 383 | 60,970 | ||||||
CME Group, Inc. — Class A | 320 | 58,256 | ||||||
Intercontinental Exchange, Inc. | 501 | 57,760 | ||||||
Truist Financial Corp. | 1,202 | 57,612 | ||||||
U.S. Bancorp | 1,223 | 56,979 | ||||||
Equinix, Inc. REIT | 79 | 56,420 | ||||||
PNC Financial Services Group, Inc. | 378 | 56,322 | ||||||
Marsh & McLennan Companies, Inc. | 452 | 52,884 | ||||||
Progressive Corp. | 522 | 51,615 | ||||||
Aon plc — Class A | 204 | 43,099 | ||||||
Capital One Financial Corp. | 408 | 40,331 | ||||||
Digital Realty Trust, Inc. REIT | 248 | 34,599 | ||||||
MetLife, Inc. | 682 | 32,020 | ||||||
Travelers Companies, Inc. | 226 | 31,724 | ||||||
Public Storage REIT | 136 | 31,407 | ||||||
Bank of New York Mellon Corp. | 727 | 30,854 | ||||||
T. Rowe Price Group, Inc. | 202 | 30,581 | ||||||
Allstate Corp. | 271 | 29,791 | ||||||
American International Group, Inc. | 768 | 29,076 | ||||||
SBA Communications Corp. REIT | 99 | 27,931 | ||||||
Prudential Financial, Inc. | 353 | 27,559 | ||||||
Aflac, Inc. | 583 | 25,926 | ||||||
Simon Property Group, Inc. REIT | 292 | 24,902 | ||||||
Discover Financial Services | 273 | 24,715 | ||||||
Willis Towers Watson plc | 115 | 24,228 | ||||||
Welltower, Inc. REIT | 372 | 24,039 | ||||||
State Street Corp. | 315 | 22,926 | ||||||
First Republic Bank | 155 | 22,774 | ||||||
Weyerhaeuser Co. REIT | 666 | 22,331 | ||||||
Arthur J Gallagher & Co. | 172 | 21,278 | ||||||
Ameriprise Financial, Inc. | 105 | 20,405 | ||||||
AvalonBay Communities, Inc. REIT | 125 | 20,054 | ||||||
Realty Income Corp. REIT | 312 | 19,397 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 108 | 19,248 | ||||||
CBRE Group, Inc. — Class A* | 299 | 18,753 | ||||||
Equity Residential REIT | 305 | 18,080 | ||||||
SVB Financial Group* | 46 | 17,840 | ||||||
Fifth Third Bancorp | 635 | 17,507 | ||||||
Northern Trust Corp. | 186 | 17,324 | ||||||
Synchrony Financial | 484 | 16,800 | ||||||
Ventas, Inc. REIT | 334 | 16,379 | ||||||
Hartford Financial Services Group, Inc. | 320 | 15,674 | ||||||
M&T Bank Corp. | 114 | 14,512 | ||||||
Healthpeak Properties, Inc. REIT | 480 | 14,510 | ||||||
KeyCorp | 871 | 14,293 | ||||||
Regions Financial Corp. | 857 | 13,815 | ||||||
Essex Property Trust, Inc. REIT | 58 | 13,770 | ||||||
Citizens Financial Group, Inc. | 381 | 13,624 | ||||||
Nasdaq, Inc. | 102 | 13,539 | ||||||
Extra Space Storage, Inc. REIT | 115 | 13,324 | ||||||
Duke Realty Corp. REIT | 331 | 13,230 | ||||||
Mid-America Apartment Communities, Inc. REIT | 102 | 12,922 | ||||||
Boston Properties, Inc. REIT | 126 | 11,911 | ||||||
Cincinnati Financial Corp. | 133 | 11,620 | ||||||
Huntington Bancshares, Inc. | 907 | 11,455 | ||||||
Principal Financial Group, Inc. | 228 | 11,311 | ||||||
Raymond James Financial, Inc. | 109 | 10,428 | ||||||
UDR, Inc. REIT | 263 | 10,107 | ||||||
Loews Corp. | 208 | 9,364 | ||||||
Host Hotels & Resorts, Inc. REIT | 629 | 9,202 | ||||||
Cboe Global Markets, Inc. | 95 | 8,846 | ||||||
Everest Re Group Ltd. | 36 | 8,427 | ||||||
W R Berkley Corp. | 126 | 8,369 | ||||||
Globe Life, Inc. | 86 | 8,167 | ||||||
Lincoln National Corp. | 162 | 8,150 | ||||||
Western Union Co. | 367 | 8,052 | ||||||
Iron Mountain, Inc. REIT | 257 | 7,576 | ||||||
Assurant, Inc. | 53 | 7,220 | ||||||
Comerica, Inc. | 124 | 6,927 | ||||||
Regency Centers Corp. REIT | 141 | 6,428 | ||||||
Zions Bancorp North America | 146 | 6,342 | ||||||
Franklin Resources, Inc. | 243 | 6,072 | ||||||
Invesco Ltd. | 336 | 5,856 | ||||||
Kimco Realty Corp. REIT | 386 | 5,794 | ||||||
Vornado Realty Trust REIT | 140 | 5,228 | ||||||
Federal Realty Investment Trust REIT | 61 | 5,192 | ||||||
People’s United Financial, Inc. | 379 | 4,901 | ||||||
Unum Group | 182 | 4,175 | ||||||
SL Green Realty Corp. REIT | 65 | 3,873 | ||||||
Total Financial | 4,084,028 | |||||||
Consumer, Cyclical - 6.0% | ||||||||
Tesla, Inc.* | 676 | 477,033 | ||||||
Home Depot, Inc. | 960 | 254,995 | ||||||
Walmart, Inc. | 1,236 | 178,169 | ||||||
NIKE, Inc. — Class B | 1,119 | 158,305 | ||||||
Costco Wholesale Corp. | 393 | 148,075 | ||||||
McDonald’s Corp. | 664 | 142,481 | ||||||
Starbucks Corp. | 1,047 | 112,008 | ||||||
Lowe’s Companies, Inc. | 653 | 104,813 | ||||||
Target Corp. | 447 | 78,909 | ||||||
TJX Companies, Inc. | 1,071 | 73,139 | ||||||
General Motors Co. | 1,123 | 46,762 | ||||||
Dollar General Corp. | 218 | 45,845 | ||||||
Ross Stores, Inc. | 317 | 38,931 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 25 | 34,668 | ||||||
Aptiv plc | 241 | 31,400 | ||||||
Marriott International, Inc. — Class A | 236 | 31,133 | ||||||
Ford Motor Co. | 3,485 | 30,633 | ||||||
Cummins, Inc. | 132 | 29,977 | ||||||
O’Reilly Automotive, Inc.* | 65 | 29,417 | ||||||
Yum! Brands, Inc. | 269 | 29,203 | ||||||
Hilton Worldwide Holdings, Inc. | 247 | 27,481 | ||||||
PACCAR, Inc. | 309 | 26,660 | ||||||
Walgreens Boots Alliance, Inc. | 641 | 25,563 | ||||||
Fastenal Co. | 512 | 25,001 | ||||||
AutoZone, Inc.* | 21 | 24,894 | ||||||
Southwest Airlines Co. | 526 | 24,517 | ||||||
VF Corp. | 285 | 24,342 | ||||||
Copart, Inc.* | 185 | 23,541 | ||||||
Delta Air Lines, Inc. | 569 | 22,879 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NOVA FUND |
| Shares | Value | ||||||
Dollar Tree, Inc.* | 210 | $ | 22,688 | |||||
Best Buy Company, Inc. | 206 | 20,557 | ||||||
DR Horton, Inc. | 296 | 20,400 | ||||||
Lennar Corp. — Class A | 245 | 18,676 | ||||||
Las Vegas Sands Corp. | 293 | 17,463 | ||||||
WW Grainger, Inc. | 40 | 16,334 | ||||||
Tractor Supply Co. | 104 | 14,620 | ||||||
Ulta Beauty, Inc.* | 50 | 14,358 | ||||||
Carnival Corp. | 651 | 14,101 | ||||||
Darden Restaurants, Inc. | 116 | 13,818 | ||||||
CarMax, Inc.* | 146 | 13,791 | ||||||
Domino’s Pizza, Inc. | 35 | 13,421 | ||||||
Pool Corp. | 36 | 13,410 | ||||||
Genuine Parts Co. | 129 | 12,955 | ||||||
Tiffany & Co. | 96 | 12,619 | ||||||
Royal Caribbean Cruises Ltd. | 165 | 12,324 | ||||||
NVR, Inc.* | 3 | 12,240 | ||||||
MGM Resorts International | 366 | 11,533 | ||||||
United Airlines Holdings, Inc.* | 260 | 11,245 | ||||||
Hasbro, Inc. | 114 | 10,664 | ||||||
PulteGroup, Inc. | 239 | 10,306 | ||||||
Whirlpool Corp. | 56 | 10,108 | ||||||
Wynn Resorts Ltd. | 87 | 9,816 | ||||||
Advance Auto Parts, Inc. | 60 | 9,451 | ||||||
Live Nation Entertainment, Inc.* | 127 | 9,332 | ||||||
LKQ Corp.* | 250 | 8,810 | ||||||
American Airlines Group, Inc.1 | 536 | 8,453 | ||||||
BorgWarner, Inc. | 218 | 8,423 | ||||||
L Brands, Inc. | 208 | 7,736 | ||||||
Tapestry, Inc. | 246 | 7,646 | ||||||
Mohawk Industries, Inc.* | 53 | 7,470 | ||||||
Newell Brands, Inc. | 337 | 7,155 | ||||||
Norwegian Cruise Line Holdings Ltd.* | 280 | 7,120 | ||||||
PVH Corp. | 63 | 5,915 | ||||||
Alaska Air Group, Inc. | 110 | 5,720 | ||||||
Leggett & Platt, Inc. | 118 | 5,227 | ||||||
Hanesbrands, Inc. | 310 | 4,520 | ||||||
Ralph Lauren Corp. — Class A | 43 | 4,461 | ||||||
Gap, Inc. | 183 | 3,695 | ||||||
Under Armour, Inc. — Class A* | 168 | 2,884 | ||||||
Under Armour, Inc. — Class C* | 174 | 2,589 | ||||||
Total Consumer, Cyclical | 2,744,828 | |||||||
Industrial - 5.1% | ||||||||
Honeywell International, Inc. | 626 | 133,150 | ||||||
Union Pacific Corp. | 601 | 125,140 | ||||||
United Parcel Service, Inc. — Class B | 638 | 107,439 | ||||||
Boeing Co. | 473 | 101,250 | ||||||
Raytheon Technologies Corp. | 1,354 | 96,824 | ||||||
3M Co. | 514 | 89,842 | ||||||
Caterpillar, Inc. | 484 | 88,098 | ||||||
General Electric Co. | 7,812 | 84,370 | ||||||
Lockheed Martin Corp. | 220 | 78,096 | ||||||
Deere & Co. | 279 | 75,065 | ||||||
CSX Corp. | 682 | 61,892 | ||||||
FedEx Corp. | 215 | 55,818 | ||||||
Norfolk Southern Corp. | 227 | 53,937 | ||||||
Illinois Tool Works, Inc. | 257 | 52,397 | ||||||
Emerson Electric Co. | 533 | 42,837 | ||||||
Eaton Corporation plc | 355 | 42,650 | ||||||
Northrop Grumman Corp. | 138 | 42,051 | ||||||
Waste Management, Inc. | 347 | 40,922 | ||||||
Roper Technologies, Inc. | 94 | 40,522 | ||||||
TE Connectivity Ltd. | 295 | 35,716 | ||||||
L3Harris Technologies, Inc. | 187 | 35,347 | ||||||
Amphenol Corp. — Class A | 267 | 34,916 | ||||||
Agilent Technologies, Inc. | 273 | 32,348 | ||||||
Parker-Hannifin Corp. | 115 | 31,327 | ||||||
Trane Technologies plc | 214 | 31,064 | ||||||
General Dynamics Corp. | 207 | 30,806 | ||||||
TransDigm Group, Inc.* | 49 | 30,324 | ||||||
Johnson Controls International plc | 646 | 30,097 | ||||||
Carrier Global Corp. | 727 | 27,423 | ||||||
Ball Corp. | 292 | 27,209 | ||||||
Rockwell Automation, Inc. | 104 | 26,084 | ||||||
Stanley Black & Decker, Inc. | 142 | 25,355 | ||||||
AMETEK, Inc. | 205 | 24,793 | ||||||
Otis Worldwide Corp. | 363 | 24,521 | ||||||
Mettler-Toledo International, Inc.* | 21 | 23,933 | ||||||
Keysight Technologies, Inc.* | 165 | 21,795 | ||||||
Fortive Corp. | 300 | 21,246 | ||||||
Republic Services, Inc. — Class A | 188 | 18,105 | ||||||
Vulcan Materials Co. | 117 | 17,352 | ||||||
Kansas City Southern | 83 | 16,943 | ||||||
Old Dominion Freight Line, Inc. | 86 | 16,786 | ||||||
Amcor plc | 1,399 | 16,466 | ||||||
Xylem, Inc. | 161 | 16,388 | ||||||
Dover Corp. | 129 | 16,286 | ||||||
Garmin Ltd. | 133 | 15,915 | ||||||
Martin Marietta Materials, Inc. | 56 | 15,902 | ||||||
Ingersoll Rand, Inc.* | 331 | 15,080 | ||||||
Expeditors International of Washington, Inc. | 151 | 14,362 | ||||||
PerkinElmer, Inc. | 100 | 14,350 | ||||||
Waters Corp.* | 55 | 13,608 | ||||||
IDEX Corp. | 68 | 13,546 | ||||||
Teledyne Technologies, Inc.* | 33 | 12,935 | ||||||
Masco Corp. | 233 | 12,799 | ||||||
Jacobs Engineering Group, Inc. | 116 | 12,639 | ||||||
Packaging Corporation of America | 85 | 11,722 | ||||||
Westinghouse Air Brake Technologies Corp. | 160 | 11,712 | ||||||
CH Robinson Worldwide, Inc. | 121 | 11,358 | ||||||
Fortune Brands Home & Security, Inc. | 124 | 10,629 | ||||||
Westrock Co. | 234 | 10,186 | ||||||
J.B. Hunt Transport Services, Inc. | 74 | 10,112 | ||||||
Howmet Aerospace, Inc. | 348 | 9,932 | ||||||
Textron, Inc. | 204 | 9,860 | ||||||
Allegion plc | 82 | 9,543 | ||||||
Snap-on, Inc. | 48 | 8,215 | ||||||
Pentair plc | 148 | 7,857 | ||||||
A O Smith Corp. | 121 | 6,633 | ||||||
Sealed Air Corp. | 138 | 6,319 | ||||||
Huntington Ingalls Industries, Inc. | 36 | 6,137 |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NOVA FUND |
| Shares | Value | ||||||
FLIR Systems, Inc. | 117 | $ | 5,128 | |||||
Flowserve Corp. | 116 | 4,275 | ||||||
Vontier Corp.* | 120 | 4,008 | ||||||
Total Industrial | 2,329,692 | |||||||
Utilities - 1.7% | ||||||||
NextEra Energy, Inc. | 1,747 | 134,781 | ||||||
Duke Energy Corp. | 656 | 60,063 | ||||||
Southern Co. | 942 | 57,867 | ||||||
Dominion Energy, Inc. | 728 | 54,746 | ||||||
American Electric Power Company, Inc. | 443 | 36,889 | ||||||
Exelon Corp. | 870 | 36,732 | ||||||
Sempra Energy | 257 | 32,744 | ||||||
Xcel Energy, Inc. | 469 | 31,268 | ||||||
Eversource Energy | 306 | 26,472 | ||||||
Public Service Enterprise Group, Inc. | 451 | 26,293 | ||||||
WEC Energy Group, Inc. | 281 | 25,861 | ||||||
American Water Works Company, Inc. | 162 | 24,862 | ||||||
Consolidated Edison, Inc. | 305 | 22,042 | ||||||
Edison International | 338 | 21,233 | ||||||
DTE Energy Co. | 173 | 21,004 | ||||||
PPL Corp. | 686 | 19,345 | ||||||
Entergy Corp. | 179 | 17,871 | ||||||
Ameren Corp. | 220 | 17,173 | ||||||
CMS Energy Corp. | 255 | 15,558 | ||||||
FirstEnergy Corp. | 484 | 14,815 | ||||||
AES Corp. | 593 | 13,936 | ||||||
Alliant Energy Corp. | 223 | 11,491 | ||||||
Evergy, Inc. | 202 | 11,213 | ||||||
Atmos Energy Corp. | 112 | 10,688 | ||||||
CenterPoint Energy, Inc. | 486 | 10,517 | ||||||
NRG Energy, Inc. | 218 | 8,186 | ||||||
Pinnacle West Capital Corp. | 100 | 7,995 | ||||||
NiSource, Inc. | 342 | 7,846 | ||||||
Total Utilities | 779,491 | |||||||
Energy - 1.4% | ||||||||
Exxon Mobil Corp. | 3,771 | 155,441 | ||||||
Chevron Corp. | 1,717 | 145,001 | ||||||
ConocoPhillips | 952 | 38,070 | ||||||
Phillips 66 | 390 | 27,277 | ||||||
Schlumberger N.V. | 1,241 | 27,091 | ||||||
EOG Resources, Inc. | 520 | 25,932 | ||||||
Marathon Petroleum Corp. | 580 | 23,989 | ||||||
Kinder Morgan, Inc. | 1,736 | 23,731 | ||||||
Williams Companies, Inc. | 1,082 | 21,694 | ||||||
Valero Energy Corp. | 364 | 20,591 | ||||||
Pioneer Natural Resources Co. | 147 | 16,742 | ||||||
ONEOK, Inc. | 396 | 15,199 | ||||||
Halliburton Co. | 788 | 14,893 | ||||||
Occidental Petroleum Corp. | 747 | 12,931 | ||||||
Hess Corp. | 244 | 12,881 | ||||||
Baker Hughes Co. | 609 | 12,698 | ||||||
Concho Resources, Inc. | 175 | 10,211 | ||||||
Diamondback Energy, Inc. | 141 | 6,824 | ||||||
Cabot Oil & Gas Corp. — Class A | 355 | 5,779 | ||||||
Devon Energy Corp. | 341 | 5,391 | ||||||
Apache Corp. | 337 | 4,782 | ||||||
NOV, Inc. | 346 | 4,750 | ||||||
Marathon Oil Corp. | 704 | 4,696 | ||||||
TechnipFMC plc | 377 | 3,544 | ||||||
HollyFrontier Corp. | 133 | 3,438 | ||||||
Total Energy | 643,576 | |||||||
Basic Materials - 1.3% | ||||||||
Linde plc | 468 | 123,323 | ||||||
Air Products and Chemicals, Inc. | 197 | 53,824 | ||||||
Sherwin-Williams Co. | 73 | 53,648 | ||||||
Ecolab, Inc. | 221 | 47,816 | ||||||
DuPont de Nemours, Inc. | 654 | 46,506 | ||||||
Newmont Corp. | 716 | 42,881 | ||||||
Dow, Inc. | 661 | 36,685 | ||||||
Freeport-McMoRan, Inc. | 1,296 | 33,722 | ||||||
PPG Industries, Inc. | 211 | 30,430 | ||||||
LyondellBasell Industries N.V. — Class A | 229 | 20,990 | ||||||
International Paper Co. | 350 | 17,402 | ||||||
Nucor Corp. | 269 | 14,308 | ||||||
Albemarle Corp. | 94 | 13,867 | ||||||
Celanese Corp. — Class A | 104 | 13,514 | ||||||
FMC Corp. | 116 | 13,332 | ||||||
Eastman Chemical Co. | 121 | 12,134 | ||||||
International Flavors & Fragrances, Inc. | 95 | 10,340 | ||||||
CF Industries Holdings, Inc. | 191 | 7,394 | ||||||
Mosaic Co. | 308 | 7,087 | ||||||
Total Basic Materials | 599,203 | |||||||
Total Common Stocks | ||||||||
(Cost $25,789,720) | 28,227,836 | |||||||
MUTUAL FUNDS† - 25.9% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 635,795 | 6,345,237 | ||||||
Guggenheim Strategy Fund II2 | 219,553 | 5,480,042 | ||||||
Total Mutual Funds | ||||||||
(Cost $11,698,561) | 11,825,279 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 2.7% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/213,4 | $ | 1,000,000 | 999,807 | |||||
0.08% due 01/28/214 | 244,000 | 243,990 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,243,766) | 1,243,797 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NOVA FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,5 - 7.3% | ||||||||
J.P. Morgan Securities LLC | $ | 1,845,446 | $ | 1,845,446 | ||||
Barclays Capital, Inc. | 768,833 | 768,833 | ||||||
BofA Securities, Inc. | 711,882 | 711,882 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,326,161) | 3,326,161 | |||||||
| Shares | |||||||
SECURITIES LENDING COLLATERAL†,6 - 0.0% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%7 | 50 | 50 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $50) | 50 | |||||||
Total Investments - 97.7% | ||||||||
(Cost $42,058,258) | $ | 44,623,123 | ||||||
Other Assets & Liabilities, net - 2.3% | 1,069,015 | |||||||
Total Net Assets - 100.0% | $ | 45,692,138 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | S&P 500 Index | 0.54% (1 Week USD LIBOR + 0.45%) | At Maturity | 02/18/21 | 5,947 | $ | 22,338,521 | $ | 93,601 | ||||||||||
BNP Paribas | S&P 500 Index | 0.69% (1 Month USD LIBOR + 0.55%) | At Maturity | 02/18/21 | 2,520 | 9,463,894 | 73,146 | ||||||||||||
Barclays Bank plc | S&P 500 Index | 0.54% (1 Week USD LIBOR + 0.45%) | At Maturity | 02/17/21 | 2,294 | 8,617,593 | 47,515 | ||||||||||||
$ | 40,420,008 | $ | 214,262 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | Securities lending collateral — See Note 7. |
7 | Rate indicated is the 7-day yield as of December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
NOVA FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 28,227,836 | $ | — | $ | — | $ | 28,227,836 | ||||||||
Mutual Funds | 11,825,279 | — | — | 11,825,279 | ||||||||||||
U.S. Treasury Bills | — | 1,243,797 | — | 1,243,797 | ||||||||||||
Repurchase Agreements | — | 3,326,161 | — | 3,326,161 | ||||||||||||
Securities Lending Collateral | 50 | — | — | 50 | ||||||||||||
Equity Index Swap Agreements** | — | 214,262 | — | 214,262 | ||||||||||||
Total Assets | $ | 40,053,165 | $ | 4,784,220 | $ | — | $ | 44,837,385 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 11,694,627 | $ | 2,251,964 | $ | (8,500,000 | ) | $ | (40,261 | ) | $ | 73,712 | $ | 5,480,042 | 219,553 | $ | 102,037 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 9,690,414 | 16,639,835 | (20,100,000 | ) | 38,426 | 76,562 | 6,345,237 | 635,795 | 89,951 | |||||||||||||||||||||||
$ | 21,385,041 | $ | 18,891,799 | $ | (28,600,000 | ) | $ | (1,835 | ) | $ | 150,274 | $ | 11,825,279 | $ | 191,988 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
NOVA FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $47 of securities loaned (cost $27,033,536) | $ | 29,471,683 | ||
Investments in affiliated issuers, at value (cost $11,698,561) | 11,825,279 | |||
Repurchase agreements, at value (cost $3,326,161) | 3,326,161 | |||
Cash | 146 | |||
Unrealized appreciation on OTC swap agreements | 214,262 | |||
Receivables: | ||||
Fund shares sold | 18,060,687 | |||
Dividends | 27,968 | |||
Swap settlement | 16,332 | |||
Securities lending income | 10 | |||
Interest | 6 | |||
Total assets | 62,942,534 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 17,071,254 | |||
Fund shares redeemed | 36,842 | |||
Management fees | 26,248 | |||
Transfer agent and administrative fees | 9,930 | |||
Investor service fees | 9,229 | |||
Portfolio accounting fees | 3,691 | |||
Trustees’ fees* | 671 | |||
Return of securities lending collateral | 50 | |||
Miscellaneous | 92,481 | |||
Total liabilities | 17,250,396 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 45,692,138 | ||
Net assets consist of: | ||||
Paid in capital | $ | 42,011,126 | ||
Total distributable earnings (loss) | 3,681,012 | |||
Net assets | $ | 45,692,138 | ||
Capital shares outstanding | 315,682 | |||
Net asset value per share | $ | 144.74 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 259,184 | ||
Dividends from securities of affiliated issuers | 191,988 | |||
Interest | 27,882 | |||
Income from securities lending, net | 111 | |||
Total investment income | 479,165 | |||
Expenses: | ||||
Management fees | 248,978 | |||
Investor service fees | 82,993 | |||
Transfer agent and administrative fees | 108,559 | |||
Professional fees | 62,031 | |||
Portfolio accounting fees | 33,197 | |||
Trustees’ fees* | 7,582 | |||
Custodian fees | 6,585 | |||
Line of credit fees | 458 | |||
Interest expense | 11 | |||
Miscellaneous | 23,903 | |||
Total expenses | 574,297 | |||
Less: | ||||
Expenses waived by Adviser | (15,865 | ) | ||
Net expenses | 558,432 | |||
Net investment loss | (79,267 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (707,722 | ) | ||
Investments in affiliated issuers | (1,835 | ) | ||
Swap agreements | 2,667,349 | |||
Futures contracts | 2,333,363 | |||
Net realized gain | 4,291,155 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1,826,864 | |||
Investments in affiliated issuers | 150,274 | |||
Swap agreements | 288,779 | |||
Net change in unrealized appreciation (depreciation) | 2,265,917 | |||
Net realized and unrealized gain | 6,557,072 | |||
Net increase in net assets resulting from operations | $ | 6,477,805 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOVA FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (79,267 | ) | $ | 282,333 | |||
Net realized gain on investments | 4,291,155 | 11,022,256 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 2,265,917 | (439,154 | ) | |||||
Net increase in net assets resulting from operations | 6,477,805 | 10,865,435 | ||||||
Distributions to shareholders | (3,551,997 | ) | (297,044 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 167,327,213 | 152,990,650 | ||||||
Distributions reinvested | 3,551,997 | 297,044 | ||||||
Cost of shares redeemed | (164,658,311 | ) | (159,619,797 | ) | ||||
Net increase (decrease) from capital share transactions | 6,220,899 | (6,332,103 | ) | |||||
Net increase in net assets | 9,146,707 | 4,236,288 | ||||||
Net assets: | ||||||||
Beginning of year | 36,545,431 | 32,309,143 | ||||||
End of year | $ | 45,692,138 | $ | 36,545,431 | ||||
Capital share activity: | ||||||||
Shares sold | 1,340,119 | 1,310,221 | ||||||
Shares issued from reinvestment of distributions | 30,137 | 2,415 | ||||||
Shares redeemed | (1,323,924 | ) | (1,384,986 | ) | ||||
Net increase (decrease) in shares | 46,332 | (72,350 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
NOVA FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 135.68 | $ | 94.55 | $ | 113.00 | $ | 89.58 | $ | 77.42 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.30 | ) | .90 | .83 | .22 | .06 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 24.12 | 41.55 | (11.15 | ) | 27.62 | 12.10 | ||||||||||||||
Total from investment operations | 23.82 | 42.45 | (10.32 | ) | 27.84 | 12.16 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.16 | ) | (1.32 | ) | (.21 | ) | (.05 | ) | — | |||||||||||
Net realized gains | (13.60 | ) | — | (7.92 | ) | (4.37 | ) | — | ||||||||||||
Total distributions | (14.76 | ) | (1.32 | ) | (8.13 | ) | (4.42 | ) | — | |||||||||||
Net asset value, end of period | $ | 144.74 | $ | 135.68 | $ | 94.55 | $ | 113.00 | $ | 89.58 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 20.03 | % | 45.04 | % | (10.32 | %) | 31.78 | % | 15.72 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 45,692 | $ | 36,545 | $ | 32,309 | $ | 51,725 | $ | 38,768 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.24 | %) | 0.77 | % | 0.73 | % | 0.22 | % | 0.04 | % | ||||||||||
Total expensesc | 1.73 | % | 1.72 | % | 1.62 | % | 1.61 | % | 1.56 | % | ||||||||||
Net expensesd | 1.68 | % | 1.66 | % | 1.61 | % | 1.61 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 650 | % | 336 | % | 604 | % | 412 | % | 636 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Share split — Per share amounts for the year ended December 31, 2016, have been restated to reflect a 2:1 share split effective December 1, 2016. |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
INVERSE S&P 500® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Inverse S&P 500 Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the S&P 500 Index. Inverse S&P 500 Strategy Fund returned -25.02%, while the S&P 500 Index returned 18.40% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Communications Services. The sectors detracting the most from return of the underlying index for the period were Energy, Financials, and Real Estate.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2020. ExxonMobil Corp., Wells Fargo & Co., and AT&T, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 21 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: June 9, 1997 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 23.4% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 21.8% |
Total | 45.2% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Inverse S&P 500® Strategy Fund | (25.02%) | (15.26%) | (14.94%) |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
22 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
INVERSE S&P 500® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 45.2% | ||||||||
Guggenheim Strategy Fund II1 | 13,192 | $ | 329,273 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 30,667 | 306,054 | ||||||
Total Mutual Funds | ||||||||
(Cost $626,860) | 635,327 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 8.5% | ||||||||
Federal Home Loan Bank | ||||||||
0.10% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 01/04/212 | $ | 120,000 | 120,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $120,000) | 120,000 | |||||||
U.S. TREASURY BILLS†† - 0.9% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/213,4 | 12,000 | 12,000 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $11,999) | 12,000 | |||||||
REPURCHASE AGREEMENTS††,5 - 40.9% | ||||||||
J.P. Morgan Securities LLC | 319,407 | 319,407 | ||||||
Barclays Capital, Inc. | 133,068 | 133,068 | ||||||
BofA Securities, Inc. | 123,212 | 123,212 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $575,687) | 575,687 | |||||||
Total Investments - 95.5% | ||||||||
(Cost $1,334,546) | $ | 1,343,014 | ||||||
Other Assets & Liabilities, net - 4.5% | 64,019 | |||||||
Total Net Assets - 100.0% | $ | 1,407,033 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
S&P 500 Index Mini Futures Contracts | 2 | Mar 2021 | $ | 374,425 | $ | (1,645 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Barclays Bank plc | S&P 500 Index | (0.39)% (1 Week USD LIBOR + 0.30%) | At Maturity | 02/17/21 | 89 | $ | 334,778 | $ | (1,846 | ) | |||||||||
Goldman Sachs International | S&P 500 Index | (0.44)% (1 Week USD LIBOR + 0.35%) | At Maturity | 02/18/21 | 70 | 263,339 | (2,037 | ) | |||||||||||
BNP Paribas | S&P 500 Index | (0.19)% (1 Month USD LIBOR + 0.05%) | At Maturity | 02/18/21 | 112 | 419,139 | (3,239 | ) | |||||||||||
$ | 1,017,256 | $ | (7,122 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
INVERSE S&P 500® STRATEGY FUND |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 635,327 | $ | — | $ | — | $ | 635,327 | ||||||||
Federal Agency Notes | — | 120,000 | — | 120,000 | ||||||||||||
U.S. Treasury Bills | — | 12,000 | — | 12,000 | ||||||||||||
Repurchase Agreements | — | 575,687 | — | 575,687 | ||||||||||||
Total Assets | $ | 635,327 | $ | 707,687 | $ | — | $ | 1,343,014 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 1,645 | $ | — | $ | — | $ | 1,645 | ||||||||
Equity Index Swap Agreements** | — | 7,122 | — | 7,122 | ||||||||||||
Total Liabilities | $ | 1,645 | $ | 7,122 | $ | — | $ | 8,767 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
INVERSE S&P 500® STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 404,003 | $ | 8,565,569 | $ | (8,640,000 | ) | $ | (4,015 | ) | $ | 3,716 | $ | 329,273 | 13,192 | $ | 15,560 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 454,324 | 15,465,537 | (15,617,000 | ) | (670 | ) | 3,863 | 306,054 | 30,667 | 15,542 | ||||||||||||||||||||||
$ | 858,327 | $ | 24,031,106 | $ | (24,257,000 | ) | $ | (4,685 | ) | $ | 7,579 | $ | 635,327 | $ | 31,102 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
INVERSE S&P 500® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $131,999) | $ | 132,000 | ||
Investments in affiliated issuers, at value (cost $626,860) | 635,327 | |||
Repurchase agreements, at value (cost $575,687) | 575,687 | |||
Segregated cash with broker | 40,061 | |||
Receivables: | ||||
Fund shares sold | 49,934 | |||
Dividends | 729 | |||
Interest | 30 | |||
Total assets | 1,433,768 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 7,122 | |||
Payable for: | ||||
Professional fees | 6,491 | |||
Management fees | 4,375 | |||
Variation margin on futures contracts | 2,005 | |||
Transfer agent and administrative fees | 1,335 | |||
Investor service fees | 1,241 | |||
Securities purchased | 777 | |||
Portfolio accounting fees | 496 | |||
Swap settlement | 307 | |||
Fund shares redeemed | 73 | |||
Trustees’ fees* | 64 | |||
Miscellaneous | 2,449 | |||
Total liabilities | 26,735 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 1,407,033 | ||
Net assets consist of: | ||||
Paid in capital | $ | 17,906,083 | ||
Total distributable earnings (loss) | (16,499,050 | ) | ||
Net assets | $ | 1,407,033 | ||
Capital shares outstanding | 34,185 | |||
Net asset value per share | $ | 41.16 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 31,102 | ||
Interest | 13,594 | |||
Total investment income | 44,696 | |||
Expenses: | ||||
Management fees | 44,845 | |||
Investor service fees | 12,457 | |||
Transfer agent and administrative fees | 16,245 | |||
Professional fees | 9,505 | |||
Portfolio accounting fees | 4,983 | |||
Trustees’ fees* | 1,027 | |||
Custodian fees | 738 | |||
Interest expense | 9 | |||
Miscellaneous | 3,808 | |||
Total expenses | 93,617 | |||
Less: | ||||
Expenses waived by Adviser | (2,565 | ) | ||
Net expenses | 91,052 | |||
Net investment loss | (46,356 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (4,685 | ) | ||
Swap agreements | (1,776,617 | ) | ||
Futures contracts | 22,557 | |||
Net realized loss | (1,758,745 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (4 | ) | ||
Investments in affiliated issuers | 7,579 | |||
Swap agreements | (7,579 | ) | ||
Futures contracts | (1,645 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,649 | ) | ||
Net realized and unrealized loss | (1,760,394 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,806,750 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE S&P 500® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (46,356 | ) | $ | 25,204 | |||
Net realized loss on investments | (1,758,745 | ) | (883,052 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (1,649 | ) | 47,214 | |||||
Net decrease in net assets resulting from operations | (1,806,750 | ) | (810,634 | ) | ||||
Distributions to shareholders | (25,202 | ) | (23,392 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 332,592,117 | 111,588,598 | ||||||
Distributions reinvested | 25,202 | 23,392 | ||||||
Cost of shares redeemed | (331,137,269 | ) | (113,432,091 | ) | ||||
Net increase (decrease) from capital share transactions | 1,480,050 | (1,820,101 | ) | |||||
Net decrease in net assets | (351,902 | ) | (2,654,127 | ) | ||||
Net assets: | ||||||||
Beginning of year | 1,758,935 | 4,413,062 | ||||||
End of year | $ | 1,407,033 | $ | 1,758,935 | ||||
Capital share activity: | ||||||||
Shares sold | 6,862,087 | 1,815,183 | ||||||
Shares issued from reinvestment of distributions | 524 | 394 | ||||||
Shares redeemed | (6,860,240 | ) | (1,844,755 | ) | ||||
Net increase (decrease) in shares | 2,371 | (29,178 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
INVERSE S&P 500® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 55.29 | $ | 72.35 | $ | 69.60 | $ | 84.21 | $ | 95.71 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.48 | ) | .44 | .41 | (.11 | ) | (.11 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (13.31 | ) | (16.97 | ) | 2.34 | (14.50 | ) | (11.39 | ) | |||||||||||
Total from investment operations | (13.79 | ) | (16.53 | ) | 2.75 | (14.61 | ) | (11.50 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.34 | ) | (.53 | ) | — | — | — | |||||||||||||
Total distributions | (.34 | ) | (.53 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 41.16 | $ | 55.29 | $ | 72.35 | $ | 69.60 | $ | 84.21 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (25.02 | %) | (22.91 | %) | 3.95 | % | (17.35 | %) | (12.01 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,407 | $ | 1,759 | $ | 4,413 | $ | 2,573 | $ | 4,584 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.93 | %) | 0.71 | % | 0.61 | % | (0.15 | %) | (0.69 | %) | ||||||||||
Total expensesc | 1.88 | % | 1.88 | % | 1.77 | % | 1.76 | % | 1.71 | % | ||||||||||
Net expensesd | 1.83 | % | 1.82 | % | 1.76 | % | 1.76 | % | 1.71 | % | ||||||||||
Portfolio turnover rate | 1,417 | % | 442 | % | 540 | % | 100 | % | 311 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016, have been restated to reflect a 1:6 reverse share split effective December 1, 2016. |
28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
NASDAQ-100® FUND
OBJECTIVE: Seeks to provide investment results that correspond, before fees and expenses, to a benchmark for over-the-counter securities on a daily basis. The Fund’s current benchmark is the NASDAQ-100® Index (the “underlying index”).
For the one-year period ended December 31, 2020, NASDAQ-100® Fund maintained a daily correlation of over 99% to its benchmark of 100% of the daily price movement of the NASDAQ-100® Index. The Fund returned 44.96%, while the NASDAQ-100® Index returned 48.88% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Communications Services. The sectors detracting the most from return of the underlying index for the period were Utilities and Financials.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2020. Walgreens Boots Alliance, Inc., Marriott International, Inc. Class A, and United Airlines Holdings, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 7, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 14.5% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 11.8% |
Apple, Inc. | 8.2% |
Microsoft Corp. | 6.1% |
Amazon.com, Inc. | 6.0% |
Tesla, Inc. | 3.0% |
Facebook, Inc. — Class A | 2.4% |
Alphabet, Inc. — Class C | 2.1% |
Alphabet, Inc. — Class A | 1.9% |
NVIDIA Corp. | 1.8% |
Top Ten Total | 57.8% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
THE RYDEX FUNDS ANNUAL REPORT | 29 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
NASDAQ-100® Fund | 44.96% | 22.04% | 18.64% |
NASDAQ-100 Index | 48.88% | 24.27% | 20.63% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
30 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
NASDAQ-100® FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 67.2% | ||||||||
Technology - 29.7% | ||||||||
Apple, Inc. | 70,004 | $ | 9,288,831 | |||||
Microsoft Corp. | 31,130 | 6,923,935 | ||||||
NVIDIA Corp. | 3,879 | 2,025,614 | ||||||
Adobe, Inc.* | 3,006 | 1,503,361 | ||||||
Intel Corp. | 25,676 | 1,279,178 | ||||||
Broadcom, Inc. | 2,535 | 1,109,950 | ||||||
QUALCOMM, Inc. | 7,087 | 1,079,634 | ||||||
Texas Instruments, Inc. | 5,752 | 944,076 | ||||||
Advanced Micro Devices, Inc.* | 7,536 | 691,127 | ||||||
Intuit, Inc. | 1,646 | 625,233 | ||||||
Micron Technology, Inc.* | 6,975 | 524,380 | ||||||
Applied Materials, Inc. | 5,722 | 493,809 | ||||||
Fiserv, Inc.* | 4,201 | 478,326 | ||||||
Activision Blizzard, Inc. | 4,843 | 449,673 | ||||||
Lam Research Corp. | 902 | 425,987 | ||||||
Autodesk, Inc.* | 1,374 | 419,537 | ||||||
Zoom Video Communications, Inc. — Class A* | 1,220 | 411,530 | ||||||
Analog Devices, Inc. | 2,315 | 341,995 | ||||||
NXP Semiconductor N.V. | 1,753 | 278,744 | ||||||
Cognizant Technology Solutions Corp. — Class A | 3,350 | 274,532 | ||||||
Workday, Inc. — Class A* | 1,128 | 270,280 | ||||||
Electronic Arts, Inc. | 1,816 | 260,778 | ||||||
DocuSign, Inc.* | 1,160 | 257,868 | ||||||
KLA Corp. | 968 | 250,625 | ||||||
Synopsys, Inc.* | 951 | 246,537 | ||||||
Cadence Design Systems, Inc.* | 1,748 | 238,480 | ||||||
ASML Holding N.V. — Class G | 475 | 231,667 | ||||||
Microchip Technology, Inc. | 1,631 | 225,257 | ||||||
Xilinx, Inc. | 1,536 | 217,759 | ||||||
Paychex, Inc. | 2,253 | 209,935 | ||||||
Marvell Technology Group Ltd. | 4,199 | 199,620 | ||||||
NetEase, Inc. ADR | 2,051 | 196,424 | ||||||
ANSYS, Inc.* | 538 | 195,724 | ||||||
Atlassian Corporation plc — Class A* | 828 | 193,644 | ||||||
Splunk, Inc.* | 1,005 | 170,739 | ||||||
Skyworks Solutions, Inc. | 1,041 | 159,148 | ||||||
Cerner Corp. | 1,921 | 150,760 | ||||||
Maxim Integrated Products, Inc. | 1,675 | 148,489 | ||||||
Check Point Software Technologies Ltd.* | 878 | 116,695 | ||||||
Total Technology | 33,509,881 | |||||||
Communications - 21.0% | ||||||||
Amazon.com, Inc.* | 2,066 | 6,728,817 | ||||||
Facebook, Inc. — Class A* | 9,899 | 2,704,011 | ||||||
Alphabet, Inc. — Class C* | 1,358 | 2,379,053 | ||||||
Alphabet, Inc. — Class A* | 1,238 | 2,169,768 | ||||||
Comcast Corp. — Class A | 28,608 | 1,499,059 | ||||||
Netflix, Inc.* | 2,768 | 1,496,741 | ||||||
Cisco Systems, Inc. | 26,475 | 1,184,756 | ||||||
T-Mobile US, Inc.* | 7,777 | 1,048,729 | ||||||
Charter Communications, Inc. — Class A* | 1,252 | 828,261 | ||||||
Booking Holdings, Inc.* | 257 | 572,408 | ||||||
MercadoLibre, Inc.* | 312 | 522,669 | ||||||
JD.com, Inc. ADR* | 5,460 | 479,934 | ||||||
Baidu, Inc. ADR* | 1,730 | 374,095 | ||||||
Pinduoduo, Inc. ADR* | 1,870 | 332,243 | ||||||
Match Group, Inc.* | 1,667 | 252,034 | ||||||
eBay, Inc. | 4,319 | 217,030 | ||||||
Okta, Inc.* | 752 | 191,203 | ||||||
Sirius XM Holdings, Inc.1 | 26,625 | 169,601 | ||||||
VeriSign, Inc.* | 715 | 154,726 | ||||||
CDW Corp. | 896 | 118,084 | ||||||
Trip.com Group Ltd. ADR* | 3,277 | 110,533 | ||||||
Fox Corp. — Class A | 2,115 | 61,589 | ||||||
Fox Corp. — Class B | 1,616 | 46,670 | ||||||
Total Communications | 23,642,014 | |||||||
Consumer, Non-cyclical - 8.9% | ||||||||
PayPal Holdings, Inc.* | 7,342 | 1,719,496 | ||||||
PepsiCo, Inc. | 8,659 | 1,284,130 | ||||||
Amgen, Inc. | 3,648 | 838,748 | ||||||
Intuitive Surgical, Inc.* | 737 | 602,940 | ||||||
Mondelez International, Inc. — Class A | 8,961 | 523,950 | ||||||
Automatic Data Processing, Inc. | 2,687 | 473,450 | ||||||
Gilead Sciences, Inc. | 7,854 | 457,574 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,629 | 384,998 | ||||||
Illumina, Inc.* | 915 | 338,550 | ||||||
Regeneron Pharmaceuticals, Inc.* | 657 | 317,403 | ||||||
Monster Beverage Corp.* | 3,308 | 305,924 | ||||||
Keurig Dr Pepper, Inc. | 8,818 | 282,176 | ||||||
IDEXX Laboratories, Inc.* | 534 | 266,930 | ||||||
Kraft Heinz Co. | 7,661 | 265,530 | ||||||
Align Technology, Inc.* | 494 | 263,984 | ||||||
Moderna, Inc.* | 2,479 | 258,981 | ||||||
Biogen, Inc.* | 964 | 236,045 | ||||||
Cintas Corp. | 656 | 231,870 | ||||||
DexCom, Inc.* | 602 | 222,571 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,371 | 214,205 | ||||||
Verisk Analytics, Inc. — Class A | 1,019 | 211,534 | ||||||
Seagen, Inc.* | 1,130 | 197,908 | ||||||
Incyte Corp.* | 1,372 | 119,337 | ||||||
Total Consumer, Non-cyclical | 10,018,234 | |||||||
Consumer, Cyclical - 6.6% | ||||||||
Tesla, Inc.* | 4,830 | 3,408,386 | ||||||
Costco Wholesale Corp. | 2,765 | 1,041,797 | ||||||
Starbucks Corp. | 7,354 | 786,731 | ||||||
Ross Stores, Inc. | 2,231 | 273,989 | ||||||
Lululemon Athletica, Inc.* | 783 | 272,507 | ||||||
Marriott International, Inc. — Class A | 2,032 | 268,061 | ||||||
Peloton Interactive, Inc. — Class A* | 1,601 | 242,904 | ||||||
Walgreens Boots Alliance, Inc. | 5,426 | 216,389 | ||||||
O’Reilly Automotive, Inc.* | 454 | 205,467 | ||||||
Copart, Inc.* | 1,480 | 188,330 | ||||||
PACCAR, Inc. | 2,171 | 187,314 | ||||||
Fastenal Co. | 3,597 | 175,642 | ||||||
Dollar Tree, Inc.* | 1,474 | 159,251 | ||||||
Total Consumer, Cyclical | 7,426,768 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NASDAQ-100® FUND |
| Shares | Value | ||||||
Utilities - 0.6% | ||||||||
American Electric Power Company, Inc. | 3,110 | $ | 258,970 | |||||
Exelon Corp. | 6,113 | 258,091 | ||||||
Xcel Energy, Inc. | 3,292 | 219,477 | ||||||
Total Utilities | 736,538 | |||||||
Industrial - 0.4% | ||||||||
CSX Corp. | 4,792 | 434,874 | ||||||
Total Common Stocks | ||||||||
(Cost $45,285,512) | 75,768,309 | |||||||
MUTUAL FUNDS† - 26.3% | ||||||||
Guggenheim Strategy Fund II2 | 653,831 | 16,319,628 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 1,341,098 | 13,384,160 | ||||||
Total Mutual Funds | ||||||||
(Cost $29,549,521) | 29,703,788 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 2.1% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/213,4 | $ | 1,834,000 | 1,833,930 | |||||
0.09% due 04/01/214,5 | 500,000 | 499,903 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $2,333,786) | 2,333,833 | |||||||
REPURCHASE AGREEMENTS††,6 - 5.7% | ||||||||
J.P. Morgan Securities LLC | 3,553,259 | 3,553,259 | ||||||
Barclays Capital, Inc. | 1,480,326 | 1,480,326 | ||||||
BofA Securities, Inc. | 1,370,672 | 1,370,672 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $6,404,257) | 6,404,257 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%8 | 132,676 | 132,676 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $132,676) | 132,676 | |||||||
Total Investments - 101.4% | ||||||||
(Cost $83,705,752) | $ | 114,342,863 | ||||||
Other Assets & Liabilities, net - (1.4)% | (1,556,263 | ) | ||||||
Total Net Assets - 100.0% | $ | 112,786,600 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 87 | Mar 2021 | $ | 22,392,495 | $ | 865,635 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | NASDAQ-100 Index | 0.64% (1 Week USD LIBOR + 0.55%) | At Maturity | 02/18/21 | 742 | $ | 9,561,658 | $ | 33,224 | ||||||||||
Barclays Bank plc | NASDAQ-100 Index | 0.59% (1 Week USD LIBOR + 0.50%) | At Maturity | 02/17/21 | 290 | 3,741,205 | 14,346 | ||||||||||||
BNP Paribas | NASDAQ-100 Index | 0.79% (1 Month USD LIBOR + 0.65%) | At Maturity | 02/18/21 | 111 | 1,428,538 | 4,965 | ||||||||||||
$ | 14,731,401 | $ | 52,535 |
32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NASDAQ-100® FUND |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 75,768,309 | $ | — | $ | — | $ | 75,768,309 | ||||||||
Mutual Funds | 29,703,788 | — | — | 29,703,788 | ||||||||||||
U.S. Treasury Bills | — | 2,333,833 | — | 2,333,833 | ||||||||||||
Repurchase Agreements | — | 6,404,257 | — | 6,404,257 | ||||||||||||
Securities Lending Collateral | 132,676 | — | — | 132,676 | ||||||||||||
Equity Futures Contracts** | 865,635 | — | — | 865,635 | ||||||||||||
Equity Index Swap Agreements** | — | 52,535 | — | 52,535 | ||||||||||||
Total Assets | $ | 106,470,408 | $ | 8,790,625 | $ | — | $ | 115,261,033 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
NASDAQ-100® FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 25,485,051 | $ | 5,950,937 | $ | (15,050,000 | ) | $ | (352,875 | ) | $ | 286,515 | $ | 16,319,628 | 653,831 | $ | 350,794 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 23,136,219 | 9,185,602 | (18,800,000 | ) | (233,777 | ) | 96,116 | 13,384,160 | 1,341,098 | 235,974 | ||||||||||||||||||||||
$ | 48,621,270 | $ | 15,136,539 | $ | (33,850,000 | ) | $ | (586,652 | ) | $ | 382,631 | $ | 29,703,788 | $ | 586,768 |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $124,680 of securities loaned (cost $47,751,974) | $ | 78,234,818 | ||
Investments in affiliated issuers, at value (cost $29,549,521) | 29,703,788 | |||
Repurchase agreements, at value (cost $6,404,257) | 6,404,257 | |||
Unrealized appreciation on OTC swap agreements | 52,535 | |||
Receivables: | ||||
Variation margin on futures contracts | 48,285 | |||
Dividends | 47,984 | |||
Fund shares sold | 16,672 | |||
Swap settlement | 3,780 | |||
Securities lending income | 16 | |||
Interest | 11 | |||
Total assets | 114,512,146 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 1,191,958 | |||
Return of securities lending collateral | 132,676 | |||
Management fees | 67,120 | |||
Securities purchased | 32,566 | |||
Transfer agent and administrative fees | 25,098 | |||
Investor service fees | 23,325 | |||
Portfolio accounting fees | 9,330 | |||
Trustees’ fees* | 1,685 | |||
Miscellaneous | 241,788 | |||
Total liabilities | 1,725,546 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 112,786,600 | ||
Net assets consist of: | ||||
Paid in capital | $ | 74,500,814 | ||
Total distributable earnings (loss) | 38,285,786 | |||
Net assets | $ | 112,786,600 | ||
Capital shares outstanding | 1,795,801 | |||
Net asset value per share | $ | 62.81 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $415) | $ | 491,500 | ||
Dividends from securities of affiliated issuers | 586,768 | |||
Interest | 43,108 | |||
Income from securities lending, net | 111 | |||
Total investment income | 1,121,487 | |||
Expenses: | ||||
Management fees | 733,577 | |||
Investor service fees | 244,526 | |||
Transfer agent and administrative fees | 312,684 | |||
Professional fees | 178,683 | |||
Portfolio accounting fees | 97,809 | |||
Trustees’ fees* | 18,797 | |||
Custodian fees | 14,353 | |||
Interest expense | 9 | |||
Miscellaneous | 123,768 | |||
Total expenses | 1,724,206 | |||
Less: | ||||
Expenses waived by Adviser | (39,126 | ) | ||
Net expenses | 1,685,080 | |||
Net investment loss | (563,593 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 7,803,200 | |||
Investments in affiliated issuers | (586,652 | ) | ||
Swap agreements | 4,086,139 | |||
Futures contracts | 10,790,308 | |||
Net realized gain | 22,092,995 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 16,721,053 | |||
Investments in affiliated issuers | 382,631 | |||
Swap agreements | 60,457 | |||
Futures contracts | 313,602 | |||
Net change in unrealized appreciation (depreciation) | 17,477,743 | |||
Net realized and unrealized gain | 39,570,738 | |||
Net increase in net assets resulting from operations | $ | 39,007,145 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
NASDAQ-100® FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (563,593 | ) | $ | 308,926 | |||
Net realized gain on investments | 22,092,995 | 21,372,288 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 17,477,743 | 710,012 | ||||||
Net increase in net assets resulting from operations | 39,007,145 | 22,391,226 | ||||||
Distributions to shareholders | (12,636,620 | ) | (1,783,685 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 234,965,835 | 168,074,241 | ||||||
Distributions reinvested | 12,636,620 | 1,783,685 | ||||||
Cost of shares redeemed | (247,809,589 | ) | (164,457,984 | ) | ||||
Net increase (decrease) from capital share transactions | (207,134 | ) | 5,399,942 | |||||
Net increase in net assets | 26,163,391 | 26,007,483 | ||||||
Net assets: | ||||||||
Beginning of year | 86,623,209 | 60,615,726 | ||||||
End of year | $ | 112,786,600 | $ | 86,623,209 | ||||
Capital share activity: | ||||||||
Shares sold | 4,565,621 | 3,917,054 | ||||||
Shares issued from reinvestment of distributions | 238,202 | 39,646 | ||||||
Shares redeemed | (4,780,733 | ) | (3,842,054 | ) | ||||
Net increase in shares | 23,090 | 114,646 |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 48.86 | $ | 36.56 | $ | 38.70 | $ | 31.89 | $ | 34.16 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.31 | ) | .18 | .04 | (.11 | ) | (.11 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 21.04 | 13.20 | (.49 | ) | 9.73 | 1.92 | ||||||||||||||
Total from investment operations | 20.73 | 13.38 | (.45 | ) | 9.62 | 1.81 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.17 | ) | (.05 | ) | — | — | — | |||||||||||||
Net realized gains | (6.61 | ) | (1.03 | ) | (1.69 | ) | (2.81 | ) | (4.08 | ) | ||||||||||
Total distributions | (6.78 | ) | (1.08 | ) | (1.69 | ) | (2.81 | ) | (4.08 | ) | ||||||||||
Net asset value, end of period | $ | 62.81 | $ | 48.86 | $ | 36.56 | $ | 38.70 | $ | 31.89 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 44.96 | % | 36.86 | % | (1.81 | %) | 31.12 | % | 5.98 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 112,787 | $ | 86,623 | $ | 60,616 | $ | 76,862 | $ | 61,516 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.58 | %) | 0.41 | % | 0.11 | % | (0.30 | %) | (0.34 | %) | ||||||||||
Total expensesc | 1.76 | % | 1.76 | % | 1.66 | % | 1.64 | % | 1.60 | % | ||||||||||
Net expensesd | 1.72 | % | 1.70 | % | 1.66 | % | 1.64 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 142 | % | 61 | % | 80 | % | 101 | % | 284 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
INVERSE NASDAQ-100® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the NASDAQ-100® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, with the NASDAQ-100 Index returning 48.88%, the Inverse NASDAQ-100® Strategy Fund returned -38.00%. For the one-year period ended December 31, 2020, Inverse NASDAQ-100® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the NASDAQ-100 Index.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Communications Services. The sectors detracting the most from return of the underlying index for the period were Utilities and Financials.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2020. Walgreens Boots Alliance, Inc., Marriott International, Inc. Class A, and United Airlines Holdings, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
38 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 21, 2001 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 27.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 26.9% |
Total | 53.9% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Inverse NASDAQ-100® Strategy Fund | (38.00%) | (21.61%) | (19.89%) |
NASDAQ-100 Index | 48.88% | 24.27% | 20.63% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 39 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
INVERSE NASDAQ-100® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 53.9% | ||||||||
Guggenheim Strategy Fund II1 | 5,010 | $ | 125,045 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 12,518 | 124,929 | ||||||
Total Mutual Funds | ||||||||
(Cost $247,416) | 249,974 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 17.2% | ||||||||
Federal Home Loan Bank | ||||||||
0.10% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 01/04/212 | $ | 80,000 | 80,000 | |||||
Total Federal Agency Notes | ||||||||
(Cost $80,000) | 80,000 | |||||||
REPURCHASE AGREEMENTS††,3 - 30.0% | ||||||||
J.P. Morgan Securities LLC | 77,084 | 77,084 | ||||||
Barclays Capital, Inc. | 32,114 | 32,114 | ||||||
BofA Securities, Inc. | 29,735 | 29,735 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $138,933) | 138,933 | |||||||
Total Investments - 101.1% | ||||||||
(Cost $466,349) | $ | 468,907 | ||||||
Other Assets & Liabilities, net - (1.1)% | (5,314 | ) | ||||||
Total Net Assets - 100.0% | $ | 463,593 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Goldman Sachs International | NASDAQ-100 Index | (0.34)% (1 Week USD LIBOR + 0.25%) | At Maturity | 02/18/21 | 8 | $ | 98,470 | $ | (339 | ) | |||||||||
BNP Paribas | NASDAQ-100 Index | (0.29)% (1 Month USD LIBOR + 0.15%) | At Maturity | 02/18/21 | 8 | 109,002 | (377 | ) | |||||||||||
Barclays Bank plc | NASDAQ-100 Index | (0.44)% (1 Week USD LIBOR + 0.35%) | At Maturity | 02/17/21 | 20 | 262,320 | (1,005 | ) | |||||||||||
$ | 469,792 | $ | (1,721 | ) |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
INVERSE NASDAQ-100® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 249,974 | $ | — | $ | — | $ | 249,974 | ||||||||
Federal Agency Notes | — | 80,000 | — | 80,000 | ||||||||||||
Repurchase Agreements | — | 138,933 | — | 138,933 | ||||||||||||
Total Assets | $ | 249,974 | $ | 218,933 | $ | — | $ | 468,907 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 1,721 | $ | — | $ | 1,721 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 142,166 | $ | 1,616,118 | $ | (1,610,000 | ) | $ | (24,725 | ) | $ | 1,486 | $ | 125,045 | 5,010 | $ | 6,117 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 137,548 | 1,949,868 | (1,945,000 | ) | (18,243 | ) | 756 | 124,929 | 12,518 | 4,872 | ||||||||||||||||||||||
$ | 279,714 | $ | 3,565,986 | $ | (3,555,000 | ) | $ | (42,968 | ) | $ | 2,242 | $ | 249,974 | $ | 10,989 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $80,000) | $ | 80,000 | ||
Investments in affiliated issuers, at value (cost $247,416) | 249,974 | |||
Repurchase agreements, at value (cost $138,933) | 138,933 | |||
Receivables: | ||||
Dividends | 451 | |||
Interest | 20 | |||
Total assets | 469,378 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 1,721 | |||
Payable for: | ||||
Professional fees | 2,007 | |||
Management fees | 720 | |||
Securities purchased | 470 | |||
Transfer agent and administrative fees | 228 | |||
Investor service fees | 212 | |||
Fund shares redeemed | 112 | |||
Swap settlement | 97 | |||
Portfolio accounting fees | 85 | |||
Trustees’ fees* | 14 | |||
Miscellaneous | 119 | |||
Total liabilities | 5,785 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 463,593 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,438,895 | ||
Total distributable earnings (loss) | (7,975,302 | ) | ||
Net assets | $ | 463,593 | ||
Capital shares outstanding | 18,326 | |||
Net asset value per share | $ | 25.30 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 10,989 | ||
Interest | 3,484 | |||
Total investment income | 14,473 | |||
Expenses: | ||||
Management fees | 13,866 | |||
Investor service fees | 3,852 | |||
Transfer agent and administrative fees | 5,267 | |||
Professional fees | 2,866 | |||
Portfolio accounting fees | 1,541 | |||
Trustees’ fees* | 425 | |||
Custodian fees | 286 | |||
Miscellaneous | 1,475 | |||
Total expenses | 29,578 | |||
Less: | ||||
Expenses waived by Adviser | (747 | ) | ||
Net expenses | 28,831 | |||
Net investment loss | (14,358 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (42,968 | ) | ||
Swap agreements | (1,028,129 | ) | ||
Futures contracts | 88,982 | |||
Net realized loss | (982,115 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in affiliated issuers | 2,242 | |||
Swap agreements | (3,889 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,647 | ) | ||
Net realized and unrealized loss | (983,762 | ) | ||
Net decrease in net assets resulting from operations | $ | (998,120 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE NASDAQ-100® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (14,358 | ) | $ | 12,149 | |||
Net realized loss on investments | (982,115 | ) | (980,799 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (1,647 | ) | 77,618 | |||||
Net decrease in net assets resulting from operations | (998,120 | ) | (891,032 | ) | ||||
Distributions to shareholders | (12,149 | ) | (7,340 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 27,846,986 | 20,383,557 | ||||||
Distributions reinvested | 12,149 | 7,340 | ||||||
Cost of shares redeemed | (26,977,515 | ) | (26,715,526 | ) | ||||
Net increase (decrease) from capital share transactions | 881,620 | (6,324,629 | ) | |||||
Net decrease in net assets | (128,649 | ) | (7,223,001 | ) | ||||
Net assets: | ||||||||
Beginning of year | 592,242 | 7,815,243 | ||||||
End of year | $ | 463,593 | $ | 592,242 | ||||
Capital share activity: | ||||||||
Shares sold | 807,771 | 417,235 | ||||||
Shares issued from reinvestment of distributions | 414 | 162 | ||||||
Shares redeemed | (804,229 | ) | (538,614 | ) | ||||
Net increase (decrease) in shares | 3,956 | (121,217 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
INVERSE NASDAQ-100® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 41.21 | $ | 57.64 | $ | 59.28 | $ | 78.68 | $ | 86.94 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.33 | ) | .34 | .32 | (.11 | ) | (.18 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (15.28 | ) | (16.47 | ) | (1.96 | )f | (19.29 | ) | (8.08 | ) | ||||||||||
Total from investment operations | (15.61 | ) | (16.13 | ) | (1.64 | ) | (19.40 | ) | (8.26 | ) | ||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.30 | ) | (.30 | ) | — | — | — | |||||||||||||
Total distributions | (.30 | ) | (.30 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 25.30 | $ | 41.21 | $ | 57.64 | $ | 59.28 | $ | 78.68 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (38.00 | %) | (28.01 | %) | (2.77 | %) | (24.66 | %) | (9.48 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 464 | $ | 592 | $ | 7,815 | $ | 772 | $ | 2,652 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.93 | %) | 0.70 | % | 0.58 | % | (0.17 | %) | (0.78 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.92 | % | 1.83 | % | 1.79 | % | 1.74 | % | ||||||||||
Net expensesd | 1.87 | % | 1.84 | % | 1.83 | % | 1.79 | % | 1.74 | % | ||||||||||
Portfolio turnover rate | 681 | % | 418 | % | 136 | % | 119 | % | 382 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
f | The amount shown for a share outstanding throughout the period does not agree with the aggregate net gain on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
S&P 500® 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the S&P 500® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, S&P 500 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the S&P 500 Index. S&P 500 2x Strategy Fund returned 18.10%, while the S&P 500 Index returned 18.40% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Communications Services. The sectors detracting the most from return of the underlying index for the period were Energy, Financials, and Real Estate.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2020. ExxonMobil Corp., Wells Fargo & Co., and AT&T, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 45 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 13.1% |
Guggenheim Strategy Fund II | 10.7% |
Apple, Inc. | 3.7% |
Microsoft Corp. | 2.9% |
Amazon.com, Inc. | 2.4% |
Facebook, Inc. — Class A | 1.1% |
Tesla, Inc. | 0.9% |
Alphabet, Inc. — Class A | 0.9% |
Alphabet, Inc. — Class C | 0.9% |
Berkshire Hathaway, Inc. — Class B | 0.8% |
Top Ten Total | 37.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
S&P 500® 2x Strategy Fund | 18.10% | 22.91% | 21.84% |
S&P 500 Index | 18.40% | 15.22% | 13.88% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
46 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 54.9% | ||||||||
Technology - 12.7% | ||||||||
Apple, Inc. | 10,151 | $ | 1,346,936 | |||||
Microsoft Corp. | 4,802 | 1,068,061 | ||||||
NVIDIA Corp. | 394 | 205,747 | ||||||
Adobe, Inc.* | 305 | 152,537 | ||||||
Intel Corp. | 2,603 | 129,682 | ||||||
salesforce.com, Inc.* | 581 | 129,290 | ||||||
Broadcom, Inc. | 257 | 112,527 | ||||||
QUALCOMM, Inc. | 718 | 109,380 | ||||||
Accenture plc — Class A | 402 | 105,006 | ||||||
Texas Instruments, Inc. | 583 | 95,688 | ||||||
Oracle Corp. | 1,205 | 77,951 | ||||||
International Business Machines Corp. | 566 | 71,248 | ||||||
Advanced Micro Devices, Inc.* | 763 | 69,975 | ||||||
ServiceNow, Inc.* | 124 | 68,253 | ||||||
Intuit, Inc. | 167 | 63,435 | ||||||
Fidelity National Information Services, Inc. | 394 | 55,735 | ||||||
Micron Technology, Inc.* | 708 | 53,227 | ||||||
Applied Materials, Inc. | 581 | 50,140 | ||||||
Activision Blizzard, Inc. | 492 | 45,682 | ||||||
Lam Research Corp. | 91 | 42,977 | ||||||
Autodesk, Inc.* | 140 | 42,748 | ||||||
Fiserv, Inc.* | 365 | 41,559 | ||||||
Analog Devices, Inc. | 235 | 34,717 | ||||||
Cognizant Technology Solutions Corp. — Class A | 339 | 27,781 | ||||||
Electronic Arts, Inc. | 184 | 26,422 | ||||||
KLA Corp. | 98 | 25,373 | ||||||
Synopsys, Inc.* | 97 | 25,146 | ||||||
Cadence Design Systems, Inc.* | 177 | 24,148 | ||||||
MSCI, Inc. — Class A | 53 | 23,666 | ||||||
Microchip Technology, Inc. | 165 | 22,788 | ||||||
Xilinx, Inc. | 156 | 22,116 | ||||||
HP, Inc. | 872 | 21,443 | ||||||
ANSYS, Inc.* | 55 | 20,009 | ||||||
Paychex, Inc. | 203 | 18,916 | ||||||
Skyworks Solutions, Inc. | 105 | 16,052 | ||||||
Cerner Corp. | 195 | 15,304 | ||||||
Take-Two Interactive Software, Inc.* | 73 | 15,169 | ||||||
Maxim Integrated Products, Inc. | 170 | 15,071 | ||||||
Paycom Software, Inc.* | 31 | 14,020 | ||||||
Zebra Technologies Corp. — Class A* | 34 | 13,067 | ||||||
Fortinet, Inc.* | 86 | 12,774 | ||||||
Teradyne, Inc. | 105 | 12,588 | ||||||
Qorvo, Inc.* | 72 | 11,971 | ||||||
Tyler Technologies, Inc.* | 26 | 11,349 | ||||||
Broadridge Financial Solutions, Inc. | 73 | 11,184 | ||||||
Akamai Technologies, Inc.* | 103 | 10,814 | ||||||
Western Digital Corp. | 194 | 10,746 | ||||||
Citrix Systems, Inc. | 78 | 10,148 | ||||||
Hewlett Packard Enterprise Co. | 817 | 9,681 | ||||||
NetApp, Inc. | 142 | 9,406 | ||||||
Leidos Holdings, Inc. | 85 | 8,935 | ||||||
Seagate Technology plc | 142 | 8,827 | ||||||
Jack Henry & Associates, Inc. | 48 | 7,775 | ||||||
IPG Photonics Corp.* | 23 | 5,147 | ||||||
DXC Technology Co. | 161 | 4,146 | ||||||
Xerox Holdings Corp. | 106 | 2,458 | ||||||
Total Technology | 4,666,941 | |||||||
Consumer, Non-cyclical - 11.5% | ||||||||
Johnson & Johnson | 1,673 | 263,297 | ||||||
Procter & Gamble Co. | 1,575 | 219,146 | ||||||
UnitedHealth Group, Inc. | 603 | 211,460 | ||||||
PayPal Holdings, Inc.* | 744 | 174,245 | ||||||
Coca-Cola Co. | 2,457 | 134,742 | ||||||
Merck & Company, Inc. | 1,607 | 131,453 | ||||||
PepsiCo, Inc. | 878 | 130,207 | ||||||
Pfizer, Inc. | 3,530 | 129,939 | ||||||
Abbott Laboratories | 1,125 | 123,176 | ||||||
AbbVie, Inc. | 1,122 | 120,222 | ||||||
Thermo Fisher Scientific, Inc. | 252 | 117,377 | ||||||
Medtronic plc | 855 | 100,155 | ||||||
Danaher Corp. | 402 | 89,300 | ||||||
Bristol-Myers Squibb Co. | 1,436 | 89,075 | ||||||
Eli Lilly & Co. | 504 | 85,095 | ||||||
Amgen, Inc. | 370 | 85,071 | ||||||
Philip Morris International, Inc. | 989 | 81,879 | ||||||
Intuitive Surgical, Inc.* | 75 | 61,357 | ||||||
CVS Health Corp. | 832 | 56,826 | ||||||
Mondelez International, Inc. — Class A | 908 | 53,091 | ||||||
Stryker Corp. | 208 | 50,968 | ||||||
Anthem, Inc. | 158 | 50,732 | ||||||
S&P Global, Inc. | 153 | 50,296 | ||||||
Zoetis, Inc. | 302 | 49,981 | ||||||
Altria Group, Inc. | 1,181 | 48,421 | ||||||
Automatic Data Processing, Inc. | 272 | 47,926 | ||||||
Cigna Corp. | 229 | 47,673 | ||||||
Colgate-Palmolive Co. | 545 | 46,603 | ||||||
Gilead Sciences, Inc. | 796 | 46,375 | ||||||
Becton Dickinson and Co. | 184 | 46,040 | ||||||
Global Payments, Inc. | 190 | 40,930 | ||||||
Vertex Pharmaceuticals, Inc.* | 165 | 38,996 | ||||||
Estee Lauder Companies, Inc. — Class A | 144 | 38,331 | ||||||
Edwards Lifesciences Corp.* | 396 | 36,127 | ||||||
Humana, Inc. | 84 | 34,463 | ||||||
Illumina, Inc.* | 93 | 34,410 | ||||||
Boston Scientific Corp.* | 910 | 32,715 | ||||||
Regeneron Pharmaceuticals, Inc.* | 67 | 32,369 | ||||||
Moody’s Corp. | 103 | 29,895 | ||||||
Kimberly-Clark Corp. | 216 | 29,123 | ||||||
HCA Healthcare, Inc. | 168 | 27,629 | ||||||
IDEXX Laboratories, Inc.* | 54 | 26,993 | ||||||
Baxter International, Inc. | 324 | 25,998 | ||||||
Align Technology, Inc.* | 46 | 24,581 | ||||||
Biogen, Inc.* | 98 | 23,996 | ||||||
Sysco Corp. | 323 | 23,986 | ||||||
Constellation Brands, Inc. — Class A | 108 | 23,657 | ||||||
General Mills, Inc. | 388 | 22,814 | ||||||
DexCom, Inc.* | 61 | 22,553 | ||||||
Centene Corp.* | 368 | 22,091 | ||||||
IQVIA Holdings, Inc.* | 122 | 21,859 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Monster Beverage Corp.* | 235 | $ | 21,733 | |||||
Alexion Pharmaceuticals, Inc.* | 139 | 21,717 | ||||||
Verisk Analytics, Inc. — Class A | 104 | 21,589 | ||||||
IHS Markit Ltd. | 237 | 21,290 | ||||||
Zimmer Biomet Holdings, Inc. | 132 | 20,340 | ||||||
Cintas Corp. | 56 | 19,794 | ||||||
ResMed, Inc. | 92 | 19,556 | ||||||
Corteva, Inc. | 474 | 18,353 | ||||||
Archer-Daniels-Midland Co. | 354 | 17,845 | ||||||
McKesson Corp. | 102 | 17,740 | ||||||
Clorox Co. | 80 | 16,154 | ||||||
Kroger Co. | 492 | 15,626 | ||||||
McCormick & Company, Inc. | 158 | 15,105 | ||||||
Equifax, Inc. | 77 | 14,849 | ||||||
FleetCor Technologies, Inc.* | 53 | 14,460 | ||||||
Viatris, Inc.* | 766 | 14,355 | ||||||
Hershey Co. | 94 | 14,319 | ||||||
Kraft Heinz Co. | 411 | 14,245 | ||||||
Church & Dwight Company, Inc. | 158 | 13,782 | ||||||
MarketAxess Holdings, Inc. | 24 | 13,693 | ||||||
West Pharmaceutical Services, Inc. | 47 | 13,316 | ||||||
Laboratory Corporation of America Holdings* | 62 | 12,620 | ||||||
Teleflex, Inc. | 30 | 12,347 | ||||||
Tyson Foods, Inc. — Class A | 187 | 12,050 | ||||||
Hologic, Inc.* | 163 | 11,871 | ||||||
Cooper Companies, Inc. | 32 | 11,626 | ||||||
Conagra Brands, Inc. | 310 | 11,241 | ||||||
Catalent, Inc.* | 105 | 10,927 | ||||||
United Rentals, Inc.* | 46 | 10,668 | ||||||
Incyte Corp.* | 119 | 10,351 | ||||||
Quest Diagnostics, Inc. | 86 | 10,249 | ||||||
STERIS plc | 54 | 10,235 | ||||||
Varian Medical Systems, Inc.* | 58 | 10,151 | ||||||
Kellogg Co. | 161 | 10,019 | ||||||
Cardinal Health, Inc. | 186 | 9,962 | ||||||
ABIOMED, Inc.* | 29 | 9,402 | ||||||
Brown-Forman Corp. — Class B | 116 | 9,214 | ||||||
Gartner, Inc.* | 57 | 9,131 | ||||||
AmerisourceBergen Corp. — Class A | 93 | 9,092 | ||||||
Avery Dennison Corp. | 54 | 8,376 | ||||||
Hormel Foods Corp. | 179 | 8,343 | ||||||
J M Smucker Co. | 72 | 8,323 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 14 | 8,161 | ||||||
Lamb Weston Holdings, Inc. | 93 | 7,323 | ||||||
Dentsply Sirona, Inc. | 139 | 7,278 | ||||||
Universal Health Services, Inc. — Class B | 49 | 6,737 | ||||||
Quanta Services, Inc. | 88 | 6,338 | ||||||
Campbell Soup Co. | 129 | 6,237 | ||||||
Henry Schein, Inc.* | 91 | 6,084 | ||||||
DaVita, Inc.* | 47 | 5,518 | ||||||
Rollins, Inc. | 140 | 5,470 | ||||||
Molson Coors Beverage Co. — Class B | 119 | 5,378 | ||||||
Nielsen Holdings plc | 227 | 4,737 | ||||||
Robert Half International, Inc. | 72 | 4,498 | ||||||
Perrigo Company plc | 87 | 3,891 | ||||||
Total Consumer, Non-cyclical | 4,209,353 | |||||||
Communications - 8.9% | ||||||||
Amazon.com, Inc.* | 272 | 885,885 | ||||||
Facebook, Inc. — Class A* | 1,527 | 417,115 | ||||||
Alphabet, Inc. — Class A* | 191 | 334,754 | ||||||
Alphabet, Inc. — Class C* | 184 | 322,346 | ||||||
Walt Disney Co.* | 1,150 | 208,357 | ||||||
Verizon Communications, Inc. | 2,628 | 154,395 | ||||||
Comcast Corp. — Class A | 2,900 | 151,960 | ||||||
Netflix, Inc.* | 280 | 151,404 | ||||||
AT&T, Inc. | 4,526 | 130,168 | ||||||
Cisco Systems, Inc. | 2,685 | 120,154 | ||||||
Charter Communications, Inc. — Class A* | 93 | 61,524 | ||||||
Booking Holdings, Inc.* | 26 | 57,909 | ||||||
T-Mobile US, Inc.* | 370 | 49,894 | ||||||
Twitter, Inc.* | 506 | 27,400 | ||||||
eBay, Inc. | 416 | 20,904 | ||||||
Motorola Solutions, Inc. | 108 | 18,366 | ||||||
Corning, Inc. | 486 | 17,496 | ||||||
Etsy, Inc.* | 80 | 14,233 | ||||||
VeriSign, Inc.* | 64 | 13,850 | ||||||
ViacomCBS, Inc. — Class B | 359 | 13,376 | ||||||
CDW Corp. | 91 | 11,993 | ||||||
Expedia Group, Inc. | 86 | 11,386 | ||||||
Arista Networks, Inc.* | 35 | 10,170 | ||||||
Omnicom Group, Inc. | 137 | 8,545 | ||||||
NortonLifeLock, Inc. | 376 | 7,813 | ||||||
F5 Networks, Inc.* | 39 | 6,862 | ||||||
Fox Corp. — Class A | 214 | 6,232 | ||||||
Lumen Technologies, Inc. | 627 | 6,113 | ||||||
Interpublic Group of Companies, Inc. | 248 | 5,833 | ||||||
DISH Network Corp. — Class A* | 158 | 5,110 | ||||||
Discovery, Inc. — Class C* | 187 | 4,898 | ||||||
Juniper Networks, Inc. | 209 | 4,705 | ||||||
News Corp. — Class A | 248 | 4,457 | ||||||
Discovery, Inc. — Class A*,1 | 102 | 3,069 | ||||||
Fox Corp. — Class B | 98 | 2,830 | ||||||
News Corp. — Class B | 78 | 1,386 | ||||||
Total Communications | 3,272,892 | |||||||
Financial - 8.0% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 1,236 | 286,591 | ||||||
JPMorgan Chase & Co. | 1,937 | 246,135 | ||||||
Visa, Inc. — Class A | 1,076 | 235,353 | ||||||
Mastercard, Inc. — Class A | 559 | 199,529 | ||||||
Bank of America Corp. | 4,835 | 146,549 | ||||||
Citigroup, Inc. | 1,323 | 81,576 | ||||||
Wells Fargo & Co. | 2,626 | 79,253 | ||||||
BlackRock, Inc. — Class A | 90 | 64,939 | ||||||
American Tower Corp. — Class A REIT | 282 | 63,298 | ||||||
Morgan Stanley | 907 | 62,157 | ||||||
Goldman Sachs Group, Inc. | 219 | 57,752 | ||||||
Charles Schwab Corp. | 947 | 50,229 | ||||||
American Express Co. | 414 | 50,057 | ||||||
Prologis, Inc. REIT | 470 | 46,840 |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Chubb Ltd. | 287 | $ | 44,175 | |||||
Crown Castle International Corp. REIT | 274 | 43,618 | ||||||
CME Group, Inc. — Class A | 228 | 41,507 | ||||||
Equinix, Inc. REIT | 58 | 41,422 | ||||||
Intercontinental Exchange, Inc. | 356 | 41,043 | ||||||
Truist Financial Corp. | 856 | 41,028 | ||||||
U.S. Bancorp | 870 | 40,533 | ||||||
PNC Financial Services Group, Inc. | 269 | 40,081 | ||||||
Marsh & McLennan Companies, Inc. | 323 | 37,791 | ||||||
Progressive Corp. | 372 | 36,783 | ||||||
Aon plc — Class A | 145 | 30,634 | ||||||
Capital One Financial Corp. | 290 | 28,667 | ||||||
Digital Realty Trust, Inc. REIT | 178 | 24,833 | ||||||
MetLife, Inc. | 486 | 22,818 | ||||||
Travelers Companies, Inc. | 161 | 22,600 | ||||||
Public Storage REIT | 97 | 22,400 | ||||||
Bank of New York Mellon Corp. | 518 | 21,984 | ||||||
T. Rowe Price Group, Inc. | 144 | 21,800 | ||||||
Allstate Corp. | 194 | 21,326 | ||||||
American International Group, Inc. | 548 | 20,747 | ||||||
SBA Communications Corp. REIT | 71 | 20,031 | ||||||
Prudential Financial, Inc. | 251 | 19,596 | ||||||
Aflac, Inc. | 415 | 18,455 | ||||||
Discover Financial Services | 196 | 17,744 | ||||||
Simon Property Group, Inc. REIT | 208 | 17,738 | ||||||
Willis Towers Watson plc | 82 | 17,276 | ||||||
Welltower, Inc. REIT | 266 | 17,189 | ||||||
State Street Corp. | 224 | 16,303 | ||||||
First Republic Bank | 110 | 16,162 | ||||||
Weyerhaeuser Co. REIT | 474 | 15,893 | ||||||
Arthur J Gallagher & Co. | 122 | 15,093 | ||||||
Ameriprise Financial, Inc. | 75 | 14,575 | ||||||
AvalonBay Communities, Inc. REIT | 89 | 14,278 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 79 | 14,079 | ||||||
Realty Income Corp. REIT | 223 | 13,864 | ||||||
CBRE Group, Inc. — Class A* | 213 | 13,359 | ||||||
Equity Residential REIT | 217 | 12,864 | ||||||
SVB Financial Group* | 33 | 12,798 | ||||||
Fifth Third Bancorp | 452 | 12,462 | ||||||
Northern Trust Corp. | 132 | 12,294 | ||||||
Synchrony Financial | 345 | 11,975 | ||||||
Ventas, Inc. REIT | 238 | 11,672 | ||||||
Hartford Financial Services Group, Inc. | 227 | 11,119 | ||||||
M&T Bank Corp. | 82 | 10,439 | ||||||
Healthpeak Properties, Inc. REIT | 342 | 10,339 | ||||||
KeyCorp | 620 | 10,174 | ||||||
Regions Financial Corp. | 610 | 9,833 | ||||||
Essex Property Trust, Inc. REIT | 41 | 9,734 | ||||||
Citizens Financial Group, Inc. | 271 | 9,691 | ||||||
Nasdaq, Inc. | 73 | 9,690 | ||||||
Extra Space Storage, Inc. REIT | 82 | 9,501 | ||||||
Duke Realty Corp. REIT | 236 | 9,433 | ||||||
Mid-America Apartment Communities, Inc. REIT | 73 | 9,248 | ||||||
Boston Properties, Inc. REIT | 90 | 8,508 | ||||||
Cincinnati Financial Corp. | 95 | 8,300 | ||||||
Huntington Bancshares, Inc. | 646 | 8,159 | ||||||
Principal Financial Group, Inc. | 162 | 8,037 | ||||||
Raymond James Financial, Inc. | 77 | 7,367 | ||||||
UDR, Inc. REIT | 187 | 7,186 | ||||||
Loews Corp. | 148 | 6,663 | ||||||
Host Hotels & Resorts, Inc. REIT | 448 | 6,554 | ||||||
Cboe Global Markets, Inc. | 69 | 6,425 | ||||||
W R Berkley Corp. | 89 | 5,911 | ||||||
Globe Life, Inc. | 62 | 5,888 | ||||||
Everest Re Group Ltd. | 25 | 5,852 | ||||||
Lincoln National Corp. | 115 | 5,786 | ||||||
Western Union Co. | 261 | 5,726 | ||||||
Iron Mountain, Inc. REIT | 183 | 5,395 | ||||||
Assurant, Inc. | 38 | 5,176 | ||||||
Comerica, Inc. | 89 | 4,972 | ||||||
Regency Centers Corp. REIT | 100 | 4,559 | ||||||
Zions Bancorp North America | 104 | 4,518 | ||||||
Franklin Resources, Inc. | 173 | 4,323 | ||||||
Invesco Ltd. | 239 | 4,166 | ||||||
Kimco Realty Corp. REIT | 275 | 4,128 | ||||||
Federal Realty Investment Trust REIT | 44 | 3,745 | ||||||
Vornado Realty Trust REIT | 100 | 3,734 | ||||||
People’s United Financial, Inc. | 270 | 3,491 | ||||||
Unum Group | 129 | 2,959 | ||||||
SL Green Realty Corp. REIT | 46 | 2,741 | ||||||
Total Financial | 2,911,218 | |||||||
Consumer, Cyclical - 5.3% | ||||||||
Tesla, Inc.* | 481 | 339,427 | ||||||
Home Depot, Inc. | 684 | 181,684 | ||||||
Walmart, Inc. | 881 | 126,996 | ||||||
NIKE, Inc. — Class B | 797 | 112,752 | ||||||
Costco Wholesale Corp. | 280 | 105,498 | ||||||
McDonald’s Corp. | 474 | 101,711 | ||||||
Starbucks Corp. | 745 | 79,700 | ||||||
Lowe’s Companies, Inc. | 465 | 74,637 | ||||||
Target Corp. | 318 | 56,137 | ||||||
TJX Companies, Inc. | 763 | 52,105 | ||||||
General Motors Co. | 800 | 33,312 | ||||||
Dollar General Corp. | 156 | 32,807 | ||||||
Ross Stores, Inc. | 226 | 27,755 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 18 | 24,961 | ||||||
Marriott International, Inc. — Class A | 169 | 22,295 | ||||||
Aptiv plc | 171 | 22,280 | ||||||
Ford Motor Co. | 2,482 | 21,817 | ||||||
Cummins, Inc. | 94 | 21,347 | ||||||
O’Reilly Automotive, Inc.* | 46 | 20,818 | ||||||
Yum! Brands, Inc. | 191 | 20,735 | ||||||
Hilton Worldwide Holdings, Inc. | 176 | 19,582 | ||||||
PACCAR, Inc. | 220 | 18,982 | ||||||
Walgreens Boots Alliance, Inc. | 456 | 18,185 | ||||||
AutoZone, Inc.* | 15 | 17,782 | ||||||
Fastenal Co. | 364 | 17,774 | ||||||
Southwest Airlines Co. | 375 | 17,479 | ||||||
VF Corp. | 203 | 17,338 | ||||||
Copart, Inc.* | 132 | 16,797 | ||||||
Delta Air Lines, Inc. | 406 | 16,325 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
Dollar Tree, Inc.* | 149 | $ | 16,098 | |||||
Best Buy Company, Inc. | 146 | 14,569 | ||||||
DR Horton, Inc. | 211 | 14,542 | ||||||
Lennar Corp. — Class A | 175 | 13,340 | ||||||
Las Vegas Sands Corp. | 209 | 12,456 | ||||||
WW Grainger, Inc. | 29 | 11,842 | ||||||
Tractor Supply Co. | 74 | 10,403 | ||||||
Ulta Beauty, Inc.* | 36 | 10,338 | ||||||
Carnival Corp. | 472 | 10,224 | ||||||
Darden Restaurants, Inc. | 83 | 9,887 | ||||||
CarMax, Inc.* | 104 | 9,824 | ||||||
Domino’s Pizza, Inc. | 25 | 9,586 | ||||||
Pool Corp. | 25 | 9,312 | ||||||
Genuine Parts Co. | 92 | 9,240 | ||||||
Tiffany & Co. | 69 | 9,070 | ||||||
Royal Caribbean Cruises Ltd. | 118 | 8,813 | ||||||
MGM Resorts International | 261 | 8,224 | ||||||
NVR, Inc.* | 2 | 8,160 | ||||||
United Airlines Holdings, Inc.* | 186 | 8,044 | ||||||
Hasbro, Inc. | 81 | 7,577 | ||||||
PulteGroup, Inc. | 170 | 7,330 | ||||||
Whirlpool Corp. | 40 | 7,220 | ||||||
Wynn Resorts Ltd. | 62 | 6,995 | ||||||
Advance Auto Parts, Inc. | 43 | 6,773 | ||||||
Live Nation Entertainment, Inc.* | 91 | 6,687 | ||||||
LKQ Corp.* | 178 | 6,273 | ||||||
American Airlines Group, Inc.1 | 388 | 6,119 | ||||||
BorgWarner, Inc. | 155 | 5,989 | ||||||
L Brands, Inc. | 148 | 5,504 | ||||||
Tapestry, Inc. | 176 | 5,470 | ||||||
Mohawk Industries, Inc.* | 38 | 5,356 | ||||||
Newell Brands, Inc. | 240 | 5,095 | ||||||
Norwegian Cruise Line Holdings Ltd.*,1 | 200 | 5,086 | ||||||
PVH Corp. | 45 | 4,225 | ||||||
Alaska Air Group, Inc. | 79 | 4,108 | ||||||
Leggett & Platt, Inc. | 84 | 3,721 | ||||||
Hanesbrands, Inc. | 221 | 3,222 | ||||||
Ralph Lauren Corp. — Class A | 31 | 3,216 | ||||||
Gap, Inc. | 131 | 2,645 | ||||||
Under Armour, Inc. — Class A* | 120 | 2,061 | ||||||
Under Armour, Inc. — Class C* | 124 | 1,845 | ||||||
Total Consumer, Cyclical | 1,955,507 | |||||||
Industrial - 4.5% | ||||||||
Honeywell International, Inc. | 445 | 94,652 | ||||||
Union Pacific Corp. | 428 | 89,118 | ||||||
United Parcel Service, Inc. — Class B | 454 | 76,454 | ||||||
Boeing Co. | 338 | 72,352 | ||||||
Raytheon Technologies Corp. | 965 | 69,007 | ||||||
3M Co. | 366 | 63,973 | ||||||
Caterpillar, Inc. | 345 | 62,797 | ||||||
General Electric Co. | 5,564 | 60,091 | ||||||
Lockheed Martin Corp. | 156 | 55,377 | ||||||
Deere & Co. | 199 | 53,541 | ||||||
CSX Corp. | 485 | 44,014 | ||||||
FedEx Corp. | 154 | 39,981 | ||||||
Norfolk Southern Corp. | 161 | 38,255 | ||||||
Illinois Tool Works, Inc. | 183 | 37,310 | ||||||
Emerson Electric Co. | 380 | 30,541 | ||||||
Eaton Corporation plc | 253 | 30,395 | ||||||
Northrop Grumman Corp. | 98 | 29,863 | ||||||
Waste Management, Inc. | 247 | 29,129 | ||||||
Roper Technologies, Inc. | 67 | 28,883 | ||||||
TE Connectivity Ltd. | 210 | 25,425 | ||||||
L3Harris Technologies, Inc. | 133 | 25,140 | ||||||
Amphenol Corp. — Class A | 190 | 24,846 | ||||||
Agilent Technologies, Inc. | 194 | 22,987 | ||||||
Parker-Hannifin Corp. | 82 | 22,338 | ||||||
Trane Technologies plc | 152 | 22,064 | ||||||
General Dynamics Corp. | 148 | 22,025 | ||||||
TransDigm Group, Inc.* | 35 | 21,660 | ||||||
Johnson Controls International plc | 460 | 21,432 | ||||||
Carrier Global Corp. | 518 | 19,539 | ||||||
Ball Corp. | 208 | 19,381 | ||||||
Rockwell Automation, Inc. | 74 | 18,560 | ||||||
Mettler-Toledo International, Inc.* | 16 | 18,235 | ||||||
Stanley Black & Decker, Inc. | 102 | 18,213 | ||||||
AMETEK, Inc. | 146 | 17,657 | ||||||
Otis Worldwide Corp. | 258 | 17,428 | ||||||
Keysight Technologies, Inc.* | 119 | 15,719 | ||||||
Fortive Corp. | 214 | 15,155 | ||||||
Republic Services, Inc. — Class A | 134 | 12,904 | ||||||
Vulcan Materials Co. | 84 | 12,458 | ||||||
Kansas City Southern | 60 | 12,248 | ||||||
Old Dominion Freight Line, Inc. | 61 | 11,906 | ||||||
Amcor plc | 997 | 11,735 | ||||||
Xylem, Inc. | 114 | 11,604 | ||||||
Dover Corp. | 91 | 11,489 | ||||||
Garmin Ltd. | 95 | 11,368 | ||||||
Martin Marietta Materials, Inc. | 40 | 11,359 | ||||||
Ingersoll Rand, Inc.* | 236 | 10,752 | ||||||
PerkinElmer, Inc. | 71 | 10,189 | ||||||
Expeditors International of Washington, Inc. | 107 | 10,177 | ||||||
Waters Corp.* | 39 | 9,649 | ||||||
IDEX Corp. | 48 | 9,562 | ||||||
Teledyne Technologies, Inc.* | 24 | 9,408 | ||||||
Masco Corp. | 166 | 9,118 | ||||||
Jacobs Engineering Group, Inc. | 82 | 8,935 | ||||||
Westinghouse Air Brake Technologies Corp. | 114 | 8,345 | ||||||
Packaging Corporation of America | 60 | 8,275 | ||||||
CH Robinson Worldwide, Inc. | 86 | 8,073 | ||||||
Fortune Brands Home & Security, Inc. | 88 | 7,543 | ||||||
Westrock Co. | 167 | 7,269 | ||||||
J.B. Hunt Transport Services, Inc. | 53 | 7,242 | ||||||
Howmet Aerospace, Inc. | 249 | 7,106 | ||||||
Textron, Inc. | 145 | 7,008 | ||||||
Allegion plc | 59 | 6,866 | ||||||
Snap-on, Inc. | 34 | 5,819 | ||||||
Pentair plc | 106 | 5,627 | ||||||
A O Smith Corp. | 86 | 4,715 | ||||||
Sealed Air Corp. | 99 | 4,533 | ||||||
Huntington Ingalls Industries, Inc. | 26 | 4,432 |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P 500® 2x STRATEGY FUND |
| Shares | Value | ||||||
FLIR Systems, Inc. | 84 | $ | 3,682 | |||||
Flowserve Corp. | 83 | 3,058 | ||||||
Vontier Corp.* | 86 | 2,872 | ||||||
Total Industrial | 1,660,863 | |||||||
Utilities - 1.5% | ||||||||
NextEra Energy, Inc. | 1,244 | 95,975 | ||||||
Duke Energy Corp. | 468 | 42,850 | ||||||
Southern Co. | 670 | 41,158 | ||||||
Dominion Energy, Inc. | 518 | 38,954 | ||||||
American Electric Power Company, Inc. | 315 | 26,230 | ||||||
Exelon Corp. | 619 | 26,134 | ||||||
Sempra Energy | 183 | 23,316 | ||||||
Xcel Energy, Inc. | 335 | 22,335 | ||||||
Eversource Energy | 218 | 18,859 | ||||||
Public Service Enterprise Group, Inc. | 321 | 18,714 | ||||||
WEC Energy Group, Inc. | 200 | 18,406 | ||||||
American Water Works Company, Inc. | 115 | 17,649 | ||||||
Consolidated Edison, Inc. | 217 | 15,683 | ||||||
Edison International | 240 | 15,077 | ||||||
DTE Energy Co. | 123 | 14,933 | ||||||
PPL Corp. | 488 | 13,762 | ||||||
Entergy Corp. | 127 | 12,680 | ||||||
Ameren Corp. | 157 | 12,255 | ||||||
CMS Energy Corp. | 182 | 11,104 | ||||||
FirstEnergy Corp. | 344 | 10,530 | ||||||
AES Corp. | 423 | 9,941 | ||||||
Alliant Energy Corp. | 159 | 8,193 | ||||||
Evergy, Inc. | 144 | 7,993 | ||||||
Atmos Energy Corp. | 80 | 7,635 | ||||||
CenterPoint Energy, Inc. | 346 | 7,487 | ||||||
NRG Energy, Inc. | 155 | 5,820 | ||||||
Pinnacle West Capital Corp. | 71 | 5,676 | ||||||
NiSource, Inc. | 244 | 5,597 | ||||||
Total Utilities | 554,946 | |||||||
Energy - 1.3% | ||||||||
Exxon Mobil Corp. | 2,685 | 110,676 | ||||||
Chevron Corp. | 1,223 | 103,282 | ||||||
ConocoPhillips | 678 | 27,113 | ||||||
Phillips 66 | 277 | 19,373 | ||||||
Schlumberger N.V. | 884 | 19,298 | ||||||
EOG Resources, Inc. | 370 | 18,452 | ||||||
Marathon Petroleum Corp. | 413 | 17,082 | ||||||
Kinder Morgan, Inc. | 1,237 | 16,910 | ||||||
Williams Companies, Inc. | 771 | 15,459 | ||||||
Valero Energy Corp. | 259 | 14,651 | ||||||
Pioneer Natural Resources Co. | 104 | 11,844 | ||||||
ONEOK, Inc. | 283 | 10,861 | ||||||
Halliburton Co. | 561 | 10,603 | ||||||
Occidental Petroleum Corp. | 532 | 9,209 | ||||||
Hess Corp. | 173 | 9,133 | ||||||
Baker Hughes Co. | 435 | 9,070 | ||||||
Concho Resources, Inc. | 125 | 7,294 | ||||||
Diamondback Energy, Inc. | 100 | 4,840 | ||||||
Cabot Oil & Gas Corp. — Class A | 253 | 4,119 | ||||||
Devon Energy Corp. | 243 | 3,842 | ||||||
Apache Corp. | 240 | 3,405 | ||||||
NOV, Inc. | 247 | 3,391 | ||||||
Marathon Oil Corp. | 501 | 3,342 | ||||||
TechnipFMC plc | 268 | 2,519 | ||||||
HollyFrontier Corp. | 95 | 2,456 | ||||||
Total Energy | 458,224 | |||||||
Basic Materials - 1.2% | ||||||||
Linde plc | 334 | 88,012 | ||||||
Air Products and Chemicals, Inc. | 140 | 38,251 | ||||||
Sherwin-Williams Co. | 52 | 38,215 | ||||||
Ecolab, Inc. | 158 | 34,185 | ||||||
DuPont de Nemours, Inc.1 | 466 | 33,137 | ||||||
Newmont Corp. | 511 | 30,604 | ||||||
Dow, Inc. | 471 | 26,141 | ||||||
Freeport-McMoRan, Inc. | 923 | 24,016 | ||||||
PPG Industries, Inc. | 150 | 21,633 | ||||||
LyondellBasell Industries N.V. — Class A | 163 | 14,941 | ||||||
International Paper Co. | 250 | 12,430 | ||||||
Nucor Corp. | 192 | 10,213 | ||||||
Albemarle Corp. | 68 | 10,031 | ||||||
Celanese Corp. — Class A | 74 | 9,616 | ||||||
FMC Corp. | 82 | 9,424 | ||||||
Eastman Chemical Co. | 86 | 8,624 | ||||||
International Flavors & Fragrances, Inc.1 | 68 | 7,401 | ||||||
CF Industries Holdings, Inc. | 136 | 5,265 | ||||||
Mosaic Co. | 220 | 5,062 | ||||||
Total Basic Materials | 427,201 | |||||||
Total Common Stocks | ||||||||
(Cost $18,653,310) | 20,117,145 | |||||||
MUTUAL FUNDS† - 23.8% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 481,782 | 4,808,189 | ||||||
Guggenheim Strategy Fund II2 | 157,669 | 3,935,408 | ||||||
Total Mutual Funds | ||||||||
(Cost $8,577,495) | 8,743,597 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 6.0% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/213,4 | $ | 2,000,000 | 1,999,613 | |||||
0.08% due 01/28/214 | 200,000 | 199,992 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $2,199,548) | 2,199,605 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P 500® 2x STRATEGY FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,5 - 17.4% | ||||||||
J.P. Morgan Securities LLC | $ | 3,546,363 | $ | 3,546,363 | ||||
Barclays Capital, Inc. | 1,477,453 | 1,477,453 | ||||||
BofA Securities, Inc. | 1,368,012 | 1,368,012 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $6,391,828) | 6,391,828 | |||||||
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,6 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%7 | 25,113 | 25,113 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $25,113) | 25,113 | |||||||
Total Investments - 102.2% | ||||||||
(Cost $35,847,294) | $ | 37,477,288 | ||||||
Other Assets & Liabilities, net - (2.2)% | (789,462 | ) | ||||||
Total Net Assets - 100.0% | $ | 36,687,826 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | S&P 500 Index | 0.54% (1 Week USD LIBOR + 0.45%) | At Maturity | 02/18/21 | 7,127 | $ | 26,767,748 | $ | 199,344 | ||||||||||
Barclays Bank plc | S&P 500 Index | 0.54% (1 Week USD LIBOR + 0.45%) | At Maturity | 02/17/21 | 6,663 | 25,025,359 | 148,658 | ||||||||||||
BNP Paribas | S&P 500 Index | 0.69% (1 Month USD LIBOR + 0.55%) | At Maturity | 02/18/21 | 394 | 1,480,560 | 11,442 | ||||||||||||
$ | 53,273,667 | $ | 359,444 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | Securities lending collateral — See Note 7. |
7 | Rate indicated is the 7-day yield as of December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
S&P 500® 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 20,117,145 | $ | — | $ | — | $ | 20,117,145 | ||||||||
Mutual Funds | 8,743,597 | — | — | 8,743,597 | ||||||||||||
U.S. Treasury Bills | — | 2,199,605 | — | 2,199,605 | ||||||||||||
Repurchase Agreements | — | 6,391,828 | — | 6,391,828 | ||||||||||||
Securities Lending Collateral | 25,113 | — | — | 25,113 | ||||||||||||
Equity Index Swap Agreements** | — | 359,444 | — | 359,444 | ||||||||||||
Total Assets | $ | 28,885,855 | $ | 8,950,877 | $ | — | $ | 37,836,732 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 13,211,039 | $ | 6,467,915 | $ | (15,800,000 | ) | $ | (74,571 | ) | $ | 131,025 | $ | 3,935,408 | 157,669 | $ | 78,223 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 15,212,806 | 16,578,014 | (27,050,000 | ) | (9,836 | ) | 77,205 | 4,808,189 | 481,782 | 83,471 | ||||||||||||||||||||||
$ | 28,423,845 | $ | 23,045,929 | $ | (42,850,000 | ) | $ | (84,407 | ) | $ | 208,230 | $ | 8,743,597 | $ | 161,694 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
S&P 500® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $24,514 of securities loaned (cost $20,877,971) | $ | 22,341,863 | ||
Investments in affiliated issuers, at value (cost $8,577,495) | 8,743,597 | |||
Repurchase agreements, at value (cost $6,391,828) | 6,391,828 | |||
Cash | 223 | |||
Segregated cash with broker | 1,020,000 | |||
Unrealized appreciation on OTC swap agreements | 359,444 | |||
Receivables: | ||||
Securities sold | 10,016,540 | |||
Swap settlement | 89,022 | |||
Fund shares sold | 33,326 | |||
Dividends | 26,625 | |||
Interest | 11 | |||
Securities lending income | 5 | |||
Total assets | 49,022,484 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 12,150,179 | |||
Management fees | 31,106 | |||
Return of securities lending collateral | 25,113 | |||
Securities purchased | 10,101 | |||
Transfer agent and administrative fees | 9,684 | |||
Investor service fees | 9,000 | |||
Portfolio accounting fees | 3,600 | |||
Trustees’ fees* | 694 | |||
Miscellaneous | 95,181 | |||
Total liabilities | 12,334,658 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 36,687,826 | ||
Net assets consist of: | ||||
Paid in capital | $ | 41,292,254 | ||
Total distributable earnings (loss) | (4,604,428 | ) | ||
Net assets | $ | 36,687,826 | ||
Capital shares outstanding | 116,309 | |||
Net asset value per share | $ | 315.43 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 225,505 | ||
Dividends from securities of affiliated issuers | 161,694 | |||
Interest | 40,574 | |||
Income from securities lending, net | 103 | |||
Total investment income | 427,876 | |||
Expenses: | ||||
Management fees | 277,899 | |||
Investor service fees | 77,194 | |||
Transfer agent and administrative fees | 102,730 | |||
Professional fees | 58,536 | |||
Portfolio accounting fees | 30,877 | |||
Trustees’ fees* | 7,937 | |||
Custodian fees | 5,287 | |||
Line of credit fees | 218 | |||
Interest expense | 34 | |||
Miscellaneous | 17,495 | |||
Total expenses | 578,207 | |||
Less: | ||||
Expenses waived by Adviser | (13,961 | ) | ||
Net expenses | 564,246 | |||
Net investment loss | (136,370 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (3,999,928 | ) | ||
Investments in affiliated issuers | (84,407 | ) | ||
Swap agreements | 513,865 | |||
Futures contracts | (2,463,842 | ) | ||
Net realized loss | (6,034,312 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 880,319 | |||
Investments in affiliated issuers | 208,230 | |||
Swap agreements | 467,025 | |||
Futures contracts | (436,792 | ) | ||
Net change in unrealized appreciation (depreciation) | 1,118,782 | |||
Net realized and unrealized loss | (4,915,530 | ) | ||
Net decrease in net assets resulting from operations | $ | (5,051,900 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (136,370 | ) | $ | 253,532 | |||
Net realized gain (loss) on investments | (6,034,312 | ) | 18,903,348 | |||||
Net change in unrealized appreciation (depreciation) on investments | 1,118,782 | 254,229 | ||||||
Net increase (decrease) in net assets resulting from operations | (5,051,900 | ) | 19,411,109 | |||||
Distributions to shareholders | (6,283,511 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 666,124,278 | 197,656,279 | ||||||
Distributions reinvested | 6,283,511 | — | ||||||
Cost of shares redeemed | (678,580,309 | ) | (194,048,996 | ) | ||||
Net increase (decrease) from capital share transactions | (6,172,520 | ) | 3,607,283 | |||||
Net increase (decrease) in net assets | (17,507,931 | ) | 23,018,392 | |||||
Net assets: | ||||||||
Beginning of year | 54,195,757 | 31,177,365 | ||||||
End of year | $ | 36,687,826 | $ | 54,195,757 | ||||
Capital share activity: | ||||||||
Shares sold | 2,451,470 | 764,748 | ||||||
Shares issued from reinvestment of distributions | 25,952 | — | ||||||
Shares redeemed | (2,534,148 | ) | (753,476 | ) | ||||
Net increase (decrease) in shares | (56,726 | ) | 11,272 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
S&P 500® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 313.21 | $ | 192.73 | $ | 244.38 | $ | 176.52 | $ | 165.22 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (1.21 | ) | 1.59 | 1.48 | .13 | (.53 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | 45.29 | e | 118.89 | (35.10 | ) | 75.18 | 32.62 | |||||||||||||
Total from investment operations | 44.08 | 120.48 | (33.62 | ) | 75.31 | 32.09 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.68 | ) | — | (.14 | ) | — | — | |||||||||||||
Net realized gains | (40.18 | ) | — | (17.89 | ) | (7.45 | ) | (20.79 | ) | |||||||||||
Total distributions | (41.86 | ) | — | (18.03 | ) | (7.45 | ) | (20.79 | ) | |||||||||||
Net asset value, end of period | $ | 315.43 | $ | 313.21 | $ | 192.73 | $ | 244.38 | $ | 176.52 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 18.10 | % | 62.51 | % | (15.41 | %) | 43.49 | % | 20.40 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 36,688 | $ | 54,196 | $ | 31,177 | $ | 36,513 | $ | 24,895 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.44 | %) | 0.62 | % | 0.60 | % | 0.06 | % | (0.32 | %) | ||||||||||
Total expensesc | 1.87 | % | 1.87 | % | 1.77 | % | 1.76 | % | 1.71 | % | ||||||||||
Net expensesd | 1.83 | % | 1.80 | % | 1.77 | % | 1.76 | % | 1.71 | % | ||||||||||
Portfolio turnover rate | 2,610 | % | 248 | % | 424 | % | 282 | % | 578 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
NASDAQ-100® 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the NASDAQ-100® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, with the NASDAQ-100 Index returning 48.88%, the NASDAQ-100® 2x Strategy Fund returned 86.87%. For the one-year period ending December 31, 2020, the Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the NASDAQ-100 Index.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Communications Services. The sectors detracting the most from return of the underlying index for the period were Utilities and Financials.
Apple, Inc., Amazon.com, Inc., and Microsoft Corp. contributed the most to performance of the underlying index for 2020. Walgreens Boots Alliance, Inc., Marriott International, Inc. - Class A, and United Airlines Holdings, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 57 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 15.2% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 8.3% |
Apple, Inc. | 7.0% |
Microsoft Corp. | 5.2% |
Amazon.com, Inc. | 5.1% |
Tesla, Inc. | 2.6% |
Facebook, Inc. — Class A | 2.0% |
Alphabet, Inc. — Class C | 1.8% |
Alphabet, Inc. — Class A | 1.6% |
NVIDIA Corp. | 1.5% |
Top Ten Total | 50.3% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
NASDAQ-100® 2x Strategy Fund | 86.87% | 41.55% | 35.82% |
NASDAQ-100 Index | 48.88% | 24.27% | 20.63% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The NASDAQ-100 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
58 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
NASDAQ-100® 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 56.9% | ||||||||
Technology - 25.2% | ||||||||
Apple, Inc. | 68,884 | $ | 9,140,218 | |||||
Microsoft Corp. | 30,631 | 6,812,947 | ||||||
NVIDIA Corp. | 3,816 | 1,992,715 | ||||||
Adobe, Inc.* | 2,958 | 1,479,355 | ||||||
Intel Corp. | 25,266 | 1,258,752 | ||||||
Broadcom, Inc. | 2,494 | 1,091,998 | ||||||
QUALCOMM, Inc. | 6,974 | 1,062,419 | ||||||
Texas Instruments, Inc. | 5,659 | 928,812 | ||||||
Advanced Micro Devices, Inc.* | 7,415 | 680,030 | ||||||
Intuit, Inc. | 1,620 | 615,357 | ||||||
Micron Technology, Inc.* | 6,864 | 516,036 | ||||||
Applied Materials, Inc. | 5,632 | 486,042 | ||||||
Fiserv, Inc.* | 4,133 | 470,583 | ||||||
Activision Blizzard, Inc. | 4,765 | 442,430 | ||||||
Lam Research Corp. | 888 | 419,376 | ||||||
Autodesk, Inc.* | 1,352 | 412,820 | ||||||
Zoom Video Communications, Inc. — Class A* | 1,201 | 405,121 | ||||||
Analog Devices, Inc. | 2,278 | 336,529 | ||||||
NXP Semiconductor N.V. | 1,725 | 274,292 | ||||||
Cognizant Technology Solutions Corp. — Class A | 3,296 | 270,107 | ||||||
Workday, Inc. — Class A* | 1,110 | 265,967 | ||||||
Electronic Arts, Inc. | 1,787 | 256,613 | ||||||
DocuSign, Inc.* | 1,142 | 253,867 | ||||||
KLA Corp. | 953 | 246,741 | ||||||
Synopsys, Inc.* | 936 | 242,649 | ||||||
Cadence Design Systems, Inc.* | 1,720 | 234,660 | ||||||
ASML Holding N.V. — Class G | 467 | 227,765 | ||||||
Microchip Technology, Inc. | 1,606 | 221,805 | ||||||
Xilinx, Inc. | 1,511 | 214,214 | ||||||
Paychex, Inc. | 2,216 | 206,487 | ||||||
Marvell Technology Group Ltd. | 4,132 | 196,435 | ||||||
NetEase, Inc. ADR | 2,018 | 193,264 | ||||||
ANSYS, Inc.* | 529 | 192,450 | ||||||
Atlassian Corporation plc — Class A* | 815 | 190,604 | ||||||
Splunk, Inc.* | 989 | 168,021 | ||||||
Skyworks Solutions, Inc. | 1,024 | 156,549 | ||||||
Cerner Corp. | 1,890 | 148,327 | ||||||
Maxim Integrated Products, Inc. | 1,648 | 146,095 | ||||||
Check Point Software Technologies Ltd.* | 864 | 114,835 | ||||||
Total Technology | 32,973,287 | |||||||
Communications - 17.8% | ||||||||
Amazon.com, Inc.* | 2,034 | 6,624,596 | ||||||
Facebook, Inc. — Class A* | 9,740 | 2,660,578 | ||||||
Alphabet, Inc. — Class C* | 1,336 | 2,340,512 | ||||||
Alphabet, Inc. — Class A* | 1,219 | 2,136,468 | ||||||
Comcast Corp. — Class A | 28,150 | 1,475,060 | ||||||
Netflix, Inc.* | 2,724 | 1,472,948 | ||||||
Cisco Systems, Inc. | 26,051 | 1,165,782 | ||||||
T-Mobile US, Inc.* | 7,654 | 1,032,142 | ||||||
Charter Communications, Inc. — Class A* | 1,233 | 815,691 | ||||||
Booking Holdings, Inc.* | 253 | 563,499 | ||||||
MercadoLibre, Inc.* | 307 | 514,293 | ||||||
JD.com, Inc. ADR* | 5,373 | 472,287 | ||||||
Baidu, Inc. ADR* | 1,703 | 368,257 | ||||||
Pinduoduo, Inc. ADR* | 1,840 | 326,913 | ||||||
Match Group, Inc.* | 1,640 | 247,952 | ||||||
eBay, Inc. | 4,250 | 213,562 | ||||||
Okta, Inc.* | 740 | 188,152 | ||||||
Sirius XM Holdings, Inc.1 | 26,201 | 166,900 | ||||||
VeriSign, Inc.* | 704 | 152,346 | ||||||
CDW Corp. | 882 | 116,239 | ||||||
Trip.com Group Ltd. ADR* | 3,225 | 108,779 | ||||||
Fox Corp. — Class A | 2,081 | 60,599 | ||||||
Fox Corp. — Class B | 1,590 | 45,919 | ||||||
Total Communications | 23,269,474 | |||||||
Consumer, Non-cyclical - 7.5% | ||||||||
PayPal Holdings, Inc.* | 7,224 | 1,691,861 | ||||||
PepsiCo, Inc. | 8,520 | 1,263,516 | ||||||
Amgen, Inc. | 3,589 | 825,183 | ||||||
Intuitive Surgical, Inc.* | 725 | 593,122 | ||||||
Mondelez International, Inc. — Class A | 8,817 | 515,530 | ||||||
Automatic Data Processing, Inc. | 2,644 | 465,873 | ||||||
Gilead Sciences, Inc. | 7,729 | 450,291 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,604 | 379,089 | ||||||
Illumina, Inc.* | 900 | 333,000 | ||||||
Regeneron Pharmaceuticals, Inc.* | 647 | 312,572 | ||||||
Monster Beverage Corp.* | 3,255 | 301,022 | ||||||
Keurig Dr Pepper, Inc. | 8,676 | 277,632 | ||||||
IDEXX Laboratories, Inc.* | 526 | 262,932 | ||||||
Kraft Heinz Co. | 7,538 | 261,267 | ||||||
Align Technology, Inc.* | 486 | 259,709 | ||||||
Moderna, Inc.* | 2,440 | 254,907 | ||||||
Biogen, Inc.* | 949 | 232,372 | ||||||
Cintas Corp. | 645 | 227,982 | ||||||
DexCom, Inc.* | 592 | 218,874 | ||||||
Alexion Pharmaceuticals, Inc.* | 1,349 | 210,768 | ||||||
Verisk Analytics, Inc. — Class A | 1,002 | 208,005 | ||||||
Seagen, Inc.* | 1,112 | 194,756 | ||||||
Incyte Corp.* | 1,351 | 117,510 | ||||||
Total Consumer, Non-cyclical | 9,857,773 | |||||||
Consumer, Cyclical - 5.6% | ||||||||
Tesla, Inc.* | 4,753 | 3,354,049 | ||||||
Costco Wholesale Corp. | 2,721 | 1,025,219 | ||||||
Starbucks Corp. | 7,237 | 774,214 | ||||||
Ross Stores, Inc. | 2,195 | 269,568 | ||||||
Lululemon Athletica, Inc.* | 770 | 267,983 | ||||||
Marriott International, Inc. — Class A | 2,000 | 263,840 | ||||||
Peloton Interactive, Inc. — Class A* | 1,576 | 239,111 | ||||||
Walgreens Boots Alliance, Inc. | 5,339 | 212,919 | ||||||
O’Reilly Automotive, Inc.* | 447 | 202,299 | ||||||
Copart, Inc.* | 1,456 | 185,276 | ||||||
PACCAR, Inc. | 2,136 | 184,294 | ||||||
Fastenal Co. | 3,539 | 172,809 | ||||||
Dollar Tree, Inc.* | 1,450 | 156,658 | ||||||
Total Consumer, Cyclical | 7,308,239 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NASDAQ-100® 2x STRATEGY FUND |
| Shares | Value | ||||||
Utilities - 0.5% | ||||||||
American Electric Power Company, Inc. | 3,062 | $ | 254,973 | |||||
Exelon Corp. | 6,015 | 253,953 | ||||||
Xcel Energy, Inc. | 3,240 | 216,011 | ||||||
Total Utilities | 724,937 | |||||||
Industrial - 0.3% | ||||||||
CSX Corp. | 4,715 | 427,886 | ||||||
Total Common Stocks | ||||||||
(Cost $58,641,827) | 74,561,596 | |||||||
MUTUAL FUNDS† - 23.5% | ||||||||
Guggenheim Strategy Fund II2 | 794,779 | 19,837,695 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 1,093,499 | 10,913,117 | ||||||
Total Mutual Funds | ||||||||
(Cost $30,376,566) | 30,750,812 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 10.3% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/213,4 | $ | 10,500,000 | 10,497,970 | |||||
0.08% due 01/28/214,5 | 2,558,000 | 2,557,902 | ||||||
0.07% due 04/01/213,4 | 500,000 | 499,903 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $13,555,435) | 13,555,775 | |||||||
REPURCHASE AGREEMENTS††,6 - 9.5% | ||||||||
J.P. Morgan Securities LLC | 6,926,473 | 6,926,473 | ||||||
Barclays Capital, Inc. | 2,885,643 | 2,885,643 | ||||||
BofA Securities, Inc. | 2,671,892 | 2,671,892 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $12,484,008) | 12,484,008 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%8 | 108,111 | 108,111 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $108,111) | 108,111 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $115,165,947) | $ | 131,460,302 | ||||||
Other Assets & Liabilities, net - (0.3)% | (411,230 | ) | ||||||
Total Net Assets - 100.0% | $ | 131,049,072 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 43 | Mar 2021 | $ | 11,067,555 | $ | 211,662 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | NASDAQ-100 Index | 0.59% (1 Week USD LIBOR + 0.50%) | At Maturity | 02/17/21 | 7,700 | $ | 99,243,924 | $ | 380,543 | ||||||||||
Goldman Sachs International | NASDAQ-100 Index | 0.64% (1 Week USD LIBOR + 0.55%) | At Maturity | 02/18/21 | 5,601 | 72,192,631 | 250,882 | ||||||||||||
BNP Paribas | NASDAQ-100 Index | 0.79% (1 Month USD LIBOR + 0.65%) | At Maturity | 02/18/21 | 381 | 4,916,578 | 17,085 | ||||||||||||
$ | 176,353,133 | $ | 648,510 |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
NASDAQ-100® 2x STRATEGY FUND |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 74,561,596 | $ | — | $ | — | $ | 74,561,596 | ||||||||
Mutual Funds | 30,750,812 | — | — | 30,750,812 | ||||||||||||
U.S. Treasury Bills | — | 13,555,775 | — | 13,555,775 | ||||||||||||
Repurchase Agreements | — | 12,484,008 | — | 12,484,008 | ||||||||||||
Securities Lending Collateral | 108,111 | — | — | 108,111 | ||||||||||||
Equity Futures Contracts** | 211,662 | — | — | 211,662 | ||||||||||||
Equity Index Swap Agreements** | — | 648,510 | — | 648,510 | ||||||||||||
Total Assets | $ | 105,632,181 | $ | 26,688,293 | $ | — | $ | 132,320,474 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
NASDAQ-100® 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 28,096,247 | $ | 15,837,388 | $ | (24,300,000 | ) | $ | (194,613 | ) | $ | 398,673 | $ | 19,837,695 | 794,779 | $ | 336,824 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 29,240,701 | 16,860,377 | (35,300,000 | ) | (70,610 | ) | 182,649 | 10,913,117 | 1,093,499 | 231,166 | ||||||||||||||||||||||
$ | 57,336,948 | $ | 32,697,765 | $ | (59,600,000 | ) | $ | (265,223 | ) | $ | 581,322 | $ | 30,750,812 | $ | 567,990 |
62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $101,595 of securities loaned (cost $72,305,373) | $ | 88,225,482 | ||
Investments in affiliated issuers, at value (cost $30,376,566) | 30,750,812 | |||
Repurchase agreements, at value (cost $12,484,008) | 12,484,008 | |||
Unrealized appreciation on OTC swap agreements | 648,510 | |||
Receivables: | ||||
Dividends | 50,744 | |||
Variation margin on futures contracts | 23,865 | |||
Swap settlement | 4,509 | |||
Interest | 21 | |||
Securities lending income | 12 | |||
Total assets | 132,187,963 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 564,582 | |||
Professional fees | 130,661 | |||
Return of securities lending collateral | 108,111 | |||
Management fees | 94,259 | |||
Securities purchased | 37,406 | |||
Transfer agent and administrative fees | 29,052 | |||
Investor service fees | 27,000 | |||
Portfolio accounting fees | 10,800 | |||
Trustees’ fees* | 1,850 | |||
Miscellaneous | 135,170 | |||
Total liabilities | 1,138,891 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 131,049,072 | ||
Net assets consist of: | ||||
Paid in capital | $ | 103,053,663 | ||
Total distributable earnings (loss) | 27,995,409 | |||
Net assets | $ | 131,049,072 | ||
Capital shares outstanding | 925,904 | |||
Net asset value per share | $ | 141.54 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $320) | $ | 368,901 | ||
Dividends from securities of affiliated issuers | 567,990 | |||
Interest | 104,831 | |||
Income from securities lending, net | 66 | |||
Total investment income | 1,041,788 | |||
Expenses: | ||||
Management fees | 902,685 | |||
Investor service fees | 250,745 | |||
Transfer agent and administrative fees | 320,577 | |||
Professional fees | 184,444 | |||
Portfolio accounting fees | 100,297 | |||
Trustees’ fees* | 19,811 | |||
Custodian fees | 14,690 | |||
Line of credit fees | 1,974 | |||
Prime broker interest expense | 129 | |||
Miscellaneous | 122,062 | |||
Total expenses | 1,917,414 | |||
Less: | ||||
Expenses waived by Adviser | (38,278 | ) | ||
Net expenses | 1,879,136 | |||
Net investment loss | (837,348 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (365,957 | ) | ||
Investments in affiliated issuers | (265,223 | ) | ||
Swap agreements | 46,380,791 | |||
Futures contracts | 6,512,137 | |||
Net realized gain | 52,261,748 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 15,359,245 | |||
Investments in affiliated issuers | 581,322 | |||
Swap agreements | 603,250 | |||
Futures contracts | (136,461 | ) | ||
Net change in unrealized appreciation (depreciation) | 16,407,356 | |||
Net realized and unrealized gain | 68,669,104 | |||
Net increase in net assets resulting from operations | $ | 67,831,756 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
NASDAQ-100® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (837,348 | ) | $ | 257,861 | |||
Net realized gain on investments | 52,261,748 | 44,758,793 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 16,407,356 | 221,731 | ||||||
Net increase in net assets resulting from operations | 67,831,756 | 45,238,385 | ||||||
Distributions to shareholders | (18,829,665 | ) | (152,254 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 720,453,470 | 435,924,619 | ||||||
Distributions reinvested | 18,829,665 | 152,254 | ||||||
Cost of shares redeemed | (757,046,894 | ) | (440,031,905 | ) | ||||
Net decrease from capital share transactions | (17,763,759 | ) | (3,955,032 | ) | ||||
Net increase in net assets | 31,238,332 | 41,131,099 | ||||||
Net assets: | ||||||||
Beginning of year | 99,810,740 | 58,679,641 | ||||||
End of year | $ | 131,049,072 | $ | 99,810,740 | ||||
Capital share activity: | ||||||||
Shares sold | 7,323,669 | 6,163,093 | ||||||
Shares issued from reinvestment of distributions | 181,473 | 1,940 | ||||||
Shares redeemed | (7,672,011 | ) | (6,230,204 | ) | ||||
Net decrease in shares | (166,869 | ) | (65,171 | ) |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NASDAQ-100® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 91.34 | $ | 50.68 | $ | 64.95 | $ | 38.79 | $ | 38.67 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.88 | ) | .22 | .14 | (.17 | ) | (.22 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 72.46 | 40.55 | (2.70 | ) | 26.97 | 3.57 | ||||||||||||||
Total from investment operations | 71.58 | 40.77 | (2.56 | ) | 26.80 | 3.35 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.30 | ) | (.11 | ) | — | — | — | |||||||||||||
Net realized gains | (21.08 | ) | — | (11.71 | ) | (.64 | ) | (3.23 | ) | |||||||||||
Total distributions | (21.38 | ) | (.11 | ) | (11.71 | ) | (.64 | ) | (3.23 | ) | ||||||||||
Net asset value, end of period | $ | 141.54 | $ | 91.34 | $ | 50.68 | $ | 64.95 | $ | 38.79 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 86.87 | % | 80.50 | % | (9.31 | %) | 69.49 | % | 9.60 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 131,049 | $ | 99,811 | $ | 58,680 | $ | 70,853 | $ | 41,115 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.83 | %) | 0.30 | % | 0.21 | % | (0.32 | %) | (0.62 | %) | ||||||||||
Total expensesc | 1.91 | % | 1.91 | % | 1.81 | % | 1.80 | % | 1.75 | % | ||||||||||
Net expensesd | 1.87 | % | 1.84 | % | 1.80 | % | 1.80 | % | 1.75 | % | ||||||||||
Portfolio turnover rate | 663 | % | 346 | % | 220 | % | 97 | % | 494 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
MID-CAP 1.5x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark for midcap securities on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the year ended December 31, 2020, the Mid-Cap 1.5x Strategy Fund returned 10.69%. Over the year, its benchmark, the S&P MidCap 400 Index, returned 13.66%. The Fund had a correlation of more than 99% to its benchmark of 150% of the daily price movement of the S&P MidCap 400 Index.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Health Care, and Consumer Discretionary. The sectors detracting the most from return of the underlying index for the period were Real Estate, Financials, and Utilities.
Enphase Energy, Inc., SolarEdge Technologies, Inc., and Etsy, Inc. contributed the most to performance of the underlying index for 2020. National Retail Properties, Inc., EPR Properties, and Alleghany Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
66 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 23.9% |
Guggenheim Strategy Fund II | 18.0% |
Enphase Energy, Inc. | 0.4% |
Trimble, Inc. | 0.3% |
SolarEdge Technologies, Inc. | 0.3% |
Monolithic Power Systems, Inc. | 0.3% |
Caesars Entertainment, Inc. | 0.3% |
Fair Isaac Corp. | 0.3% |
Generac Holdings, Inc. | 0.3% |
Cognex Corp. | 0.3% |
Top Ten Total | 44.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Mid-Cap 1.5x Strategy Fund | 10.69% | 14.03% | 13.41% |
S&P MidCap 400 Index | 13.66% | 12.35% | 11.51% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 67 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 39.5% | ||||||||
Financial - 9.3% | ||||||||
Medical Properties Trust, Inc. REIT | 489 | $ | 10,655 | |||||
Brown & Brown, Inc. | 215 | 10,193 | ||||||
Camden Property Trust REIT | 89 | 8,893 | ||||||
CyrusOne, Inc. REIT | 110 | 8,047 | ||||||
Alleghany Corp. | 13 | 7,848 | ||||||
RenaissanceRe Holdings Ltd. | 46 | 7,628 | ||||||
Omega Healthcare Investors, Inc. REIT | 207 | 7,518 | ||||||
STORE Capital Corp. REIT | 216 | 7,340 | ||||||
Reinsurance Group of America, Inc. — Class A | 62 | 7,186 | ||||||
Eaton Vance Corp. | 104 | 7,065 | ||||||
Jones Lang LaSalle, Inc.* | 47 | 6,973 | ||||||
Signature Bank | 49 | 6,629 | ||||||
Lamar Advertising Co. — Class A REIT | 79 | 6,574 | ||||||
East West Bancorp, Inc. | 129 | 6,541 | ||||||
National Retail Properties, Inc. REIT | 159 | 6,506 | ||||||
First Horizon National Corp. | 507 | 6,469 | ||||||
SEI Investments Co. | 110 | 6,322 | ||||||
Commerce Bancshares, Inc. | 96 | 6,314 | ||||||
Prosperity Bancshares, Inc. | 85 | 5,896 | ||||||
Rexford Industrial Realty, Inc. REIT | 119 | 5,844 | ||||||
American Financial Group, Inc. | 64 | 5,608 | ||||||
Kilroy Realty Corp. REIT | 96 | 5,510 | ||||||
American Campus Communities, Inc. REIT | 126 | 5,389 | ||||||
First American Financial Corp. | 102 | 5,266 | ||||||
Life Storage, Inc. REIT | 44 | 5,253 | ||||||
Apartment Income REIT Corp.* | 136 | 5,224 | ||||||
TCF Financial Corp. | 139 | 5,146 | ||||||
Old Republic International Corp. | 258 | 5,085 | ||||||
First Industrial Realty Trust, Inc. REIT | 118 | 4,971 | ||||||
EastGroup Properties, Inc. REIT | 36 | 4,970 | ||||||
CoreSite Realty Corp. REIT | 39 | 4,886 | ||||||
Primerica, Inc. | 36 | 4,822 | ||||||
Stifel Financial Corp. | 94 | 4,743 | ||||||
First Financial Bankshares, Inc. | 130 | 4,703 | ||||||
Jefferies Financial Group, Inc. | 189 | 4,649 | ||||||
Cousins Properties, Inc. REIT | 136 | 4,556 | ||||||
Interactive Brokers Group, Inc. — Class A | 74 | 4,508 | ||||||
Brixmor Property Group, Inc. REIT | 271 | 4,485 | ||||||
New York Community Bancorp, Inc. | 424 | 4,473 | ||||||
Essent Group Ltd. | 103 | 4,450 | ||||||
Cullen/Frost Bankers, Inc. | 51 | 4,449 | ||||||
Pinnacle Financial Partners, Inc. | 69 | 4,444 | ||||||
Janus Henderson Group plc | 136 | 4,421 | ||||||
Douglas Emmett, Inc. REIT | 151 | 4,406 | ||||||
Synovus Financial Corp. | 135 | 4,370 | ||||||
Kemper Corp. | 56 | 4,303 | ||||||
SLM Corp. | 343 | 4,250 | ||||||
Spirit Realty Capital, Inc. REIT | 104 | 4,178 | ||||||
Affiliated Managers Group, Inc. | 41 | 4,170 | ||||||
Evercore, Inc. — Class A | 37 | 4,057 | ||||||
Glacier Bancorp, Inc. | 87 | 4,003 | ||||||
Hanover Insurance Group, Inc. | 34 | 3,975 | ||||||
MGIC Investment Corp. | 309 | 3,878 | ||||||
United Bankshares, Inc. | 118 | 3,823 | ||||||
Kinsale Capital Group, Inc. | 19 | 3,802 | ||||||
Highwoods Properties, Inc. REIT | 95 | 3,765 | ||||||
RLI Corp. | 36 | 3,749 | ||||||
Park Hotels & Resorts, Inc. REIT | 215 | 3,687 | ||||||
Selective Insurance Group, Inc. | 55 | 3,684 | ||||||
Rayonier, Inc. REIT | 125 | 3,673 | ||||||
Healthcare Realty Trust, Inc. REIT | 124 | 3,670 | ||||||
Valley National Bancorp | 369 | 3,598 | ||||||
Webster Financial Corp. | 82 | 3,456 | ||||||
Bank OZK | 110 | 3,440 | ||||||
Physicians Realty Trust REIT | 190 | 3,382 | ||||||
PROG Holdings, Inc. | 62 | 3,340 | ||||||
Hudson Pacific Properties, Inc. REIT | 139 | 3,339 | ||||||
Sabra Health Care REIT, Inc. | 189 | 3,283 | ||||||
Alliance Data Systems Corp. | 44 | 3,260 | ||||||
Wintrust Financial Corp. | 53 | 3,238 | ||||||
CIT Group, Inc. | 90 | 3,231 | ||||||
JBG SMITH Properties REIT | 102 | 3,190 | ||||||
Sterling Bancorp | 177 | 3,183 | ||||||
PotlatchDeltic Corp. REIT | 61 | 3,051 | ||||||
Umpqua Holdings Corp. | 201 | 3,043 | ||||||
Brighthouse Financial, Inc.* | 82 | 2,969 | ||||||
Bank of Hawaii Corp. | 37 | 2,835 | ||||||
CNO Financial Group, Inc. | 127 | 2,823 | ||||||
FNB Corp. | 295 | 2,802 | ||||||
LendingTree, Inc.* | 10 | 2,738 | ||||||
Texas Capital Bancshares, Inc.* | 46 | 2,737 | ||||||
PacWest Bancorp | 107 | 2,718 | ||||||
Home BancShares, Inc. | 139 | 2,708 | ||||||
UMB Financial Corp. | 39 | 2,691 | ||||||
Hancock Whitney Corp. | 79 | 2,687 | ||||||
Corporate Office Properties Trust REIT | 102 | 2,660 | ||||||
Federated Hermes, Inc. — Class B | 86 | 2,485 | ||||||
BancorpSouth Bank | 88 | 2,415 | ||||||
PS Business Parks, Inc. REIT | 18 | 2,392 | ||||||
Associated Banc-Corp. | 140 | 2,387 | ||||||
Weingarten Realty Investors REIT | 110 | 2,384 | ||||||
Pebblebrook Hotel Trust REIT | 120 | 2,256 | ||||||
EPR Properties REIT | 68 | 2,210 | ||||||
Cathay General Bancorp | 68 | 2,189 | ||||||
International Bancshares Corp. | 51 | 1,909 | ||||||
Fulton Financial Corp. | 148 | 1,882 | ||||||
Washington Federal, Inc. | 69 | 1,776 | ||||||
Genworth Financial, Inc. — Class A* | 462 | 1,746 | ||||||
Service Properties Trust REIT | 151 | 1,735 | ||||||
Navient Corp. | 170 | 1,669 | ||||||
Trustmark Corp. | 58 | 1,584 | ||||||
Urban Edge Properties REIT | 100 | 1,294 | ||||||
Mercury General Corp. | 24 | 1,253 | ||||||
Macerich Co. REIT1 | 102 | 1,088 | ||||||
Total Financial | 440,951 | |||||||
Industrial - 8.2% | ||||||||
Trimble, Inc.* | 228 | 15,224 | ||||||
Generac Holdings, Inc.* | 57 | 12,962 | ||||||
Cognex Corp. | 159 | 12,765 |
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Graco, Inc. | 153 | $ | 11,070 | |||||
XPO Logistics, Inc.* | 83 | 9,894 | ||||||
Nordson Corp. | 49 | 9,847 | ||||||
Toro Co. | 98 | 9,294 | ||||||
Universal Display Corp. | 39 | 8,962 | ||||||
Trex Company, Inc.* | 106 | 8,875 | ||||||
Lennox International, Inc. | 32 | 8,767 | ||||||
AptarGroup, Inc. | 59 | 8,076 | ||||||
Hubbell, Inc. | 50 | 7,839 | ||||||
Carlisle Companies, Inc. | 49 | 7,653 | ||||||
Builders FirstSource, Inc.* | 187 | 7,632 | ||||||
Owens Corning | 99 | 7,500 | ||||||
II-VI, Inc.* | 95 | 7,216 | ||||||
Axon Enterprise, Inc.* | 58 | 7,107 | ||||||
AECOM* | 138 | 6,870 | ||||||
Arrow Electronics, Inc.* | 69 | 6,714 | ||||||
Middleby Corp.* | 51 | 6,575 | ||||||
Woodward, Inc. | 53 | 6,441 | ||||||
Donaldson Company, Inc. | 115 | 6,426 | ||||||
Lincoln Electric Holdings, Inc. | 54 | 6,278 | ||||||
ITT, Inc. | 79 | 6,084 | ||||||
Stericycle, Inc.* | 84 | 5,824 | ||||||
AGCO Corp. | 56 | 5,773 | ||||||
Tetra Tech, Inc. | 49 | 5,673 | ||||||
Littelfuse, Inc. | 22 | 5,603 | ||||||
TopBuild Corp.* | 30 | 5,522 | ||||||
Sonoco Products Co. | 92 | 5,451 | ||||||
Oshkosh Corp. | 62 | 5,336 | ||||||
National Instruments Corp. | 120 | 5,273 | ||||||
Jabil, Inc. | 123 | 5,231 | ||||||
MSA Safety, Inc. | 33 | 4,930 | ||||||
MDU Resources Group, Inc. | 183 | 4,820 | ||||||
Knight-Swift Transportation Holdings, Inc. | 115 | 4,809 | ||||||
Timken Co. | 62 | 4,796 | ||||||
Landstar System, Inc. | 35 | 4,713 | ||||||
EMCOR Group, Inc. | 50 | 4,573 | ||||||
Regal Beloit Corp. | 37 | 4,544 | ||||||
Mercury Systems, Inc.* | 51 | 4,491 | ||||||
Curtiss-Wright Corp. | 38 | 4,421 | ||||||
Acuity Brands, Inc. | 34 | 4,117 | ||||||
KBR, Inc. | 130 | 4,021 | ||||||
Eagle Materials, Inc. | 38 | 3,851 | ||||||
Simpson Manufacturing Company, Inc. | 40 | 3,738 | ||||||
Louisiana-Pacific Corp. | 100 | 3,717 | ||||||
Hexcel Corp. | 76 | 3,685 | ||||||
nVent Electric plc | 155 | 3,610 | ||||||
Colfax Corp.* | 92 | 3,518 | ||||||
Clean Harbors, Inc.* | 46 | 3,500 | ||||||
Crane Co. | 45 | 3,495 | ||||||
MasTec, Inc.* | 51 | 3,477 | ||||||
Valmont Industries, Inc. | 19 | 3,324 | ||||||
Coherent, Inc.* | 22 | 3,300 | ||||||
EnerSys | 39 | 3,239 | ||||||
Avnet, Inc. | 90 | 3,160 | ||||||
SYNNEX Corp. | 38 | 3,095 | ||||||
Ryder System, Inc. | 49 | 3,026 | ||||||
Kirby Corp.* | 55 | 2,851 | ||||||
Kennametal, Inc. | 76 | 2,754 | ||||||
Silgan Holdings, Inc. | 72 | 2,670 | ||||||
GATX Corp. | 32 | 2,662 | ||||||
Vishay Intertechnology, Inc. | 121 | 2,506 | ||||||
Energizer Holdings, Inc. | 53 | 2,236 | ||||||
Terex Corp. | 63 | 2,198 | ||||||
Dycom Industries, Inc.* | 29 | 2,190 | ||||||
Werner Enterprises, Inc. | 53 | 2,079 | ||||||
Trinity Industries, Inc. | 77 | 2,032 | ||||||
Fluor Corp. | 114 | 1,821 | ||||||
Belden, Inc. | 41 | 1,718 | ||||||
O-I Glass, Inc. | 144 | 1,714 | ||||||
Worthington Industries, Inc. | 33 | 1,694 | ||||||
Greif, Inc. — Class A | 24 | 1,125 | ||||||
Total Industrial | 389,977 | |||||||
Consumer, Non-cyclical - 7.1% | ||||||||
Masimo Corp.* | 46 | 12,345 | ||||||
Molina Healthcare, Inc.* | 54 | 11,485 | ||||||
Charles River Laboratories International, Inc.* | 45 | 11,244 | ||||||
Bio-Techne Corp. | 35 | 11,114 | ||||||
Repligen Corp.* | 46 | 8,815 | ||||||
Amedisys, Inc.* | 30 | 8,800 | ||||||
Darling Ingredients, Inc.* | 148 | 8,537 | ||||||
Jazz Pharmaceuticals plc* | 51 | 8,418 | ||||||
WEX, Inc.* | 40 | 8,141 | ||||||
Chemed Corp. | 15 | 7,989 | ||||||
Boston Beer Company, Inc. — Class A* | 8 | 7,954 | ||||||
Service Corporation International | 158 | 7,758 | ||||||
Encompass Health Corp. | 91 | 7,525 | ||||||
PRA Health Sciences, Inc.* | 59 | 7,401 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 94 | 7,213 | ||||||
Paylocity Holding Corp.* | 34 | 7,001 | ||||||
Quidel Corp.* | 35 | 6,288 | ||||||
United Therapeutics Corp.* | 41 | 6,223 | ||||||
LHC Group, Inc.* | 29 | 6,186 | ||||||
Hill-Rom Holdings, Inc. | 61 | 5,976 | ||||||
Exelixis, Inc.* | 283 | 5,680 | ||||||
Post Holdings, Inc.* | 56 | 5,657 | ||||||
CoreLogic, Inc. | 71 | 5,490 | ||||||
Haemonetics Corp.* | 46 | 5,463 | ||||||
Penumbra, Inc.* | 31 | 5,425 | ||||||
Helen of Troy Ltd.* | 23 | 5,110 | ||||||
Halozyme Therapeutics, Inc.* | 116 | 4,954 | ||||||
HealthEquity, Inc.* | 70 | 4,880 | ||||||
Ingredion, Inc. | 61 | 4,799 | ||||||
ManpowerGroup, Inc. | 53 | 4,779 | ||||||
Syneos Health, Inc.* | 69 | 4,701 | ||||||
Globus Medical, Inc. — Class A* | 70 | 4,565 | ||||||
LiveRamp Holdings, Inc.* | 61 | 4,465 | ||||||
Integra LifeSciences Holdings Corp.* | 65 | 4,220 | ||||||
Flowers Foods, Inc. | 180 | 4,073 | ||||||
Acadia Healthcare Company, Inc.* | 81 | 4,071 | ||||||
ASGN, Inc.* | 48 | 4,009 | ||||||
Grand Canyon Education, Inc.* | 43 | 4,004 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
ICU Medical, Inc.* | 18 | $ | 3,861 | |||||
Tenet Healthcare Corp.* | 96 | 3,833 | ||||||
Neogen Corp.* | 48 | 3,806 | ||||||
FTI Consulting, Inc.* | 33 | 3,687 | ||||||
Emergent BioSolutions, Inc.* | 41 | 3,673 | ||||||
Sabre Corp.* | 290 | 3,486 | ||||||
Medpace Holdings, Inc.* | 25 | 3,480 | ||||||
Lancaster Colony Corp. | 18 | 3,307 | ||||||
Brink’s Co. | 45 | 3,240 | ||||||
Grocery Outlet Holding Corp.* | 78 | 3,062 | ||||||
Hain Celestial Group, Inc.* | 75 | 3,011 | ||||||
LivaNova plc* | 44 | 2,913 | ||||||
Nektar Therapeutics* | 164 | 2,788 | ||||||
Insperity, Inc. | 33 | 2,687 | ||||||
Cantel Medical Corp. | 34 | 2,681 | ||||||
H&R Block, Inc. | 167 | 2,649 | ||||||
NuVasive, Inc.* | 47 | 2,648 | ||||||
Sanderson Farms, Inc. | 18 | 2,380 | ||||||
Patterson Companies, Inc. | 79 | 2,341 | ||||||
TreeHouse Foods, Inc.* | 52 | 2,209 | ||||||
Sprouts Farmers Market, Inc.* | 108 | 2,171 | ||||||
Graham Holdings Co. — Class B | 4 | 2,133 | ||||||
Strategic Education, Inc. | 22 | 2,097 | ||||||
Avanos Medical, Inc.* | 44 | 2,019 | ||||||
John Wiley & Sons, Inc. — Class A | 40 | 1,826 | ||||||
Coty, Inc. — Class A | 259 | 1,818 | ||||||
Avis Budget Group, Inc.* | 47 | 1,753 | ||||||
Edgewell Personal Care Co. | 50 | 1,729 | ||||||
Adtalem Global Education, Inc.* | 48 | 1,630 | ||||||
Prestige Consumer Healthcare, Inc.* | 46 | 1,604 | ||||||
Ligand Pharmaceuticals, Inc. — Class B*,1 | 15 | 1,492 | ||||||
WW International, Inc.* | 43 | 1,049 | ||||||
Pilgrim’s Pride Corp.* | 44 | 863 | ||||||
Tootsie Roll Industries, Inc. | 16 | 475 | ||||||
Total Consumer, Non-cyclical | 337,159 | |||||||
Consumer, Cyclical - 6.1% | ||||||||
Caesars Entertainment, Inc.* | 190 | 14,112 | ||||||
Penn National Gaming, Inc.* | 135 | 11,660 | ||||||
Five Below, Inc.* | 51 | 8,924 | ||||||
IAA, Inc.* | 123 | 7,993 | ||||||
Lear Corp. | 50 | 7,951 | ||||||
Gentex Corp. | 224 | 7,600 | ||||||
Deckers Outdoor Corp.* | 26 | 7,456 | ||||||
Scotts Miracle-Gro Co. — Class A | 37 | 7,368 | ||||||
Williams-Sonoma, Inc. | 70 | 7,129 | ||||||
Lithia Motors, Inc. — Class A | 24 | 7,024 | ||||||
Watsco, Inc. | 30 | 6,796 | ||||||
RH* | 14 | 6,265 | ||||||
Churchill Downs, Inc. | 32 | 6,233 | ||||||
Casey’s General Stores, Inc. | 34 | 6,073 | ||||||
Kohl’s Corp. | 144 | 5,859 | ||||||
Mattel, Inc.* | 318 | 5,549 | ||||||
Brunswick Corp. | 72 | 5,489 | ||||||
Harley-Davidson, Inc. | 140 | 5,138 | ||||||
Marriott Vacations Worldwide Corp. | 37 | 5,077 | ||||||
Wyndham Hotels & Resorts, Inc. | 85 | 5,053 | ||||||
Polaris, Inc. | 53 | 5,050 | ||||||
Thor Industries, Inc. | 51 | 4,743 | ||||||
Tempur Sealy International, Inc.* | 175 | 4,725 | ||||||
Texas Roadhouse, Inc. — Class A | 60 | 4,690 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 125 | 4,660 | ||||||
Toll Brothers, Inc. | 105 | 4,564 | ||||||
Skechers USA, Inc. — Class A* | 124 | 4,456 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 52 | 4,252 | ||||||
JetBlue Airways Corp.* | 287 | 4,173 | ||||||
Fox Factory Holding Corp.* | 38 | 4,017 | ||||||
Foot Locker, Inc. | 95 | 3,842 | ||||||
AutoNation, Inc.* | 54 | 3,769 | ||||||
Carter’s, Inc. | 40 | 3,763 | ||||||
Wendy’s Co. | 164 | 3,595 | ||||||
Wingstop, Inc. | 27 | 3,579 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 42 | 3,544 | ||||||
Wyndham Destinations, Inc. | 78 | 3,499 | ||||||
Avient Corp. | 84 | 3,383 | ||||||
Dick’s Sporting Goods, Inc. | 60 | 3,373 | ||||||
Visteon Corp.* | 25 | 3,138 | ||||||
Boyd Gaming Corp.* | 73 | 3,133 | ||||||
Nordstrom, Inc. | 99 | 3,090 | ||||||
Taylor Morrison Home Corp. — Class A* | 119 | 3,052 | ||||||
Adient plc* | 86 | 2,990 | ||||||
Univar Solutions, Inc.* | 154 | 2,928 | ||||||
Cracker Barrel Old Country Store, Inc. | 22 | 2,902 | ||||||
Choice Hotels International, Inc. | 26 | 2,775 | ||||||
American Eagle Outfitters, Inc. | 137 | 2,750 | ||||||
KB Home | 80 | 2,682 | ||||||
FirstCash, Inc. | 38 | 2,661 | ||||||
Dana, Inc. | 132 | 2,577 | ||||||
Nu Skin Enterprises, Inc. — Class A | 47 | 2,568 | ||||||
Papa John’s International, Inc. | 30 | 2,545 | ||||||
Columbia Sportswear Co. | 28 | 2,447 | ||||||
Six Flags Entertainment Corp. | 69 | 2,353 | ||||||
Goodyear Tire & Rubber Co. | 213 | 2,324 | ||||||
KAR Auction Services, Inc. | 118 | 2,196 | ||||||
Scientific Games Corp. — Class A* | 51 | 2,116 | ||||||
TRI Pointe Group, Inc.* | 116 | 2,001 | ||||||
Jack in the Box, Inc. | 21 | 1,949 | ||||||
Healthcare Services Group, Inc. | 68 | 1,911 | ||||||
Herman Miller, Inc. | 54 | 1,825 | ||||||
World Fuel Services Corp. | 58 | 1,807 | ||||||
Cinemark Holdings, Inc.1 | 98 | 1,706 | ||||||
Urban Outfitters, Inc.* | 63 | 1,613 | ||||||
HNI Corp. | 39 | 1,344 | ||||||
Total Consumer, Cyclical | 287,809 | |||||||
Technology - 3.4% | ||||||||
Monolithic Power Systems, Inc. | 39 | 14,283 | ||||||
Fair Isaac Corp.* | 27 | 13,798 | ||||||
Ceridian HCM Holding, Inc.* | 119 | 12,681 | ||||||
PTC, Inc.* | 96 | 11,482 | ||||||
Cree, Inc.* | 101 | 10,696 | ||||||
MKS Instruments, Inc. | 50 | 7,522 | ||||||
Lumentum Holdings, Inc.* | 69 | 6,541 |
70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MID-CAP 1.5x STRATEGY FUND |
| Shares | Value | ||||||
Manhattan Associates, Inc.* | 58 | $ | 6,100 | |||||
CDK Global, Inc. | 111 | 5,753 | ||||||
CACI International, Inc. — Class A* | 23 | 5,735 | ||||||
Silicon Laboratories, Inc.* | 40 | 5,094 | ||||||
Science Applications International Corp. | 53 | 5,016 | ||||||
NCR Corp.* | 118 | 4,433 | ||||||
Sailpoint Technologies Holdings, Inc.* | 83 | 4,419 | ||||||
Cirrus Logic, Inc.* | 53 | 4,357 | ||||||
Semtech Corp.* | 59 | 4,253 | ||||||
ACI Worldwide, Inc.* | 107 | 4,112 | ||||||
MAXIMUS, Inc. | 56 | 4,099 | ||||||
CMC Materials, Inc. | 27 | 4,085 | ||||||
J2 Global, Inc.* | 39 | 3,810 | ||||||
Qualys, Inc.* | 31 | 3,778 | ||||||
Concentrix Corp.* | 38 | 3,751 | ||||||
Synaptics, Inc.* | 32 | 3,085 | ||||||
Perspecta, Inc. | 125 | 3,010 | ||||||
Blackbaud, Inc. | 45 | 2,590 | ||||||
CommVault Systems, Inc.* | 43 | 2,381 | ||||||
Teradata Corp.* | 100 | 2,247 | ||||||
NetScout Systems, Inc.* | 67 | 1,837 | ||||||
Total Technology | 160,948 | |||||||
Energy - 1.6% | ||||||||
Enphase Energy, Inc.* | 115 | 20,179 | ||||||
SolarEdge Technologies, Inc.* | 47 | 14,998 | ||||||
Sunrun, Inc.* | 142 | 9,852 | ||||||
First Solar, Inc.* | 77 | 7,617 | ||||||
Cimarex Energy Co. | 93 | 3,489 | ||||||
Equities Corp. | 252 | 3,203 | ||||||
Murphy USA, Inc. | 24 | 3,141 | ||||||
WPX Energy, Inc.* | 369 | 3,007 | ||||||
Equitrans Midstream Corp. | 371 | 2,983 | ||||||
ChampionX Corp.* | 170 | 2,601 | ||||||
CNX Resources Corp.* | 205 | 2,214 | ||||||
Antero Midstream Corp. | 261 | 2,012 | ||||||
Murphy Oil Corp. | 132 | 1,597 | ||||||
Total Energy | 76,893 | |||||||
Basic Materials - 1.4% | ||||||||
RPM International, Inc. | 119 | 10,803 | ||||||
Reliance Steel & Aluminum Co. | 58 | 6,946 | ||||||
Steel Dynamics, Inc. | 182 | 6,710 | ||||||
Royal Gold, Inc. | 60 | 6,382 | ||||||
Ashland Global Holdings, Inc. | 50 | 3,960 | ||||||
Valvoline, Inc. | 169 | 3,910 | ||||||
Chemours Co. | 150 | 3,718 | ||||||
United States Steel Corp. | 201 | 3,371 | ||||||
Olin Corp. | 130 | 3,193 | ||||||
Ingevity Corp.* | 38 | 2,878 | ||||||
Sensient Technologies Corp. | 39 | 2,877 | ||||||
NewMarket Corp. | 7 | 2,788 | ||||||
Cabot Corp. | 52 | 2,334 | ||||||
Commercial Metals Co. | 110 | 2,259 | ||||||
Minerals Technologies, Inc. | 31 | 1,926 | ||||||
Compass Minerals International, Inc. | 31 | 1,913 | ||||||
Domtar Corp. | 50 | 1,583 | ||||||
Total Basic Materials | 67,551 | |||||||
Utilities - 1.2% | ||||||||
Essential Utilities, Inc. | 204 | 9,647 | ||||||
UGI Corp. | 190 | 6,642 | ||||||
OGE Energy Corp. | 183 | 5,831 | ||||||
IDACORP, Inc. | 46 | 4,417 | ||||||
ONE Gas, Inc. | 48 | 3,685 | ||||||
PNM Resources, Inc. | 73 | 3,543 | ||||||
Hawaiian Electric Industries, Inc. | 100 | 3,539 | ||||||
Black Hills Corp. | 57 | 3,503 | ||||||
National Fuel Gas Co. | 83 | 3,414 | ||||||
Southwest Gas Holdings, Inc. | 52 | 3,159 | ||||||
New Jersey Resources Corp. | 88 | 3,128 | ||||||
Spire, Inc. | 47 | 3,010 | ||||||
ALLETE, Inc. | 47 | 2,911 | ||||||
NorthWestern Corp. | 46 | 2,682 | ||||||
Total Utilities | 59,111 | |||||||
Communications - 1.2% | ||||||||
FactSet Research Systems, Inc. | 35 | 11,637 | ||||||
Cable One, Inc. | 5 | 11,139 | ||||||
Ciena Corp.* | 141 | 7,452 | ||||||
New York Times Co. — Class A | 132 | 6,834 | ||||||
GrubHub, Inc.* | 85 | 6,313 | ||||||
TEGNA, Inc. | 200 | 2,790 | ||||||
TripAdvisor, Inc.* | 88 | 2,532 | ||||||
Yelp, Inc. — Class A* | 64 | 2,091 | ||||||
World Wrestling Entertainment, Inc. — Class A | 43 | 2,066 | ||||||
ViaSat, Inc.* | 59 | 1,926 | ||||||
InterDigital, Inc. | 28 | 1,699 | ||||||
Telephone & Data Systems, Inc. | 91 | 1,690 | ||||||
Total Communications | 58,169 | |||||||
Total Common Stocks | ||||||||
(Cost $1,180,059) | 1,878,568 | |||||||
MUTUAL FUNDS† - 41.9% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 113,633 | 1,134,053 | ||||||
Guggenheim Strategy Fund II2 | 34,358 | 857,565 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,968,402) | 1,991,618 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 11.9% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/213,4 | $ | 400,000 | 399,922 | |||||
0.08% due 01/28/214 | 163,000 | 162,994 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $562,904) | 562,916 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
MID-CAP 1.5x STRATEGY FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,5 - 46.7% | ||||||||
J.P. Morgan Securities LLC | $ | 1,233,368 | $ | 1,233,368 | ||||
Barclays Capital, Inc. | 513,835 | 513,835 | ||||||
BofA Securities, Inc. | 475,773 | 475,773 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,222,976) | 2,222,976 | |||||||
| Shares | |||||||
SECURITIES LENDING COLLATERAL†,6 - 0.1% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%7 | 5,152 | 5,152 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $5,152) | 5,152 | |||||||
Total Investments - 140.1% | ||||||||
(Cost $5,939,493) | $ | 6,661,230 | ||||||
Other Assets & Liabilities, net - (40.1)% | (1,905,543 | ) | ||||||
Total Net Assets - 100.0% | $ | 4,755,687 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | S&P MidCap 400 Index | 0.49% (1 Week USD LIBOR + 0.40%) | At Maturity | 02/18/21 | 563 | $ | 1,297,601 | $ | 12,731 | ||||||||||
BNP Paribas | S&P MidCap 400 Index | 0.59% (1 Month USD LIBOR + 0.45%) | At Maturity | 02/18/21 | 370 | 852,409 | 8,362 | ||||||||||||
Barclays Bank plc | S&P MidCap 400 Index | 0.44% (1 Week USD LIBOR + 0.35%) | At Maturity | 02/17/21 | 1,351 | 3,116,577 | (3,918 | ) | |||||||||||
$ | 5,266,587 | $ | 17,175 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | Securities lending collateral — See Note 7. |
7 | Rate indicated is the 7-day yield as of December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
MID-CAP 1.5x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 1,878,568 | $ | — | $ | — | $ | 1,878,568 | ||||||||
Mutual Funds | 1,991,618 | — | — | 1,991,618 | ||||||||||||
U.S. Treasury Bills | — | 562,916 | — | 562,916 | ||||||||||||
Repurchase Agreements | — | 2,222,976 | — | 2,222,976 | ||||||||||||
Securities Lending Collateral | 5,152 | — | — | 5,152 | ||||||||||||
Equity Index Swap Agreements** | — | 21,093 | — | 21,093 | ||||||||||||
Total Assets | $ | 3,875,338 | $ | 2,806,985 | $ | — | $ | 6,682,323 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 3,918 | $ | — | $ | 3,918 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,140,345 | $ | 769,857 | $ | (1,050,000 | ) | $ | (11,605 | ) | $ | 8,968 | $ | 857,565 | 34,358 | $ | 12,008 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 762,708 | 4,309,501 | (3,950,000 | ) | (1,848 | ) | 13,692 | 1,134,053 | 113,633 | 16,579 | ||||||||||||||||||||||
$ | 1,903,053 | $ | 5,079,358 | $ | (5,000,000 | ) | $ | (13,453 | ) | $ | 22,660 | $ | 1,991,618 | $ | 28,587 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
MID-CAP 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $4,906 of securities loaned (cost $1,748,115) | $ | 2,446,636 | ||
Investments in affiliated issuers, at value (cost $1,968,402) | 1,991,618 | |||
Repurchase agreements, at value (cost $2,222,976) | 2,222,976 | |||
Unrealized appreciation on OTC swap agreements | 21,093 | |||
Receivables: | ||||
Securities sold | 1,702,949 | |||
Swap settlement | 42,099 | |||
Dividends | 5,250 | |||
Variation margin on futures contracts | 580 | |||
Securities lending income | 13 | |||
Interest | 4 | |||
Total assets | 8,433,218 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 4 | |||
Unrealized depreciation on OTC swap agreements | 3,918 | |||
Payable for: | ||||
Fund shares redeemed | 3,635,701 | |||
Securities purchased | 7,692 | |||
Management fees | 5,414 | |||
Return of securities lending collateral | 5,152 | |||
Transfer agent and administrative fees | 1,738 | |||
Investor service fees | 1,615 | |||
Portfolio accounting fees | 646 | |||
Trustees’ fees* | 113 | |||
Miscellaneous | 15,538 | |||
Total liabilities | 3,677,531 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 4,755,687 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,579,436 | ||
Total distributable earnings (loss) | 1,176,251 | |||
Net assets | $ | 4,755,687 | ||
Capital shares outstanding | 23,169 | |||
Net asset value per share | $ | 205.26 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $2) | $ | 32,984 | ||
Dividends from securities of affiliated issuers | 28,587 | |||
Interest | 3,638 | |||
Income from securities lending, net | 94 | |||
Total investment income | 65,303 | |||
Expenses: | ||||
Management fees | 43,791 | |||
Investor service fees | 12,164 | |||
Transfer agent and administrative fees | 16,296 | |||
Professional fees | 9,374 | |||
Portfolio accounting fees | 4,866 | |||
Trustees’ fees* | 1,309 | |||
Custodian fees | 752 | |||
Miscellaneous | 2,605 | |||
Total expenses | 91,157 | |||
Less: | ||||
Expenses waived by Adviser | (2,859 | ) | ||
Net expenses | 88,298 | |||
Net investment loss | (22,995 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (302,533 | ) | ||
Investments in affiliated issuers | (13,453 | ) | ||
Swap agreements | 774,504 | |||
Futures contracts | 174,855 | |||
Net realized gain | 633,373 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 535,582 | |||
Investments in affiliated issuers | 22,660 | |||
Swap agreements | 16,218 | |||
Futures contracts | (54,602 | ) | ||
Net change in unrealized appreciation (depreciation) | 519,858 | |||
Net realized and unrealized gain | 1,153,231 | |||
Net increase in net assets resulting from operations | $ | 1,130,236 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (22,995 | ) | $ | 41,603 | |||
Net realized gain on investments | 633,373 | 1,913,633 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 519,858 | 218,106 | ||||||
Net increase in net assets resulting from operations | 1,130,236 | 2,173,342 | ||||||
Distributions to shareholders | (204,307 | ) | (57,404 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 18,591,440 | 22,974,077 | ||||||
Distributions reinvested | 204,307 | 57,404 | ||||||
Cost of shares redeemed | (20,409,667 | ) | (25,111,651 | ) | ||||
Net decrease from capital share transactions | (1,613,920 | ) | (2,080,170 | ) | ||||
Net increase (decrease) in net assets | (687,991 | ) | 35,768 | |||||
Net assets: | ||||||||
Beginning of year | 5,443,678 | 5,407,910 | ||||||
End of year | $ | 4,755,687 | $ | 5,443,678 | ||||
Capital share activity:* | ||||||||
Shares sold | 118,727 | 125,842 | ||||||
Shares issued from reinvestment of distributions | 1,368 | 312 | ||||||
Shares redeemed | (124,988 | ) | (135,648 | ) | ||||
Net decrease in shares | (4,893 | ) | (9,494 | ) |
* | Capital share activity for the year ended December 31, 2020, has been restated to reflect a 1:10 reverse share split effective August 24, 2020 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
MID-CAP 1.5x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 193.99 | $ | 144.00 | $ | 233.70 | $ | 361.85 | $ | 311.39 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.12 | ) | 1.10 | 1.30 | .20 | (1.00 | ) | |||||||||||||
Net gain (loss) on investments (realized and unrealized) | 12.09 | 50.79 | (32.00 | ) | 58.15 | 88.66 | ||||||||||||||
Total from investment operations | 11.97 | 51.89 | (30.70 | ) | 58.35 | 87.66 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.15 | ) | (1.90 | ) | (.60 | ) | — | — | ||||||||||||
Net realized gains | (.55 | ) | — | (58.40 | ) | (186.50 | ) | (37.20 | ) | |||||||||||
Total distributions | (.70 | ) | (1.90 | ) | (59.00 | ) | (186.50 | ) | (37.20 | ) | ||||||||||
Net asset value, end of period | $ | 205.26 | $ | 193.99 | $ | 144.00 | $ | 233.70 | $ | 361.85 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 10.69 | % | 36.11 | % | (19.40 | %) | 22.44 | % | 29.64 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,756 | $ | 5,444 | $ | 5,408 | $ | 7,875 | $ | 19,948 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.47 | %) | 0.60 | % | 0.67 | % | 0.07 | % | (0.30 | %) | ||||||||||
Total expensesc | 1.87 | % | 1.87 | % | 1.78 | % | 1.76 | % | 1.72 | % | ||||||||||
Net expensese | 1.81 | % | 1.80 | % | 1.78 | % | 1.76 | % | 1.72 | % | ||||||||||
Portfolio turnover rate | 472 | % | 274 | % | 368 | % | 403 | % | 368 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Reverse share split — Per share amounts for the years presented through December 31, 2019 have been restated to reflect a 1:10 reverse share split effective August 24, 2020 — See Note 11. |
e | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
INVERSE MID-CAP STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the year ended December 31, 2020, Inverse Mid-Cap Strategy Fund returned -24.89%. Over the year, its benchmark, the S&P MidCap 400 Index, returned 13.66%. Inverse Mid-Cap Strategy Fund achieved a daily correlation of 99% to its benchmark of -100% of the daily price movement of the S&P MidCap 400 Index.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Health Care, and Consumer Discretionary. The sectors detracting the most from return of the underlying index for the period were Real Estate, Financials, and Utilities.
Enphase Energy, Inc., SolarEdge Technologies, Inc., and Etsy, Inc. contributed the most to performance of the underlying index for 2020. National Retail Properties, Inc., EPR Properties, and Alleghany Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 77 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 26.3% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 22.9% |
Total | 49.2% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Inverse Mid-Cap Strategy Fund | (24.89%) | (14.23%) | (13.96%) |
S&P MidCap 400 Index | 13.66% | 12.35% | 11.51% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
78 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
INVERSE MID-CAP STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 49.2% | ||||||||
Guggenheim Strategy Fund II1 | 1,448 | $ | 36,131 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 3,151 | 31,450 | ||||||
Total Mutual Funds | ||||||||
(Cost $65,540) | 67,581 | |||||||
| Face | |||||||
REPURCHASE AGREEMENTS††,2 - 53.1% | ||||||||
J.P. Morgan Securities LLC | $ | 40,437 | 40,437 | |||||
Barclays Capital, Inc. | 16,846 | 16,846 | ||||||
BofA Securities, Inc. | 15,598 | 15,598 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $72,881) | 72,881 | |||||||
Total Investments - 102.3% | ||||||||
(Cost $138,421) | $ | 140,462 | ||||||
Other Assets & Liabilities, net - (2.3)% | (3,102 | ) | ||||||
Total Net Assets - 100.0% | $ | 137,360 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Barclays Bank plc | S&P MidCap 400 Index | (0.29)% (1 Week USD LIBOR + 0.20%) | At Maturity | 02/17/21 | 22 | $ | 50,707 | $ | 64 | ||||||||||
Goldman Sachs International | S&P MidCap 400 Index | (0.19)% (1 Week USD LIBOR + 0.10%) | At Maturity | 02/18/21 | 18 | 41,354 | (406 | ) | |||||||||||
BNP Paribas | S&P MidCap 400 Index | (0.09)% (1 Month USD LIBOR - 0.05%) | At Maturity | 02/18/21 | 21 | 47,808 | (470 | ) | |||||||||||
$ | 139,869 | $ | (812 | ) |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Repurchase Agreements — See Note 6. |
3 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
INVERSE MID-CAP STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 67,581 | $ | — | $ | — | $ | 67,581 | ||||||||
Repurchase Agreements | — | 72,881 | — | 72,881 | ||||||||||||
Equity Index Swap Agreements** | — | 64 | — | 64 | ||||||||||||
Total Assets | $ | 67,581 | $ | 72,945 | $ | — | $ | 140,526 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 876 | $ | — | $ | 876 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 67,902 | $ | 146,100 | $ | (178,000 | ) | $ | (1,222 | ) | $ | 1,351 | $ | 36,131 | 1,448 | $ | 1,101 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 72,747 | 203,063 | (245,000 | ) | (252 | ) | 892 | 31,450 | 3,151 | 1,063 | ||||||||||||||||||||||
$ | 140,649 | $ | 349,163 | $ | (423,000 | ) | $ | (1,474 | ) | $ | 2,243 | $ | 67,581 | $ | 2,164 |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in affiliated issuers, at value (cost $65,540) | $ | 67,581 | ||
Repurchase agreements, at value (cost $72,881) | 72,881 | |||
Unrealized appreciation on OTC swap agreements | 64 | |||
Receivables: | ||||
Dividends | 106 | |||
Variation margin on futures contracts | 56 | |||
Total assets | 140,688 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 876 | |||
Payable for: | ||||
Swap settlement | 1,329 | |||
Professional fees | 435 | |||
Management fees | 204 | |||
Securities purchased | 111 | |||
Transfer agent and administrative fees | 66 | |||
Investor service fees | 61 | |||
Portfolio accounting fees | 25 | |||
Fund shares redeemed | 5 | |||
Trustees’ fees* | 5 | |||
Miscellaneous | 211 | |||
Total liabilities | 3,328 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 137,360 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,008,487 | ||
Total distributable earnings (loss) | (1,871,127 | ) | ||
Net assets | $ | 137,360 | ||
Capital shares outstanding | 3,074 | |||
Net asset value per share | $ | 44.68 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 2,164 | ||
Interest | 572 | |||
Total investment income | 2,736 | |||
Expenses: | ||||
Management fees | 3,006 | |||
Investor service fees | 835 | |||
Transfer agent and administrative fees | 1,116 | |||
Professional fees | 607 | |||
Portfolio accounting fees | 334 | |||
Trustees’ fees* | 81 | |||
Custodian fees | 51 | |||
Miscellaneous | 260 | |||
Total expenses | 6,290 | |||
Less: | ||||
Expenses waived by Adviser | (191 | ) | ||
Net expenses | 6,099 | |||
Net investment loss | (3,363 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 2 | |||
Investments in affiliated issuers | (1,474 | ) | ||
Swap agreements | (87,996 | ) | ||
Net realized loss | (89,468 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (1 | ) | ||
Investments in affiliated issuers | 2,243 | |||
Swap agreements | (1,297 | ) | ||
Net change in unrealized appreciation (depreciation) | 945 | |||
Net realized and unrealized loss | (88,523 | ) | ||
Net decrease in net assets resulting from operations | $ | (91,886 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
INVERSE MID-CAP STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (3,363 | ) | $ | 2,781 | |||
Net realized loss on investments | (89,468 | ) | (98,279 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 945 | 4,084 | ||||||
Net decrease in net assets resulting from operations | (91,886 | ) | (91,414 | ) | ||||
Distributions to shareholders | (2,781 | ) | (1,261 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 4,452,907 | 2,723,707 | ||||||
Distributions reinvested | 2,781 | 1,261 | ||||||
Cost of shares redeemed | (4,488,838 | ) | (3,012,184 | ) | ||||
Net decrease from capital share transactions | (33,150 | ) | (287,216 | ) | ||||
Net decrease in net assets | (127,817 | ) | (379,891 | ) | ||||
Net assets: | ||||||||
Beginning of year | 265,177 | 645,068 | ||||||
End of year | $ | 137,360 | $ | 265,177 | ||||
Capital share activity: | ||||||||
Shares sold | 67,443 | 41,564 | ||||||
Shares issued from reinvestment of distributions | 49 | 20 | ||||||
Shares redeemed | (68,834 | ) | (45,693 | ) | ||||
Net decrease in shares | (1,342 | ) | (4,109 | ) |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 60.05 | $ | 75.67 | $ | 68.22 | $ | 78.92 | $ | 97.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.61 | ) | .51 | .35 | (.16 | ) | (.26 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (14.22 | ) | (15.87 | ) | 7.10 | f | (10.54 | ) | (18.43 | ) | ||||||||||
Total from investment operations | (14.83 | ) | (15.36 | ) | 7.45 | (10.70 | ) | (18.69 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.54 | ) | (.26 | ) | — | — | — | |||||||||||||
Total distributions | (.54 | ) | (.26 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 44.68 | $ | 60.05 | $ | 75.67 | $ | 68.22 | $ | 78.92 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (24.89 | %) | (20.31 | %) | 10.90 | % | (13.55 | %) | (19.13 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 137 | $ | 265 | $ | 645 | $ | 178 | $ | 380 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.01 | %) | 0.78 | % | 0.51 | % | (0.22 | %) | (0.82 | %) | ||||||||||
Total expensesc | 1.88 | % | 1.88 | % | 1.77 | % | 1.76 | % | 1.71 | % | ||||||||||
Net expensesd | 1.83 | % | 1.81 | % | 1.77 | % | 1.76 | % | 1.71 | % | ||||||||||
Portfolio turnover rate | 281 | % | 185 | % | 404 | % | 111 | % | 565 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse Share Split — Per share amounts for the year ended December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016. |
f | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments in the Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
RUSSELL 2000® 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Russell 2000® 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the Russell 2000 Index. Russell 2000® 2x Strategy Fund returned 17.21%, while the Russell 2000 Index returned 19.96% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Health Care, Information Technology, and Consumer Discretionary. The sectors detracting the most from return of the underlying index for the period were Financials, Real Estate, and Energy.
Teladoc Health, Inc., Plug Power, Inc., and MyoKardia, Inc. contributed the most to performance of the underlying index for 2020. Invesco Mortgage Capital, Inc., Blackstone Mortgage Trust, Inc. Class A, Intercept Pharmaceuticals, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
84 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 27, 2006 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 17.2% |
Guggenheim Strategy Fund II | 11.0% |
Total | 28.2% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Russell 2000® 2x Strategy Fund | 17.21% | 17.28% | 14.64% |
Russell 2000 Index | 19.96% | 14.21% | 13.29% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 85 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
RUSSELL 2000® 2x STRATEGY FUND |
| Shares | Value | ||||||
RIGHTS††† - 0.0% | ||||||||
Communications - 0.0% | ||||||||
Nexstar Media Group, Inc.* | 207 | $ | — | |||||
Consumer, Non-cyclical - 0.0% | ||||||||
Omthera Pharmaceuticals, Inc.* | 10 | — | ||||||
Tobira Therapeutics, Inc.* | 7 | — | ||||||
Total Consumer, Non-cyclical | — | |||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 28.2% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 283,783 | 2,832,155 | ||||||
Guggenheim Strategy Fund II1 | 73,015 | 1,822,457 | ||||||
Total Mutual Funds | ||||||||
(Cost $4,639,893) | 4,654,612 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 4.3% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/212,3 | $ | 600,000 | 599,884 | |||||
0.08% due 01/28/213 | 109,000 | 108,996 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $708,860) | 708,880 | |||||||
REPURCHASE AGREEMENTS††,4 - 72.6% | ||||||||
J.P. Morgan Securities LLC | 6,651,360 | 6,651,360 | ||||||
Barclays Capital, Inc. | 2,771,028 | 2,771,028 | ||||||
BofA Securities, Inc. | 2,565,767 | 2,565,767 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $11,988,155) | 11,988,155 | |||||||
Total Investments - 105.1% | ||||||||
(Cost $17,336,908) | $ | 17,351,647 | ||||||
Other Assets & Liabilities, net - (5.1)% | (837,335 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,514,312 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
BNP Paribas | Russell 2000 Index | 0.24% (1 Month USD LIBOR + 0.10%) | At Maturity | 02/18/21 | 1,711 | $ | 3,379,543 | $ | 22,938 | ||||||||||
Goldman Sachs International | Russell 2000 Index | 0.34% (1 Week USD LIBOR + 0.25%) | At Maturity | 02/18/21 | 7,811 | 15,425,540 | 2,773 | ||||||||||||
Barclays Bank plc | Russell 2000 Index | 0.09% (1 Week USD LIBOR) | At Maturity | 02/17/21 | 7,184 | 14,187,770 | (71,594 | ) | |||||||||||
$ | 32,992,853 | $ | (45,883 | ) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
86 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
RUSSELL 2000® 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Rights | $ | — | $ | — | $ | — | * | $ | — | |||||||
Mutual Funds | 4,654,612 | — | — | 4,654,612 | ||||||||||||
U.S. Treasury Bills | — | 708,880 | — | 708,880 | ||||||||||||
Repurchase Agreements | — | 11,988,155 | — | 11,988,155 | ||||||||||||
Equity Index Swap Agreements** | — | 25,711 | — | 25,711 | ||||||||||||
Total Assets | $ | 4,654,612 | $ | 12,722,746 | $ | — | $ | 17,377,358 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 71,594 | $ | — | $ | 71,594 |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 655,774 | $ | 3,833,685 | $ | (2,670,000 | ) | $ | (4,434 | ) | $ | 7,432 | $ | 1,822,457 | 73,015 | $ | 8,691 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 954,930 | 5,731,960 | (3,865,000 | ) | 791 | 9,474 | 2,832,155 | 283,783 | 11,881 | |||||||||||||||||||||||
$ | 1,610,704 | $ | 9,565,645 | $ | (6,535,000 | ) | $ | (3,643 | ) | $ | 16,906 | $ | 4,654,612 | $ | 20,572 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
RUSSELL 2000® 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $708,860) | $ | 708,880 | ||
Investments in affiliated issuers, at value (cost $4,639,893) | 4,654,612 | |||
Repurchase agreements, at value (cost $11,988,155) | 11,988,155 | |||
Segregated cash with broker | 870,000 | |||
Unrealized appreciation on OTC swap agreements | 25,711 | |||
Receivables: | ||||
Fund shares sold | 373,676 | |||
Swap settlement | 4,178 | |||
Dividends | 2,166 | |||
Interest | 20 | |||
Total assets | 18,627,398 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 71,594 | |||
Payable for: | ||||
Securities purchased | 2,002,321 | |||
Management fees | 8,455 | |||
Transfer agent and administrative fees | 2,675 | |||
Investor service fees | 2,486 | |||
Portfolio accounting fees | 995 | |||
Fund shares redeemed | 410 | |||
Trustees’ fees* | 166 | |||
Miscellaneous | 23,984 | |||
Total liabilities | 2,113,086 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 16,514,312 | ||
Net assets consist of: | ||||
Paid in capital | $ | 15,555,865 | ||
Total distributable earnings (loss) | 958,447 | |||
Net assets | $ | 16,514,312 | ||
Capital shares outstanding | 60,361 | |||
Net asset value per share | $ | 273.59 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 20,572 | ||
Interest | 5,099 | |||
Total investment income | 25,671 | |||
Expenses: | ||||
Management fees | 36,705 | |||
Investor service fees | 10,196 | |||
Transfer agent and administrative fees | 12,584 | |||
Professional fees | 6,158 | |||
Portfolio accounting fees | 4,078 | |||
Trustees’ fees* | 642 | |||
Custodian fees | 618 | |||
Interest expense | 66 | |||
Miscellaneous | 7,141 | |||
Total expenses | 78,188 | |||
Less: | ||||
Expenses waived by Adviser | (2,167 | ) | ||
Net expenses | 76,021 | |||
Net investment loss | (50,350 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 449 | |||
Investments in affiliated issuers | (3,643 | ) | ||
Swap agreements | 2,971,841 | |||
Futures contracts | 353,836 | |||
Net realized gain | 3,322,483 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 2 | |||
Investments in affiliated issuers | 16,906 | |||
Swap agreements | (33,094 | ) | ||
Futures contracts | (1,302 | ) | ||
Net change in unrealized appreciation (depreciation) | (17,488 | ) | ||
Net realized and unrealized gain | 3,304,995 | |||
Net increase in net assets resulting from operations | $ | 3,254,645 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (50,350 | ) | $ | 18,473 | |||
Net realized gain on investments | 3,322,483 | 487,126 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (17,488 | ) | (46,667 | ) | ||||
Net increase in net assets resulting from operations | 3,254,645 | 458,932 | ||||||
Distributions to shareholders | (18,804 | ) | (17,289 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 133,357,212 | 36,929,861 | ||||||
Distributions reinvested | 18,804 | 17,289 | ||||||
Cost of shares redeemed | (123,972,068 | ) | (35,204,749 | ) | ||||
Net increase from capital share transactions | 9,403,948 | 1,742,401 | ||||||
Net increase in net assets | 12,639,789 | 2,184,044 | ||||||
Net assets: | ||||||||
Beginning of year | 3,874,523 | 1,690,479 | ||||||
End of year | $ | 16,514,312 | $ | 3,874,523 | ||||
Capital share activity: | ||||||||
Shares sold | 732,820 | 176,687 | ||||||
Shares issued from reinvestment of distributions | 119 | 81 | ||||||
Shares redeemed | (689,066 | ) | (170,815 | ) | ||||
Net increase in shares | 43,873 | 5,953 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
RUSSELL 2000® 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 234.99 | $ | 160.46 | $ | 234.65 | $ | 192.92 | $ | 139.69 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (2.35 | ) | 1.27 | .70 | (.79 | ) | (1.11 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 42.01 | 74.31 | (54.40 | ) | 50.24 | 54.34 | ||||||||||||||
Total from investment operations | 39.66 | 75.58 | (53.70 | ) | 49.45 | 53.23 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.06 | ) | (1.05 | ) | — | — | — | |||||||||||||
Net realized gains | — | — | (20.49 | ) | (7.72 | ) | — | |||||||||||||
Total distributions | (1.06 | ) | (1.05 | ) | (20.49 | ) | (7.72 | ) | — | |||||||||||
Net asset value, end of period | $ | 273.59 | $ | 234.99 | $ | 160.46 | $ | 234.65 | $ | 192.92 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 17.21 | % | 47.15 | % | (26.21 | %) | 26.26 | % | 38.11 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,514 | $ | 3,875 | $ | 1,690 | $ | 7,040 | $ | 5,747 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.23 | %) | 0.61 | % | 0.28 | % | (0.38 | %) | (0.74 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.92 | % | 1.82 | % | 1.80 | % | 1.77 | % | ||||||||||
Net expensesd | 1.86 | % | 1.86 | % | 1.82 | % | 1.80 | % | 1.77 | % | ||||||||||
Portfolio turnover rate | 463 | % | 510 | % | 625 | % | 525 | % | 1,125 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark for small-cap securities on a daily basis. The Fund’s current benchmark is 150% of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Russell 2000® 1.5x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 150% of the daily price movement of the Russell 2000 Index. Russell 2000® 1.5x Strategy Fund returned 20.04%, while the Russell 2000 Index returned 19.96% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Health Care, Information Technology, and Consumer Discretionary. The sectors detracting the most from return of the underlying index for the period were Financials, Real Estate, and Energy.
Teladoc Health, Inc., Plug Power, Inc., and MyoKardia, Inc. contributed the most to performance of the underlying index for 2020. Invesco Mortgage Capital, Inc., Blackstone Mortgage Trust, Inc. Class A, Intercept Pharmaceuticals, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 91 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 20.9% |
Guggenheim Strategy Fund II | 12.3% |
Total | 33.2% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Russell 2000® 1.5x Strategy Fund | 20.04% | 15.39% | 12.67% |
Russell 2000 Index | 19.96% | 14.21% | 13.29% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
92 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | ||||||
RIGHTS††† - 0.0% | ||||||||
Communications - 0.0% | ||||||||
Nexstar Media Group, Inc.* | 132 | $ | — | |||||
Consumer, Non-cyclical - 0.0% | ||||||||
Omthera Pharmaceuticals, Inc.* | 37 | — | ||||||
Tobira Therapeutics, Inc.* | 8 | — | ||||||
Total Consumer, Non-cyclical | — | |||||||
Total Rights | ||||||||
(Cost $—) | — | |||||||
MUTUAL FUNDS† - 33.2% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 235,715 | 2,352,432 | ||||||
Guggenheim Strategy Fund II1 | 55,671 | 1,389,548 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,725,393) | 3,741,980 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 5.7% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/212,3 | $ | 600,000 | 599,884 | |||||
0.08% due 01/28/213 | 43,000 | 42,998 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $642,863) | 642,882 | |||||||
FEDERAL AGENCY NOTES†† - 2.2% | ||||||||
Federal Farm Credit Bank | ||||||||
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/224 | 250,000 | 250,852 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $250,000) | 250,852 | |||||||
REPURCHASE AGREEMENTS††,5 - 70.1% | ||||||||
J.P. Morgan Securities LLC | 4,387,472 | 4,387,472 | ||||||
Barclays Capital, Inc. | 1,827,868 | 1,827,868 | ||||||
BofA Securities, Inc. | 1,692,471 | 1,692,471 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $7,907,811) | 7,907,811 | |||||||
Total Investments - 111.2% | ||||||||
(Cost $12,526,067) | $ | 12,543,525 | ||||||
Other Assets & Liabilities, net - (11.2)% | (1,259,902 | ) | ||||||
Total Net Assets - 100.0% | $ | 11,283,623 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | Russell 2000 Index | 0.34% (1 Week USD LIBOR + 0.25%) | At Maturity | 02/18/21 | 3,870 | $ | 7,642,784 | $ | 56,313 | ||||||||||
BNP Paribas | Russell 2000 Index | 0.24% (1 Month USD LIBOR + 0.10%) | At Maturity | 02/18/21 | 1,690 | 3,337,727 | 26,184 | ||||||||||||
Barclays Bank plc | Russell 2000 Index | 0.09% (1 Week USD LIBOR) | At Maturity | 02/17/21 | 3,002 | 5,928,686 | (64,229 | ) | |||||||||||
$ | 16,909,197 | $ | 18,268 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 93 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Variable rate security. Rate indicated is the rate effective at December 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
5 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Rights | $ | — | $ | — | $ | — | * | $ | — | |||||||
Mutual Funds | 3,741,980 | — | — | 3,741,980 | ||||||||||||
U.S. Treasury Bills | — | 642,882 | — | 642,882 | ||||||||||||
Federal Agency Notes | — | 250,852 | — | 250,852 | ||||||||||||
Repurchase Agreements | — | 7,907,811 | — | 7,907,811 | ||||||||||||
Equity Index Swap Agreements** | — | 82,497 | — | 82,497 | ||||||||||||
Total Assets | $ | 3,741,980 | $ | 8,884,042 | $ | — | $ | 12,626,022 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 64,229 | $ | — | $ | 64,229 |
* | Includes securities with a market value of $0. |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
94 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
RUSSELL 2000® 1.5x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,251,714 | $ | 1,675,253 | $ | (1,540,000 | ) | $ | (5,782 | ) | $ | 8,363 | $ | 1,389,548 | 55,671 | $ | 15,267 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,798,499 | 2,228,823 | (1,685,000 | ) | (2,291 | ) | 12,401 | 2,352,432 | 235,715 | 18,783 | ||||||||||||||||||||||
$ | 3,050,213 | $ | 3,904,076 | $ | (3,225,000 | ) | $ | (8,073 | ) | $ | 20,764 | $ | 3,741,980 | $ | 34,050 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
RUSSELL 2000® 1.5x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $892,863) | $ | 893,734 | ||
Investments in affiliated issuers, at value (cost $3,725,393) | 3,741,980 | |||
Repurchase agreements, at value (cost $7,907,811) | 7,907,811 | |||
Segregated cash with broker | 110,000 | |||
Unrealized appreciation on OTC swap agreements | 82,497 | |||
Receivables: | ||||
Swap settlement | 2,859 | |||
Dividends | 2,513 | |||
Interest | 71 | |||
Fund shares sold | 52 | |||
Total assets | 12,741,517 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 64,229 | |||
Payable for: | ||||
Securities purchased | 802,695 | |||
Fund shares redeemed | 560,107 | |||
Management fees | 6,962 | |||
Transfer agent and administrative fees | 2,231 | |||
Investor service fees | 2,073 | |||
Portfolio accounting fees | 829 | |||
Trustees’ fees* | 124 | |||
Miscellaneous | 18,644 | |||
Total liabilities | 1,457,894 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 11,283,623 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,625,759 | ||
Total distributable earnings (loss) | 1,657,864 | |||
Net assets | $ | 11,283,623 | ||
Capital shares outstanding | 125,564 | |||
Net asset value per share | $ | 89.86 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 34,050 | ||
Interest | 7,864 | |||
Total investment income | 41,914 | |||
Expenses: | ||||
Management fees | 44,781 | |||
Investor service fees | 12,439 | |||
Transfer agent and administrative fees | 16,183 | |||
Professional fees | 8,794 | |||
Portfolio accounting fees | 4,976 | |||
Trustees’ fees* | 1,110 | |||
Custodian fees | 793 | |||
Interest expense | 12 | |||
Miscellaneous | 6,399 | |||
Total expenses | 95,487 | |||
Less: | ||||
Expenses waived by Adviser | (3,306 | ) | ||
Net expenses | 92,181 | |||
Net investment loss | (50,267 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,368 | |||
Investments in affiliated issuers | (8,073 | ) | ||
Swap agreements | 2,076,984 | |||
Futures contracts | 23,316 | |||
Net realized gain | 2,093,595 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 347 | |||
Investments in affiliated issuers | 20,764 | |||
Swap agreements | 16,528 | |||
Net change in unrealized appreciation (depreciation) | 37,639 | |||
Net realized and unrealized gain | 2,131,234 | |||
Net increase in net assets resulting from operations | $ | 2,080,967 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 1.5x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (50,267 | ) | $ | 35,778 | |||
Net realized gain on investments | 2,093,595 | 1,892,716 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 37,639 | (97,262 | ) | |||||
Net increase in net assets resulting from operations | 2,080,967 | 1,831,232 | ||||||
Distributions to shareholders | (148,557 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 27,542,995 | 22,821,308 | ||||||
Distributions reinvested | 148,557 | — | ||||||
Cost of shares redeemed | (23,685,229 | ) | (25,780,443 | ) | ||||
Net increase (decrease) from capital share transactions | 4,006,323 | (2,959,135 | ) | |||||
Net increase (decrease) in net assets | 5,938,733 | (1,127,903 | ) | |||||
Net assets: | ||||||||
Beginning of year | 5,344,890 | 6,472,793 | ||||||
End of year | $ | 11,283,623 | $ | 5,344,890 | ||||
Capital share activity: | ||||||||
Shares sold | 412,440 | 328,788 | ||||||
Shares issued from reinvestment of distributions | 2,515 | — | ||||||
Shares redeemed | (357,968 | ) | (372,633 | ) | ||||
Net increase (decrease) in shares | 56,987 | (43,845 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 97 |
RUSSELL 2000® 1.5x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 77.94 | $ | 57.58 | $ | 74.58 | $ | 64.03 | $ | 49.10 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.67 | ) | .41 | .34 | (.14 | ) | (.38 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 15.02 | 19.95 | (13.90 | ) | 12.71 | 15.31 | ||||||||||||||
Total from investment operations | 14.35 | 20.36 | (13.56 | ) | 12.57 | 14.93 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.43 | ) | — | (3.44 | ) | (2.02 | ) | — | ||||||||||||
Total distributions | (2.43 | ) | — | (3.44 | ) | (2.02 | ) | — | ||||||||||||
Net asset value, end of period | $ | 89.86 | $ | 77.94 | $ | 57.58 | $ | 74.58 | $ | 64.03 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 20.04 | % | 35.36 | % | (19.57 | %) | 20.01 | % | 30.41 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,284 | $ | 5,345 | $ | 6,473 | $ | 9,070 | $ | 9,759 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.01 | %) | 0.58 | % | 0.45 | % | (0.21 | %) | (0.74 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.92 | % | 1.82 | % | 1.80 | % | 1.77 | % | ||||||||||
Net expensesd | 1.85 | % | 1.85 | % | 1.81 | % | 1.80 | % | 1.77 | % | ||||||||||
Portfolio turnover rate | 148 | % | 127 | % | 268 | % | 234 | % | 1,198 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
98 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
INVERSE RUSSELL 2000® STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the Russell 2000® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Inverse Russell 2000® Strategy Fund maintained a daily correlation of over 99% to its benchmark of -100% of the daily price movement of the Russell 2000 Index. Inverse Russell 2000® Strategy Fund returned -30.81% while the Russell 2000 Index returned 19.96% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Health Care, Information Technology, and Consumer Discretionary. The sectors detracting the most from return of the underlying index for the period were Financials, Real Estate, and Energy.
Teladoc Health, Inc., Plug Power, Inc., and MyoKardia, Inc. contributed the most to performance of the underlying index for 2020. Invesco Mortgage Capital, Inc., Blackstone Mortgage Trust, Inc. Class A, Intercept Pharmaceuticals, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 99 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 20.5% |
Guggenheim Strategy Fund II | 19.6% |
Total | 40.1% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Inverse Russell 2000® Strategy Fund | (30.81%) | (15.89%) | (14.83%) |
Russell 2000 Index | 19.96% | 14.21% | 13.29% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
100 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
INVERSE RUSSELL 2000® STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 40.1% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 7,686 | $ | 76,710 | |||||
Guggenheim Strategy Fund II1 | 2,926 | 73,033 | ||||||
Total Mutual Funds | ||||||||
(Cost $145,936) | 149,743 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 1.9% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/212 | $ | 7,000 | 7,000 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $6,999) | 7,000 | |||||||
REPURCHASE AGREEMENTS††,3 - 100.7% | ||||||||
J.P. Morgan Securities LLC | 208,743 | 208,743 | ||||||
Barclays Capital, Inc. | 86,965 | 86,965 | ||||||
BofA Securities, Inc. | 80,523 | 80,523 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $376,231) | 376,231 | |||||||
Total Investments - 142.7% | ||||||||
(Cost $529,166) | $ | 532,974 | ||||||
Other Assets & Liabilities, net - (42.7)% | (159,473 | ) | ||||||
Total Net Assets - 100.0% | $ | 373,501 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Barclays Bank plc | Russell 2000 Index | 0.41% (1 Week USD LIBOR - 0.50%) | At Maturity | 02/17/21 | 79 | $ | 156,509 | $ | 1,696 | ||||||||||
Goldman Sachs International | Russell 2000 Index | (0.04)% (1 Week USD LIBOR - 0.05%) | At Maturity | 02/18/21 | 45 | 88,274 | (692 | ) | |||||||||||
BNP Paribas | Russell 2000 Index | 0.26% (1 Month USD LIBOR - 0.40%) | At Maturity | 02/18/21 | 64 | 125,631 | (986 | ) | |||||||||||
$ | 370,414 | $ | 18 |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Repurchase Agreements — See Note 6. |
4 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 101 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
INVERSE RUSSELL 2000® STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 149,743 | $ | — | $ | — | $ | 149,743 | ||||||||
U.S. Treasury Bills | — | 7,000 | — | 7,000 | ||||||||||||
Repurchase Agreements | — | 376,231 | — | 376,231 | ||||||||||||
Equity Index Swap Agreements** | — | 1,696 | — | 1,696 | ||||||||||||
Total Assets | $ | 149,743 | $ | 384,927 | $ | — | $ | 534,670 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 1,678 | $ | — | $ | 1,678 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 153,407 | $ | 634,007 | $ | (715,000 | ) | $ | (1,981 | ) | $ | 2,600 | $ | 73,033 | 2,926 | $ | 4,008 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 164,715 | 704,417 | (795,000 | ) | 1,442 | 1,136 | 76,710 | 7,686 | 4,420 | |||||||||||||||||||||||
$ | 318,122 | $ | 1,338,424 | $ | (1,510,000 | ) | $ | (539 | ) | $ | 3,736 | $ | 149,743 | $ | 8,428 |
102 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $6,999) | $ | 7,000 | ||
Investments in affiliated issuers, at value (cost $145,936) | 149,743 | |||
Repurchase agreements, at value (cost $376,231) | 376,231 | |||
Unrealized appreciation on OTC swap agreements | 1,696 | |||
Receivables: | ||||
Dividends | 284 | |||
Variation margin on futures contracts | 111 | |||
Total assets | 535,065 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 1,678 | |||
Payable for: | ||||
Fund shares redeemed | 156,381 | |||
Swap settlement | 1,071 | |||
Management fees | 403 | |||
Securities purchased | 296 | |||
Transfer agent and administrative fees | 130 | |||
Investor service fees | 121 | |||
Portfolio accounting fees | 48 | |||
Trustees’ fees* | 8 | |||
Miscellaneous | 1,428 | |||
Total liabilities | 161,564 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 373,501 | ||
Net assets consist of: | ||||
Paid in capital | $ | 8,028,381 | ||
Total distributable earnings (loss) | (7,654,880 | ) | ||
Net assets | $ | 373,501 | ||
Capital shares outstanding | 10,106 | |||
Net asset value per share | $ | 36.96 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 8,428 | ||
Interest | 1,619 | |||
Total investment income | 10,047 | |||
Expenses: | ||||
Management fees | 11,059 | |||
Investor service fees | 3,072 | |||
Transfer agent and administrative fees | 4,074 | |||
Professional fees | 2,218 | |||
Portfolio accounting fees | 1,229 | |||
Trustees’ fees* | 290 | |||
Custodian fees | 193 | |||
Miscellaneous | 1,578 | |||
Total expenses | 23,713 | |||
Less: | ||||
Expenses waived by Adviser | (789 | ) | ||
Net expenses | 22,924 | |||
Net investment loss | (12,877 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (539 | ) | ||
Swap agreements | (789,638 | ) | ||
Futures contracts | (20,496 | ) | ||
Net realized loss | (810,673 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (1 | ) | ||
Investments in affiliated issuers | 3,736 | |||
Swap agreements | (1,975 | ) | ||
Futures contracts | 1,656 | |||
Net change in unrealized appreciation (depreciation) | 3,416 | |||
Net realized and unrealized loss | (807,257 | ) | ||
Net decrease in net assets resulting from operations | $ | (820,134 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 103 |
INVERSE RUSSELL 2000® STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (12,877 | ) | $ | 9,218 | |||
Net realized loss on investments | (810,673 | ) | (502,346 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 3,416 | 50,004 | ||||||
Net decrease in net assets resulting from operations | (820,134 | ) | (443,124 | ) | ||||
Distributions to shareholders | (9,218 | ) | (7,165 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 32,339,554 | 15,962,630 | ||||||
Distributions reinvested | 9,218 | 7,165 | ||||||
Cost of shares redeemed | (31,758,192 | ) | (18,689,264 | ) | ||||
Net increase (decrease) from capital share transactions | 590,580 | (2,719,469 | ) | |||||
Net decrease in net assets | (238,772 | ) | (3,169,758 | ) | ||||
Net assets: | ||||||||
Beginning of year | 612,273 | 3,782,031 | ||||||
End of year | $ | 373,501 | $ | 612,273 | ||||
Capital share activity: | ||||||||
Shares sold | 598,355 | 269,058 | ||||||
Shares issued from reinvestment of distributions | 182 | 125 | ||||||
Shares redeemed | (599,808 | ) | (313,193 | ) | ||||
Net decrease in shares | (1,271 | ) | (44,010 | ) |
104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 53.82 | $ | 68.28 | $ | 61.44 | $ | 71.04 | $ | 89.12 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.57 | ) | .46 | .31 | (.51 | ) | (.35 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (15.89 | ) | (14.50 | ) | 6.53 | (9.09 | ) | (17.73 | ) | |||||||||||
Total from investment operations | (16.46 | ) | (14.04 | ) | 6.84 | (9.60 | ) | (18.08 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.40 | ) | (.42 | ) | — | — | — | |||||||||||||
Total distributions | (.40 | ) | (.42 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 36.96 | $ | 53.82 | $ | 68.28 | $ | 61.44 | $ | 71.04 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (30.81 | %) | (20.62 | %) | 11.13 | % | (13.49 | %) | (20.28 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 374 | $ | 612 | $ | 3,782 | $ | 923 | $ | 12,310 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.05 | %) | 0.76 | % | 0.51 | % | (0.74 | %) | (1.14 | %) | ||||||||||
Total expensesc | 1.93 | % | 1.93 | % | 1.83 | % | 1.80 | % | 1.75 | % | ||||||||||
Net expensesd | 1.87 | % | 1.85 | % | 1.82 | % | 1.80 | % | 1.75 | % | ||||||||||
Portfolio turnover rate | 275 | % | 164 | % | 287 | % | 445 | % | 1,160 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 105 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
DOW 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the Dow Jones Industrial Average® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Dow 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the Dow Jones Industrial Average Index. Dow 2x Strategy Fund gained 1.73% while the Dow Jones Industrial Average Index returned 9.72% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Health Care. The sectors detracting the most from return of the underlying index for the period were Industrials and Energy.
Apple, Inc., Microsoft Corp., and Home Depot, Inc. contributed the most to performance of the underlying index for 2020. Boeing Co., Raytheon Technologies Corp., and salesforce.com, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
106 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 23.2% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 23.1% |
UnitedHealth Group, Inc. | 2.8% |
Home Depot, Inc. | 2.1% |
Goldman Sachs Group, Inc. | 2.1% |
Amgen, Inc. | 1.8% |
salesforce.com, Inc. | 1.8% |
Microsoft Corp. | 1.8% |
Visa, Inc. — Class A | 1.7% |
McDonald’s Corp. | 1.7% |
Top Ten Total | 62.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Dow 2x Strategy Fund | 1.73% | 21.67% | 20.02% |
Dow Jones Industrial Average Index | 9.72% | 14.65% | 12.97% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Dow Jones Industrial Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 107 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
DOW 2x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 37.1% | ||||||||
Consumer, Non-cyclical - 8.1% | ||||||||
UnitedHealth Group, Inc. | 1,136 | $ | 398,372 | |||||
Amgen, Inc. | 1,136 | 261,189 | ||||||
Johnson & Johnson | 1,136 | 178,784 | ||||||
Procter & Gamble Co. | 1,136 | 158,063 | ||||||
Merck & Company, Inc. | 1,136 | 92,925 | ||||||
Coca-Cola Co. | 1,136 | 62,298 | ||||||
Total Consumer, Non-cyclical | 1,151,631 | |||||||
Financial - 6.9% | ||||||||
Goldman Sachs Group, Inc. | 1,136 | 299,575 | ||||||
Visa, Inc. — Class A | 1,136 | 248,477 | ||||||
Travelers Companies, Inc. | 1,136 | 159,460 | ||||||
JPMorgan Chase & Co. | 1,136 | 144,351 | ||||||
American Express Co. | 1,136 | 137,354 | ||||||
Total Financial | 989,217 | |||||||
Consumer, Cyclical - 6.4% | ||||||||
Home Depot, Inc. | 1,136 | 301,744 | ||||||
McDonald’s Corp. | 1,136 | 243,763 | ||||||
Walmart, Inc. | 1,136 | 163,754 | ||||||
NIKE, Inc. — Class B | 1,136 | 160,710 | ||||||
Walgreens Boots Alliance, Inc. | 1,136 | 45,304 | ||||||
Total Consumer, Cyclical | 915,275 | |||||||
Industrial - 6.3% | ||||||||
Boeing Co. | 1,136 | 243,172 | ||||||
Honeywell International, Inc. | 1,136 | 241,627 | ||||||
Caterpillar, Inc. | 1,136 | 206,775 | ||||||
3M Co. | 1,136 | 198,562 | ||||||
Total Industrial | 890,136 | |||||||
Technology - 6.0% | ||||||||
salesforce.com, Inc.* | 1,136 | 252,794 | ||||||
Microsoft Corp. | 1,136 | 252,669 | ||||||
Apple, Inc. | 1,136 | 150,736 | ||||||
International Business Machines Corp. | 1,136 | 143,000 | ||||||
Intel Corp. | 1,136 | 56,595 | ||||||
Total Technology | 855,794 | |||||||
Communications - 2.3% | ||||||||
Walt Disney Co.* | 1,136 | 205,821 | ||||||
Verizon Communications, Inc. | 1,136 | 66,740 | ||||||
Cisco Systems, Inc. | 1,136 | 50,836 | ||||||
Total Communications | 323,397 | |||||||
Energy - 0.7% | ||||||||
Chevron Corp. | 1,136 | 95,935 | ||||||
Basic Materials - 0.4% | ||||||||
Dow, Inc. | 1,136 | 63,048 | ||||||
Total Common Stocks | ||||||||
(Cost $4,665,480) | 5,284,433 | |||||||
MUTUAL FUNDS† - 46.3% | ||||||||
Guggenheim Strategy Fund II1 | 132,539 | 3,308,169 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 330,330 | 3,296,696 | ||||||
Total Mutual Funds | ||||||||
(Cost $6,524,234) | 6,604,865 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 12.8% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/212,3 | $ | 1,700,000 | 1,699,671 | |||||
0.08% due 01/28/213,4 | 127,000 | 126,995 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $1,826,612) | 1,826,666 | |||||||
REPURCHASE AGREEMENTS††,5 - 5.7% | ||||||||
J.P. Morgan Securities LLC | 449,429 | 449,429 | ||||||
Barclays Capital, Inc. | 187,237 | 187,237 | ||||||
BofA Securities, Inc. | 173,368 | 173,368 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $810,034) | 810,034 | |||||||
Total Investments - 101.9% | ||||||||
(Cost $13,826,360) | $ | 14,525,998 | ||||||
Other Assets & Liabilities, net - (1.9)% | (273,051 | ) | ||||||
Total Net Assets - 100.0% | $ | 14,252,947 |
108 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
DOW 2x STRATEGY FUND |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 3 | Mar 2021 | $ | 457,020 | $ | 7,810 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | 0.59% (1 Week USD LIBOR + 0.50%) | At Maturity | 02/17/21 | 465 | $ | 14,235,291 | $ | 94,187 | ||||||||||
BNP Paribas | Dow Jones Industrial Average Index | 0.64% (1 Month USD LIBOR + 0.50%) | At Maturity | 02/18/21 | 280 | 8,566,179 | 75,802 | ||||||||||||
$ | 22,801,470 | $ | 169,989 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
5 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 5,284,433 | $ | — | $ | — | $ | 5,284,433 | ||||||||
Mutual Funds | 6,604,865 | — | — | 6,604,865 | ||||||||||||
U.S. Treasury Bills | — | 1,826,666 | — | 1,826,666 | ||||||||||||
Repurchase Agreements | — | 810,034 | — | 810,034 | ||||||||||||
Equity Futures Contracts** | 7,810 | — | — | 7,810 | ||||||||||||
Equity Index Swap Agreements** | — | 169,989 | — | 169,989 | ||||||||||||
Total Assets | $ | 11,897,108 | $ | 2,806,689 | $ | — | $ | 14,703,797 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 109 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
DOW 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 4,466,704 | $ | 7,463,068 | $ | (8,650,000 | ) | $ | (41,894 | ) | $ | 70,291 | $ | 3,308,169 | 132,539 | $ | 62,999 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 5,476,105 | 12,446,843 | (14,650,000 | ) | (7,301 | ) | 31,049 | 3,296,696 | 330,330 | 46,925 | ||||||||||||||||||||||
$ | 9,942,809 | $ | 19,909,911 | $ | (23,300,000 | ) | $ | (49,195 | ) | $ | 101,340 | $ | 6,604,865 | $ | 109,924 |
110 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $6,492,092) | $ | 7,111,099 | ||
Investments in affiliated issuers, at value (cost $6,524,234) | 6,604,865 | |||
Repurchase agreements, at value (cost $810,034) | 810,034 | |||
Unrealized appreciation on OTC swap agreements | 169,989 | |||
Receivables: | ||||
Fund shares sold | 13,594 | |||
Dividends | 7,292 | |||
Swap settlement | 4,737 | |||
Variation margin on futures contracts | 2,490 | |||
Total assets | 14,724,100 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 413,500 | |||
Management fees | 9,788 | |||
Securities purchased | 7,099 | |||
Transfer agent and administrative fees | 3,136 | |||
Investor service fees | 2,914 | |||
Portfolio accounting fees | 1,165 | |||
Trustees’ fees* | 204 | |||
Miscellaneous | 33,347 | |||
Total liabilities | 471,153 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 14,252,947 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,948,895 | ||
Total distributable earnings (loss) | 304,052 | |||
Net assets | $ | 14,252,947 | ||
Capital shares outstanding | 96,411 | |||
Net asset value per share | $ | 147.84 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 74,156 | ||
Dividends from securities of affiliated issuers | 109,924 | |||
Interest | 14,029 | |||
Total investment income | 198,109 | |||
Expenses: | ||||
Management fees | 124,223 | |||
Investor service fees | 34,506 | |||
Transfer agent and administrative fees | 45,486 | |||
Professional fees | 25,616 | |||
Portfolio accounting fees | 13,802 | |||
Trustees’ fees* | 3,302 | |||
Custodian fees | 2,085 | |||
Interest expense | 56 | |||
Line of credit fees | 36 | |||
Miscellaneous | 14,617 | |||
Total expenses | 263,729 | |||
Less: | ||||
Expenses waived by Adviser | (7,731 | ) | ||
Net expenses | 255,998 | |||
Net investment loss | (57,889 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 209,360 | |||
Investments in affiliated issuers | (49,195 | ) | ||
Swap agreements | 521,553 | |||
Futures contracts | (1,144,233 | ) | ||
Net realized loss | (462,515 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 201,517 | |||
Investments in affiliated issuers | 101,340 | |||
Swap agreements | 150,505 | |||
Futures contracts | 8,216 | |||
Net change in unrealized appreciation (depreciation) | 461,578 | |||
Net realized and unrealized loss | (937 | ) | ||
Net decrease in net assets resulting from operations | $ | (58,826 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 111 |
DOW 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (57,889 | ) | $ | 103,391 | |||
Net realized gain (loss) on investments | (462,515 | ) | 6,232,472 | |||||
Net change in unrealized appreciation (depreciation) on investments | 461,578 | 181,382 | ||||||
Net increase (decrease) in net assets resulting from operations | (58,826 | ) | 6,517,245 | |||||
Distributions to shareholders | (1,605,976 | ) | (111,188 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 155,052,801 | 79,655,407 | ||||||
Distributions reinvested | 1,605,976 | 111,188 | ||||||
Cost of shares redeemed | (156,260,037 | ) | (84,863,093 | ) | ||||
Net increase (decrease) from capital share transactions | 398,740 | (5,096,498 | ) | |||||
Net increase (decrease) in net assets | (1,266,062 | ) | 1,309,559 | |||||
Net assets: | ||||||||
Beginning of year | 15,519,009 | 14,209,450 | ||||||
End of year | $ | 14,252,947 | $ | 15,519,009 | ||||
Capital share activity: | ||||||||
Shares sold | 1,248,400 | 564,560 | ||||||
Shares issued from reinvestment of distributions | 13,989 | 742 | ||||||
Shares redeemed | (1,260,965 | ) | (597,755 | ) | ||||
Net increase (decrease) in shares | 1,424 | (32,453 | ) |
112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DOW 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 163.38 | $ | 111.50 | $ | 171.44 | $ | 110.08 | $ | 84.22 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.53 | ) | .91 | 1.01 | .25 | .06 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (.73 | ) | 51.94 | (18.55 | ) | 63.43 | 25.80 | |||||||||||||
Total from investment operations | (1.26 | ) | 52.85 | (17.54 | ) | 63.68 | 25.86 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.92 | ) | (.97 | ) | (.36 | ) | (.06 | ) | — | |||||||||||
Net realized gains | (13.36 | ) | — | (42.04 | ) | (2.26 | ) | — | ||||||||||||
Total distributions | (14.28 | ) | (.97 | ) | (42.40 | ) | (2.32 | ) | — | |||||||||||
Net asset value, end of period | $ | 147.84 | $ | 163.38 | $ | 111.50 | $ | 171.44 | $ | 110.08 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 1.73 | % | 47.47 | % | (14.23 | %) | 58.51 | % | 30.72 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 14,253 | $ | 15,519 | $ | 14,209 | $ | 23,319 | $ | 16,510 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.42 | %) | 0.65 | % | 0.65 | % | 0.18 | % | 0.07 | % | ||||||||||
Total expensesc | 1.91 | % | 1.91 | % | 1.80 | % | 1.81 | % | 1.77 | % | ||||||||||
Net expensesd | 1.85 | % | 1.84 | % | 1.80 | % | 1.81 | % | 1.77 | % | ||||||||||
Portfolio turnover rate | 607 | % | 256 | % | 362 | % | 256 | % | 361 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
INVERSE DOW 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the inverse (opposite) of the performance of the Dow Jones Industrial Average® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Inverse Dow 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the Dow Jones Industrial Average Index. Inverse Dow 2x Strategy Fund returned -45.76% while the Dow Jones Industrial Average Index returned 9.72% over the same time period.
The sectors contributing the most to the performance of the underlying index for the period were Information Technology, Consumer Discretionary, and Health Care. The sectors detracting the most from return of the underlying index for the period were Industrials and Energy.
Apple, Inc., Microsoft Corp., and Home Depot, Inc. contributed the most to performance of the underlying index for 2020. Boeing Co., Raytheon Technologies Corp., and salesforce.com, Inc. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
114 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 3, 2004 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 27.4% |
Guggenheim Strategy Fund II | 13.2% |
Total | 40.6% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Inverse Dow 2x Strategy Fund | (45.76%) | (31.48%) | (28.59%) |
Dow Jones Industrial Average Index | 9.72% | 14.65% | 12.97% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Dow Jones Industrial Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 115 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
INVERSE DOW 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 40.6% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 94,082 | $ | 938,935 | |||||
Guggenheim Strategy Fund II1 | 18,224 | 454,861 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,371,610) | 1,393,796 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 6.1% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/212 | $ | 200,000 | 199,961 | |||||
0.08% due 01/28/212,3 | 10,000 | 10,000 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $209,957) | 209,961 | |||||||
REPURCHASE AGREEMENTS††,4 - 54.5% | ||||||||
J.P. Morgan Securities LLC | 1,036,845 | 1,036,845 | ||||||
Barclays Capital, Inc. | 431,961 | 431,961 | ||||||
BofA Securities, Inc. | 399,963 | 399,963 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,868,769) | 1,868,769 | |||||||
Total Investments - 101.2% | ||||||||
(Cost $3,450,336) | $ | 3,472,526 | ||||||
Other Assets & Liabilities, net - (1.2)% | (42,024 | ) | ||||||
Total Net Assets - 100.0% | $ | 3,430,502 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
Dow Jones Industrial Average Index Mini Futures Contracts | 1 | Mar 2021 | $ | 152,340 | $ | (2,607 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Equity Index Swap Agreements Sold Short†† | |||||||||||||||||||
Barclays Bank plc | Dow Jones Industrial Average Index | (0.34)% (1 Week USD LIBOR + 0.25%) | At Maturity | 02/17/21 | 44 | $ | 1,353,020 | $ | (8,959 | ) | |||||||||
BNP Paribas | Dow Jones Industrial Average Index | (0.14)% (1 Month USD LIBOR) | At Maturity | 02/18/21 | 176 | 5,384,733 | (47,627 | ) | |||||||||||
$ | 6,737,753 | $ | (56,586 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
4 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as equity index swap collateral at December 31, 2020. |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
116 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
INVERSE DOW 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,393,796 | $ | — | $ | — | $ | 1,393,796 | ||||||||
U.S. Treasury Bills | — | 209,961 | — | 209,961 | ||||||||||||
Repurchase Agreements | — | 1,868,769 | — | 1,868,769 | ||||||||||||
Total Assets | $ | 1,393,796 | $ | 2,078,730 | $ | — | $ | 3,472,526 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 2,607 | $ | — | $ | — | $ | 2,607 | ||||||||
Equity Index Swap Agreements** | — | 56,586 | — | 56,586 | ||||||||||||
Total Liabilities | $ | 2,607 | $ | 56,586 | $ | — | $ | 59,193 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 752,002 | $ | 3,586,594 | $ | (3,880,000 | ) | $ | (19,307 | ) | $ | 15,572 | $ | 454,861 | 18,224 | $ | 11,593 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 703,973 | 4,219,559 | (3,980,000 | ) | (13,095 | ) | 8,498 | 938,935 | 94,082 | 9,542 | ||||||||||||||||||||||
$ | 1,455,975 | $ | 7,806,153 | $ | (7,860,000 | ) | $ | (32,402 | ) | $ | 24,070 | $ | 1,393,796 | $ | 21,135 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 117 |
INVERSE DOW 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $209,957) | $ | 209,961 | ||
Investments in affiliated issuers, at value (cost $1,371,610) | 1,393,796 | |||
Repurchase agreements, at value (cost $1,868,769) | 1,868,769 | |||
Receivables: | ||||
Fund shares sold | 30,087 | |||
Dividends | 1,279 | |||
Total assets | 3,503,892 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 56,586 | |||
Payable for: | ||||
Management fees | 2,615 | |||
Securities purchased | 1,370 | |||
Transfer agent and administrative fees | 841 | |||
Variation margin on futures contracts | 830 | |||
Swap settlement | 820 | |||
Investor service fees | 782 | |||
Portfolio accounting fees | 313 | |||
Trustees’ fees* | 58 | |||
Fund shares redeemed | 11 | |||
Miscellaneous | 9,164 | |||
Total liabilities | 73,390 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 3,430,502 | ||
Net assets consist of: | ||||
Paid in capital | $ | 24,849,228 | ||
Total distributable earnings (loss) | (21,418,726 | ) | ||
Net assets | $ | 3,430,502 | ||
Capital shares outstanding | 48,631 | |||
Net asset value per share | $ | 70.54 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 21,135 | ||
Interest | 4,916 | |||
Total investment income | 26,051 | |||
Expenses: | ||||
Management fees | 28,352 | |||
Investor service fees | 7,876 | |||
Transfer agent and administrative fees | 10,453 | |||
Professional fees | 5,796 | |||
Portfolio accounting fees | 3,150 | |||
Trustees’ fees* | 761 | |||
Custodian fees | 510 | |||
Miscellaneous | 3,438 | |||
Total expenses | 60,336 | |||
Less: | ||||
Expenses waived by Adviser | (1,635 | ) | ||
Net expenses | 58,701 | |||
Net investment loss | (32,650 | ) | ||
�� | ||||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 24 | |||
Investments in affiliated issuers | (32,402 | ) | ||
Swap agreements | (2,457,471 | ) | ||
Futures contracts | 45,600 | |||
Net realized loss | (2,444,249 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (27 | ) | ||
Investments in affiliated issuers | 24,070 | |||
Swap agreements | (56,717 | ) | ||
Futures contracts | (881 | ) | ||
Net change in unrealized appreciation (depreciation) | (33,555 | ) | ||
Net realized and unrealized loss | (2,477,804 | ) | ||
Net decrease in net assets resulting from operations | $ | (2,510,454 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
118 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE DOW 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (32,650 | ) | $ | 20,050 | |||
Net realized loss on investments | (2,444,249 | ) | (1,435,569 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (33,555 | ) | 32,472 | |||||
Net decrease in net assets resulting from operations | (2,510,454 | ) | (1,383,047 | ) | ||||
Distributions to shareholders | (20,050 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 71,582,539 | 57,014,446 | ||||||
Distributions reinvested | 20,050 | — | ||||||
Cost of shares redeemed | (68,916,815 | ) | (54,477,965 | ) | ||||
Net increase from capital share transactions | 2,685,774 | 2,536,481 | ||||||
Net increase in net assets | 155,270 | 1,153,434 | ||||||
Net assets: | ||||||||
Beginning of year | 3,275,232 | 2,121,798 | ||||||
End of year | $ | 3,430,502 | $ | 3,275,232 | ||||
Capital share activity*: | ||||||||
Shares sold | 638,978 | 334,573 | ||||||
Shares issued from reinvestment of distributions | 209 | — | ||||||
Shares redeemed | (615,557 | ) | (319,924 | ) | ||||
Net increase in shares | 23,630 | 14,649 |
* | Capital share activity for the year ended December 31, 2020 has been restated to reflect a 1:5 reverse share split effective August 24, 2020 — See Note 11. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 119 |
INVERSE DOW 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 131.01 | $ | 204.97 | $ | 202.08 | $ | 331.11 | $ | 470.55 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.34 | ) | .90 | 1.25 | (1.60 | ) | (1.25 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (59.99 | ) | (74.86 | ) | 1.64 | (127.43 | ) | (138.19 | ) | |||||||||||
Total from investment operations | (60.33 | ) | (73.96 | ) | 2.89 | (129.03 | ) | (139.44 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.14 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.14 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 70.54 | $ | 131.01 | $ | 204.97 | $ | 202.08 | $ | 331.11 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (45.76 | %) | (36.08 | %) | 1.43 | % | (38.95 | %) | (29.65 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,431 | $ | 3,275 | $ | 2,122 | $ | 3,699 | $ | 3,403 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.04 | %) | 0.56 | % | 0.67 | % | (0.58 | %) | (0.84 | %) | ||||||||||
Total expensesc | 1.92 | % | 1.92 | % | 1.81 | % | 1.81 | % | 1.77 | % | ||||||||||
Net expensesd | 1.86 | % | 1.86 | % | 1.80 | % | 1.81 | % | 1.77 | % | ||||||||||
Portfolio turnover rate | 616 | % | 427 | % | 524 | % | 915 | % | 642 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016. |
f | Reverse share split — Per share amounts for the years presented through December 31, 2019 have been restated to reflect a 1:5 reverse share split effective August 24, 2020 — See Note 11. |
120 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correspond, before fees and expenses, to a benchmark for U.S. Government securities on a daily basis. The Fund’s current benchmark is 120% of the daily price movement of the Long Treasury Bond. The Long Treasury Bond is the U.S. Treasury bond with the longest maturity, which is currently 30 years. The price movement of the Long Treasury Bond is based on the daily price change of the most recently issued Long Treasury Bond. The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, the Government Long Bond 1.2x Strategy Fund returned 21.96%.
The Price Movement of Long Treasury Bond was 17.44% for 2020.
The return of a comparison index, the Bloomberg Barclays Long U.S. Treasury Index, was 17.70%.
As prices of long-term Treasury bonds rose over 2020, their yields fell, from 2.39% to 1.65%. This performance masked considerable volatility, as investors fearful of global economic fallout from the coronavirus outbreak and oil price instability early in the year rushed into safe havens and sent prices of U.S. Treasuries skyrocketing. In early March, for the first time ever, the entire yield curve briefly slipped below 1%, and the yield on the 30-year Treasury yield fell below 1%.
Yields gradually creeped back to end the year at their highest level since the pandemic. This was partly due to investors shifting from Treasuries to higher-yielding corners of the market, and to expectations that the government may step up issuance of long-term bonds in 2021 to support its vast spending programs, along with increases in economic growth and inflation. The yield curve steepened, with the spread between 2-year and 30-year Treasuries increasing from 82 basis points to 153 basis points during the year, as yields in shorter maturities saw the largest decline.
Derivatives in the Fund are used to provide additional exposure to composition of the benchmark in the most efficient manner possible and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amounts and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 121 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: August 18, 1997 |
The Fund invests principally in U.S. Government securities and in derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) | |
U.S. Treasury Bonds | 52.8% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 10.6% |
Guggenheim Strategy Fund II | 9.2% |
Total | 72.6% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Government Long Bond 1.2x Strategy Fund | 21.96% | 8.07% | 8.42% |
Price Movement of Long Treasury Bond** | 17.44% | 5.59% | 4.94% |
Bloomberg Barclays U.S. Long Treasury Index | 17.70% | 7.85% | 7.80% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Long Treasury Index and the Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
** | Does not reflect any interest. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
122 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 19.8% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 164,711 | $ | 1,643,816 | |||||
Guggenheim Strategy Fund II1 | 56,740 | 1,416,232 | ||||||
Total Mutual Funds | ||||||||
(Cost $3,002,192) | 3,060,048 | |||||||
Face | ||||||||
U.S. GOVERNMENT SECURITIES†† - 52.8% | ||||||||
U.S. Treasury Bonds | ||||||||
1.63% due 11/15/50 | $ | 8,200,000 | 8,167,969 | |||||
Total U.S. Government Securities | ||||||||
(Cost $8,106,740) | 8,167,969 | |||||||
FEDERAL AGENCY NOTES†† - 7.1% | ||||||||
Federal Home Loan Bank | ||||||||
0.10% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 01/04/212 | 1,095,000 | 1,095,000 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $1,095,001) | 1,095,000 | |||||||
U.S. TREASURY BILLS†† - 2.6% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/213,4 | 403,000 | 402,984 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $402,977) | 402,984 | |||||||
REPURCHASE AGREEMENTS††,5 - 25.7% | ||||||||
J.P. Morgan Securities LLC | 2,209,707 | 2,209,707 | ||||||
Barclays Capital, Inc. | 920,587 | 920,587 | ||||||
BofA Securities, Inc. | 852,396 | 852,396 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $3,982,690) | 3,982,690 | |||||||
Total Investments - 108.0% | ||||||||
(Cost $16,589,600) | $ | 16,708,691 | ||||||
Other Assets & Liabilities, net - (8.0)% | (1,237,114 | ) | ||||||
Total Net Assets - 100.0% | $ | 15,471,577 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 59 | Mar 2021 | $ | 12,603,875 | $ | (2,992 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 123 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 3,060,048 | $ | — | $ | — | $ | 3,060,048 | ||||||||
U.S. Government Securities | — | 8,167,969 | — | 8,167,969 | ||||||||||||
Federal Agency Notes | — | 1,095,000 | — | 1,095,000 | ||||||||||||
U.S. Treasury Bills | — | 402,984 | — | 402,984 | ||||||||||||
Repurchase Agreements | — | 3,982,690 | — | 3,982,690 | ||||||||||||
Total Assets | $ | 3,060,048 | $ | 13,648,643 | $ | — | $ | 16,708,691 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Interest Rate Futures Contracts** | $ | 2,992 | $ | — | $ | — | $ | 2,992 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,115,601 | $ | 8,391,459 | $ | (8,130,000 | ) | $ | 2,173 | $ | 36,999 | $ | 1,416,232 | 56,740 | $ | 36,384 | ||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,233,472 | 11,834,675 | (11,440,000 | ) | (7,897 | ) | 23,566 | 1,643,816 | 164,711 | 34,642 | ||||||||||||||||||||||
$ | 2,349,073 | $ | 20,226,134 | $ | (19,570,000 | ) | $ | (5,724 | ) | $ | 60,565 | $ | 3,060,048 | $ | 71,026 |
124 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $9,604,718) | $ | 9,665,953 | ||
Investments in affiliated issuers, at value (cost $3,002,192) | 3,060,048 | |||
Repurchase agreements, at value (cost $3,982,690) | 3,982,690 | |||
Segregated cash with broker | 216,735 | |||
Receivables: | ||||
Securities sold | 796,875 | |||
Variation margin on futures contracts | 56,405 | |||
Interest | 21,042 | |||
Dividends | 2,946 | |||
Total assets | 17,802,694 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 2,274,624 | |||
Management fees | 7,037 | |||
Investor service fees | 3,678 | |||
Transfer agent and administrative fees | 3,222 | |||
Securities purchased | 3,176 | |||
Portfolio accounting fees | 1,471 | |||
Trustees’ fees* | 260 | |||
Miscellaneous | 37,649 | |||
Total liabilities | 2,331,117 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 15,471,577 | ||
Net assets consist of: | ||||
Paid in capital | $ | 26,516,143 | ||
Total distributable earnings (loss) | (11,044,566 | ) | ||
Net assets | $ | 15,471,577 | ||
Capital shares outstanding | 371,990 | |||
Net asset value per share | $ | 41.59 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 71,026 | ||
Interest | 259,335 | |||
Total investment income | 330,361 | |||
Expenses: | ||||
Management fees | 113,519 | |||
Investor service fees | 56,760 | |||
Transfer agent and administrative fees | 62,277 | |||
Professional fees | 41,783 | |||
Portfolio accounting fees | 22,704 | |||
Trustees’ fees* | 4,589 | |||
Custodian fees | 3,360 | |||
Line of credit fees | 18 | |||
Miscellaneous | 18,869 | |||
Total expenses | 323,879 | |||
Less: | ||||
Expenses waived by Adviser | (6,042 | ) | ||
Net expenses | 317,837 | |||
Net investment income | 12,524 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (1,716,452 | ) | ||
Investments in affiliated issuers | (5,724 | ) | ||
Futures contracts | 222,255 | |||
Net realized loss | (1,499,921 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 106,054 | |||
Investments in affiliated issuers | 60,565 | |||
Futures contracts | 92,200 | |||
Net change in unrealized appreciation (depreciation) | 258,819 | |||
Net realized and unrealized loss | (1,241,102 | ) | ||
Net decrease in net assets resulting from operations | $ | (1,228,578 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 12,524 | $ | 192,911 | ||||
Net realized gain (loss) on investments | (1,499,921 | ) | 2,785,216 | |||||
Net change in unrealized appreciation (depreciation) on investments | 258,819 | (970,082 | ) | |||||
Net increase (decrease) in net assets resulting from operations | (1,228,578 | ) | 2,008,045 | |||||
Distributions: | ||||||||
Distributions to shareholders | (13,020 | ) | (192,415 | ) | ||||
Return of capital | (16,202 | ) | — | |||||
Total Distributions | (29,222 | ) | (192,415 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 423,159,024 | 243,488,670 | ||||||
Distributions reinvested | 29,222 | 192,415 | ||||||
Cost of shares redeemed | (416,811,935 | ) | (248,580,079 | ) | ||||
Net increase (decrease) from capital share transactions | 6,376,311 | (4,898,994 | ) | |||||
Net increase (decrease) in net assets | 5,118,511 | (3,083,364 | ) | |||||
Net assets: | ||||||||
Beginning of year | 10,353,066 | 13,436,430 | ||||||
End of year | $ | 15,471,577 | $ | 10,353,066 | ||||
Capital share activity: | ||||||||
Shares sold | 9,798,142 | 7,334,753 | ||||||
Shares issued from reinvestment of distributions | 760 | 5,919 | ||||||
Shares redeemed | (9,730,041 | ) | (7,491,457 | ) | ||||
Net increase (decrease) in shares | 68,861 | (150,785 | ) |
126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 34.15 | $ | 29.60 | $ | 31.79 | $ | 29.36 | $ | 29.73 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .02 | .39 | .46 | .38 | .31 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 7.48 | e | 4.55 | (2.16 | ) | 2.43 | (.38 | ) | ||||||||||||
Total from investment operations | 7.50 | 4.94 | (1.70 | ) | 2.81 | (.07 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.03 | ) | (.39 | ) | (.46 | ) | (.38 | ) | (.30 | ) | ||||||||||
Net realized gains | — | — | (.03 | ) | — | — | ||||||||||||||
Return of capital | (.03 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.06 | ) | (.39 | ) | (.49 | ) | (.38 | ) | (.30 | ) | ||||||||||
Net asset value, end of period | $ | 41.59 | $ | 34.15 | $ | 29.60 | $ | 31.79 | $ | 29.36 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 21.96 | % | 16.78 | % | (5.32 | %) | 9.64 | % | (0.33 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 15,472 | $ | 10,353 | $ | 13,436 | $ | 11,617 | $ | 17,124 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | % | 1.19 | % | 1.58 | % | 1.24 | % | 0.93 | % | ||||||||||
Total expensesc | 1.43 | % | 1.41 | % | 1.32 | % | 1.30 | % | 1.25 | % | ||||||||||
Net expensesd | 1.40 | % | 1.38 | % | 1.32 | % | 1.30 | % | 1.25 | % | ||||||||||
Portfolio turnover rate | 1,887 | % | 2,060 | % | 2,292 | % | 2,055 | % | 1,386 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 127 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND
OBJECTIVE: Seeks to provide total returns that inversely correlate, before fees and expenses, to the price movements of a benchmark for U.S. Treasury debt instruments or futures contract on a specified debt instrument on a daily basis. The Fund’s current benchmark is the daily price movement of the Long Treasury Bond. The Long Treasury Bond is the most recently issued 30 Year U.S. Treasury Bond. The price movement of the Long Treasury Bond is based on the daily price change of the most recently issued Long Treasury Bond. The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, the Inverse Government Long Bond Strategy Fund returned -21.09%.
The Price Movement of Long Treasury Bond was 17.44% for 2020.
The return of a comparison index, the Bloomberg Barclays Long U.S. Treasury Index, was 17.70%.
As prices of long-term Treasury bonds rose over 2020, their yields fell, from 2.39% to 1.65%. This performance masked considerable volatility, as investors fearful of global economic fallout from the coronavirus outbreak and oil price instability early in the year rushed into safe havens and sent prices of U.S. Treasuries skyrocketing. In early March, for the first time ever, the entire yield curve briefly slipped below 1%, and the yield on the 30-year Treasury yield fell below 1%.
Yields gradually creeped back to end the year at their highest level since the pandemic. This was partly due to investors shifting from Treasuries to higher-yielding corners of the market, and to expectations that the government may step up issuance of long-term bonds in 2021 to support its vast spending programs, along with increases in economic growth and inflation. The yield curve steepened, with the spread between 2-year and 30-year Treasuries increasing from 82 basis points to 153 basis points during the year, as yields in shorter maturities saw the largest decline.
Derivatives in the Fund are used to provide additional exposure to composition of the benchmark in the most efficient manner possible and to provide leverage and not for hedging purposes. Derivatives performed as expected.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amounts and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
128 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: May 1, 2003 |
The Fund invests principally in short sales and derivative investments such as futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 19.8% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 19.0% |
Total | 38.8% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Inverse Government Long Bond Strategy Fund | (21.09%) | (8.88%) | (9.96%) |
Price Movement of Long Treasury Bond** | 17.44% | 5.59% | 4.94% |
Bloomberg Barclays U.S. Long Treasury Index | 17.70% | 7.85% | 7.80% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Long Treasury Index and the Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
** | Does not reflect any interest. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 129 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 38.8% | ||||||||
Guggenheim Strategy Fund II1 | 20,990 | $ | 523,908 | |||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 50,481 | 503,804 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,022,670) | 1,027,712 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 1.6% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/212,3 | $ | 44,000 | 43,998 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $43,996) | 43,998 | |||||||
REPURCHASE AGREEMENTS†† - 94.7% | ||||||||
Individual Repurchase Agreements4 | ||||||||
Mizuho Financial Group, Inc. | 1,169,709 | 1,169,709 | ||||||
Barclays Capital, Inc. | 487,500 | 487,500 | ||||||
Joint Repurchase Agreements5 | ||||||||
J.P. Morgan Securities LLC | 471,636 | 471,636 | ||||||
Barclays Capital, Inc. | 196,488 | 196,488 | ||||||
BofA Securities, Inc. | 181,934 | 181,934 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,507,267) | 2,507,267 | |||||||
Total Investments - 135.1% | ||||||||
(Cost $3,573,933) | $ | 3,578,977 | ||||||
U.S. Government Securities Sold Short†† - (75.2)% | ||||||||
U.S. Treasury Bonds | ||||||||
1.63% due 11/15/50 | 2,000,000 | (1,992,187 | ) | |||||
Total U.S. Government Securities Sold Short | ||||||||
(Proceeds $2,003,498) | $ | (1,992,187 | ) | |||||
Other Assets & Liabilities, net - 40.1% | 1,061,234 | |||||||
Total Net Assets - 100.0% | $ | 2,648,024 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Interest Rate Futures Contracts Sold Short† | ||||||||||||||||
U.S. Treasury Ultra Long Bond Futures Contracts | 4 | Mar 2021 | $ | 854,500 | $ | 3,798 |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | All or a portion of this security is pledged as short security collateral at December 31, 2020. |
5 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
130 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,027,712 | $ | — | $ | — | $ | 1,027,712 | ||||||||
U.S. Treasury Bills | — | 43,998 | — | 43,998 | ||||||||||||
Repurchase Agreements | — | 2,507,267 | — | 2,507,267 | ||||||||||||
Interest Rate Futures Contracts** | 3,798 | — | — | 3,798 | ||||||||||||
Total Assets | $ | 1,031,510 | $ | 2,551,265 | $ | — | $ | 3,582,775 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Government Securities | $ | — | $ | 1,992,187 | $ | — | $ | 1,992,187 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 529,529 | $ | 408,928 | $ | (415,000 | ) | $ | (2,437 | ) | $ | 2,888 | $ | 523,908 | 20,990 | $ | 8,905 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 582,120 | 831,878 | (910,000 | ) | (1,657 | ) | 1,463 | 503,804 | 50,481 | 6,878 | ||||||||||||||||||||||
$ | 1,111,649 | $ | 1,240,806 | $ | (1,325,000 | ) | $ | (4,094 | ) | $ | 4,351 | $ | 1,027,712 | $ | 15,783 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 131 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $43,996) | $ | 43,998 | ||
Investments in affiliated issuers, at value (cost $1,022,670) | 1,027,712 | |||
Repurchase agreements, at value (cost $2,507,267) | 2,507,267 | |||
Receivables: | ||||
Fund shares sold | 786,412 | |||
Securities sold | 298,828 | |||
Dividends | 1,077 | |||
Interest | 671 | |||
Total assets | 4,665,965 | |||
Liabilities: | ||||
Securities sold short, at value (proceeds $2,003,498) | 1,992,187 | |||
Payable for: | ||||
Fund shares redeemed | 10,324 | |||
Interest payable on short sales | 4,260 | |||
Management fees | 1,949 | |||
Securities purchased | 1,157 | |||
Variation margin on futures contracts | 1,099 | |||
Transfer agent and administrative fees | 617 | |||
Investor service fees | 574 | |||
Portfolio accounting fees | 229 | |||
Trustees’ fees* | 40 | |||
Miscellaneous | 5,505 | |||
Total liabilities | 2,017,941 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 2,648,024 | ||
Net assets consist of: | ||||
Paid in capital | $ | 10,251,215 | ||
Total distributable earnings (loss) | (7,603,191 | ) | ||
Net assets | $ | 2,648,024 | ||
Capital shares outstanding | 39,474 | |||
Net asset value per share | $ | 67.08 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 15,783 | ||
Interest | 5,064 | |||
Total investment income | 20,847 | |||
Expenses: | ||||
Management fees | 25,401 | |||
Investor service fees | 7,056 | |||
Transfer agent and administrative fees | 9,153 | |||
Short interest expense | 32,081 | |||
Professional fees | 5,077 | |||
Portfolio accounting fees | 2,822 | |||
Trustees’ fees* | 620 | |||
Custodian fees | 423 | |||
Miscellaneous | 2,317 | |||
Total expenses | 84,950 | |||
Less: | ||||
Expenses waived by Adviser | (1,190 | ) | ||
Net expenses | 83,760 | |||
Net investment loss | (62,913 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (4,094 | ) | ||
Investments sold short | (36,674 | ) | ||
Futures contracts | (38,028 | ) | ||
Net realized loss | (78,796 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in affiliated issuers | 4,351 | |||
Investments sold short | (29,068 | ) | ||
Futures contracts | (19,469 | ) | ||
Net change in unrealized appreciation (depreciation) | (44,186 | ) | ||
Net realized and unrealized loss | (122,982 | ) | ||
Net decrease in net assets resulting from operations | $ | (185,895 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
132 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (62,913 | ) | $ | 8,507 | |||
Net realized loss on investments | (78,796 | ) | (650,854 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | (44,186 | ) | 283,716 | |||||
Net decrease in net assets resulting from operations | (185,895 | ) | (358,631 | ) | ||||
Distributions to shareholders | (8,507 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 68,251,100 | 31,903,197 | ||||||
Distributions reinvested | 8,507 | — | ||||||
Cost of shares redeemed | (67,799,247 | ) | (33,588,425 | ) | ||||
Net increase (decrease) from capital share transactions | 460,360 | (1,685,228 | ) | |||||
Net increase (decrease) in net assets | 265,958 | (2,043,859 | ) | |||||
Net assets: | ||||||||
Beginning of year | 2,382,066 | 4,425,925 | ||||||
End of year | $ | 2,648,024 | $ | 2,382,066 | ||||
Capital share activity: | ||||||||
Shares sold | 1,034,768 | 337,151 | ||||||
Shares issued from reinvestment of distributions | 135 | — | ||||||
Shares redeemed | (1,023,365 | ) | (354,225 | ) | ||||
Net increase (decrease) in shares | 11,538 | (17,074 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 133 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 85.27 | $ | 98.33 | $ | 94.75 | $ | 104.00 | $ | 107.17 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (1.48 | ) | .26 | (.64 | ) | (1.88 | ) | (.87 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (16.51 | ) | (13.32 | ) | 4.22 | (7.37 | ) | (2.30 | ) | |||||||||||
Total from investment operations | (17.99 | ) | (13.06 | ) | 3.58 | (9.25 | ) | (3.17 | ) | |||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.20 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.20 | ) | — | — | — | — | ||||||||||||||
Net asset value, end of period | $ | 67.08 | $ | 85.27 | $ | 98.33 | $ | 94.75 | $ | 104.00 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (21.09 | %) | (13.28 | %) | 3.79 | % | (8.89 | %) | (2.94 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,648 | $ | 2,382 | $ | 4,426 | $ | 4,676 | $ | 3,821 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (2.23 | %) | 0.29 | % | (0.63 | %) | (1.89 | %) | (2.59 | %) | ||||||||||
Total expensesc | 3.01 | % | 3.58 | % | 4.31 | % | 4.00 | % | 3.65 | % | ||||||||||
Net expensesd,e | 2.97 | % | 3.49 | % | 4.30 | % | 4.00 | % | 3.65 | % | ||||||||||
Portfolio turnover rate | 2,529 | % | 966 | % | 907 | % | 2,300 | % | 1,384 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Total expenses may include interest expense related to short sales. Excluding interest expense, the net expense ratios for the periods presented would be: |
2020 | 2019 | 2018 | 2017 | 2016 | |
1.83% | 1.79% | 1.75% | 1.75% | 1.72% |
f | Reverse share split — Per share amounts for the year ended December 31, 2016, have been restated to reflect a 1:3 reverse share split effective December 1, 2016. |
134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
HIGH YIELD STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of the high yield bond market.
For the one-year period ended December 31, 2020, the High Yield Strategy returned -0.47%. For comparison, the Bloomberg Barclays U.S. Corporate High Yield Index returned 7.11% for the same period.
The Fund primarily invests in credit default swaps to gain exposure similar to the high yield bond market. Credit default swaps are instruments which allow for the full or partial transfer of third-party credit risk, with respect to a particular entity or entities, from one counterparty to the other. A buyer of credit default swaps is buying credit protection or mitigating credit risk. A seller of credit default swaps is selling credit protection or assuming credit risk. The Fund will normally be a seller of credit protection (assuming credit risk) as it seeks to gain exposure to the high yield bond market. In addition, the Fund may invest in bond futures for the purpose of managing duration risk. For cash management purposes, the Fund may invest in other fixed income securities and money market instruments.
The high yield market had a benign start to the year, but rapidly changed with the onset of the Coronavirus in March. Lower-quality credit sold off and the new issue market was effectively shut for three weeks. Overall, the high yield market returned -12.7% in the first quarter and was the weakest quarter since fourth quarter of 2008 during the Global Financial Crisis. The Coronavirus outbreak dramatically halted large portions of the U.S. economy to which the U.S. Federal Reserve responded quickly. The Federal Open Market Committee cut rates by 125 basis points and implemented a series of liquidity programs to support commercial loans, mortgages, corporations, and municipalities. The Fed also agreed to buy bonds from recent fallen angels, adding a strong technical tailwind to the high yield market.
The combination of the monetary and fiscal support helped to jumpstart the high yield market. The new issue market reopened, and issuance has remained robust since. The second and third quarters of 2020 alone saw $276 billion in issuance, which nearly equaled full-year 2019 levels. Over the period, the market experienced sizeable demand, with high-yield fund flows surging $53 billion during the last three quarters of the year. Overall, the market was up 10.2%, 4.6%, and 6.5% in the year’s final three quarters, respectively. With the market rally, most sectors exhibited positive performance for the full year period even with the selloff in the first quarter. At the end of the year, the average high yield corporate bond yield was 4.18% which compares favorably to considerably lower global yields.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the most efficient manner possible and not for hedging purposes. Derivatives performed as expected.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 135 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 15, 2014 |
Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund II | 20.9% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 20.8% |
iShares iBoxx High Yield Corporate Bond ETF | 14.8% |
SPDR Bloomberg Barclays High Yield Bond ETF | 14.4% |
Total | 70.9% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | Since |
High Yield Strategy Fund | (0.47%) | 6.03% | 4.95% |
Bloomberg Barclays U.S. Corporate High Yield Index | 7.11% | 8.59% | 6.09% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Bloomberg Barclays U.S. Corporate High Yield Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
136 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
HIGH YIELD STRATEGY FUND |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 29.2% | ||||||||
iShares iBoxx High Yield Corporate Bond ETF1 | 18,347 | $ | 1,600,501 | |||||
SPDR Bloomberg Barclays High Yield Bond ETF1 | 14,236 | 1,549,446 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $3,091,331) | 3,149,947 | |||||||
MUTUAL FUNDS† - 41.7% | ||||||||
Guggenheim Strategy Fund II2 | 89,966 | 2,245,542 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 224,744 | 2,242,947 | ||||||
Total Mutual Funds | ||||||||
(Cost $4,464,657) | 4,488,489 | |||||||
Face | ||||||||
FEDERAL AGENCY NOTES†† - 0.9% | ||||||||
Federal Farm Credit Bank | ||||||||
0.45% (U.S. Prime Rate - 2.80%, Rate Floor: 0.00%) due 03/14/223 | $ | 100,000 | 100,341 | |||||
Total Federal Agency Notes | ||||||||
(Cost $100,000) | 100,341 | |||||||
U.S. TREASURY BILLS†† - 0.4% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/214,5 | 37,000 | 36,999 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $36,998) | 36,999 | |||||||
REPURCHASE AGREEMENTS††,6 - 25.0% | ||||||||
J.P. Morgan Securities LLC | 1,495,822 | 1,495,822 | ||||||
Barclays Capital, Inc. | 623,175 | 623,175 | ||||||
BofA Securities, Inc. | 577,014 | 577,014 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $2,696,011) | 2,696,011 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,7 - 7.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%8 | 786,010 | 786,010 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $786,010) | 786,010 | |||||||
Total Investments - 104.5% | ||||||||
(Cost $11,175,007) | $ | 11,257,797 | ||||||
Other Assets & Liabilities, net - (4.5)% | (482,641 | ) | ||||||
Total Net Assets - 100.0% | $ | 10,775,156 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
U.S. Treasury 5 Year Note Futures Contracts | 56 | Mar 2021 | $ | 7,066,063 | $ | 15,219 |
Centrally Cleared Credit Default Swap Agreements Protection Sold†† | |||||||||||||||||||||||||||
Counterparty | Exchange | Index | Protection | Payment | Maturity | Notional | Value | Upfront | Unrealized | ||||||||||||||||||
Barclays Bank plc | ICE | CDX.NA.HY.35.V1 | 5.00 | % | Quarterly | 12/20/25 | $ | 8,000,000 | $ | 747,000 | $ | 451,365 | $ | 295,635 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 137 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
HIGH YIELD STRATEGY FUND |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Credit Index Swap Agreements†† | |||||||||||||||||||
BNP Paribas | iShares iBoxx $ High Yield Corporate Bond ETF | 0.49% (1 Month USD LIBOR + 0.35%) | At Maturity | 02/18/21 | 3,248 | $ | 283,310 | $ | 601 | ||||||||||
BNP Paribas | SPDR Bloomberg Barclays High Yield Bond ETF | 0.54% (1 Month USD LIBOR + 0.40%) | At Maturity | 02/18/21 | 2,119 | 230,584 | 487 | ||||||||||||
Goldman Sachs International | iShares iBoxx $ High Yield Corporate Bond ETF | 0.45% (1 Week USD LIBOR + 0.35%) | At Maturity | 01/28/21 | 888 | 77,465 | 67 | ||||||||||||
$ | 591,359 | $ | 1,155 |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | Variable rate security. Rate indicated is the rate effective at December 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
4 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
5 | Rate indicated is the effective yield at the time of purchase. |
6 | Repurchase Agreements — See Note 6. |
7 | Securities lending collateral — See Note 7. |
8 | Rate indicated is the 7-day yield as of December 31, 2020. |
CDX.NA.HY.35.V1 — Credit Default Swap North American High Yield Series 35 Index Version 1 | |
ICE — Intercontinental Exchange | |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Exchange-Traded Funds | $ | 3,149,947 | $ | — | $ | — | $ | 3,149,947 | ||||||||
Mutual Funds | 4,488,489 | — | — | 4,488,489 | ||||||||||||
Federal Agency Notes | — | 100,341 | — | 100,341 | ||||||||||||
U.S. Treasury Bills | — | 36,999 | — | 36,999 | ||||||||||||
Repurchase Agreements | — | 2,696,011 | — | 2,696,011 | ||||||||||||
Securities Lending Collateral | 786,010 | — | — | 786,010 | ||||||||||||
Futures Contracts** | 15,219 | — | — | 15,219 | ||||||||||||
Credit Default Swap Agreements** | — | 295,635 | — | 295,635 | ||||||||||||
Credit Index Swap Agreements** | — | 1,155 | — | 1,155 | ||||||||||||
Total Assets | $ | 8,439,665 | $ | 3,130,141 | $ | — | $ | 11,569,806 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
138 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
HIGH YIELD STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 2,204,880 | $ | 3,392,918 | $ | (3,345,000 | ) | $ | (18,739 | ) | $ | 11,483 | $ | 2,245,542 | 89,966 | $ | 22,823 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 2,051,428 | 5,819,037 | (5,630,000 | ) | (7,442 | ) | 9,924 | 2,242,947 | 224,744 | 19,027 | ||||||||||||||||||||||
$ | 4,256,308 | $ | 9,211,955 | $ | (8,975,000 | ) | $ | (26,181 | ) | $ | 21,407 | $ | 4,488,489 | $ | 41,850 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 139 |
HIGH YIELD STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $767,870 of securities loaned (cost $4,014,339) | $ | 4,073,297 | ||
Investments in affiliated issuers, at value (cost $4,464,657) | 4,488,489 | |||
Repurchase agreements, at value (cost $2,696,011) | 2,696,011 | |||
Segregated cash with broker | 375,205 | |||
Unamortized upfront premiums paid on credit default swap agreements | 451,365 | |||
Unrealized appreciation on OTC swap agreements | 1,155 | |||
Receivables: | ||||
Protection fees on credit default swap agreements | 12,222 | |||
Variation margin on credit default swap agreements | 11,226 | |||
Dividends | 4,036 | |||
Variation margin on futures contracts | 3,705 | |||
Securities lending income | 73 | |||
Interest | 27 | |||
Total assets | 12,116,811 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 786,010 | |||
Fund shares redeemed | 514,749 | |||
Management fees | 6,733 | |||
Securities purchased | 4,380 | |||
Transfer agent and administrative fees | 2,578 | |||
Investor service fees | 2,396 | |||
Portfolio accounting fees | 958 | |||
Trustees’ fees* | 174 | |||
Swap settlement | 17 | |||
Miscellaneous | 23,660 | |||
Total liabilities | 1,341,655 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 10,775,156 | ||
Net assets consist of: | ||||
Paid in capital | $ | 10,636,593 | ||
Total distributable earnings (loss) | 138,563 | |||
Net assets | $ | 10,775,156 | ||
Capital shares outstanding | 133,872 | |||
Net asset value per share | $ | 80.49 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 33,874 | ||
Dividends from securities of affiliated issuers | 41,850 | |||
Interest | 11,137 | |||
Income from securities lending, net | 94 | |||
Total investment income | 86,955 | |||
Expenses: | ||||
Management fees | 45,913 | |||
Investor service fees | 15,304 | |||
Transfer agent and administrative fees | 19,953 | |||
Professional fees | 11,325 | |||
Portfolio accounting fees | 6,122 | |||
Trustees’ fees* | 1,335 | |||
Custodian fees | 916 | |||
Miscellaneous | 4,446 | |||
Total expenses | 105,314 | |||
Less: | ||||
Expenses waived by Adviser | (3,160 | ) | ||
Net expenses | 102,154 | |||
Net investment loss | (15,199 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (11,880 | ) | ||
Investments in affiliated issuers | (26,181 | ) | ||
Swap agreements | (515,264 | ) | ||
Futures contracts | 225,715 | |||
Net realized loss | (327,610 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 58,308 | |||
Investments in affiliated issuers | 21,407 | |||
Swap agreements | 96,575 | |||
Futures contracts | 31,721 | |||
Net change in unrealized appreciation (depreciation) | 208,011 | |||
Net realized and unrealized loss | (119,599 | ) | ||
Net decrease in net assets resulting from operations | $ | (134,798 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
140 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
HIGH YIELD STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (15,199 | ) | $ | 51,455 | |||
Net realized gain (loss) on investments | (327,610 | ) | 514,452 | |||||
Net change in unrealized appreciation (depreciation) on investments | 208,011 | 211,422 | ||||||
Net increase (decrease) in net assets resulting from operations | (134,798 | ) | 777,329 | |||||
Distributions to shareholders | (322,452 | ) | (210,642 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 43,956,938 | 56,719,845 | ||||||
Distributions reinvested | 322,452 | 210,642 | ||||||
Cost of shares redeemed | (43,555,192 | ) | (51,101,531 | ) | ||||
Net increase from capital share transactions | 724,198 | 5,828,956 | ||||||
Net increase in net assets | 266,948 | 6,395,643 | ||||||
Net assets: | ||||||||
Beginning of year | 10,508,208 | 4,112,565 | ||||||
End of year | $ | 10,775,156 | $ | 10,508,208 | ||||
Capital share activity: | ||||||||
Shares sold | 554,786 | 680,824 | ||||||
Shares issued from reinvestment of distributions | 4,307 | 2,509 | ||||||
Shares redeemed | (546,558 | ) | (614,753 | ) | ||||
Net increase in shares | 12,535 | 68,580 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 141 |
HIGH YIELD STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 86.60 | $ | 77.95 | $ | 83.54 | $ | 81.50 | $ | 75.17 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.20 | ) | .64 | .71 | .29 | .14 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (.60 | ) | 10.08 | (1.39 | ) | 5.23 | 6.99 | |||||||||||||
Total from investment operations | (.80 | ) | 10.72 | (.68 | ) | 5.52 | 7.13 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (4.92 | ) | (2.07 | ) | (4.91 | ) | (3.48 | ) | (.80 | ) | ||||||||||
Net realized gains | (.39 | ) | — | — | — | — | ||||||||||||||
Total distributions | (5.31 | ) | (2.07 | ) | (4.91 | ) | (3.48 | ) | (.80 | ) | ||||||||||
Net asset value, end of period | $ | 80.49 | $ | 86.60 | $ | 77.95 | $ | 83.54 | $ | 81.50 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (0.47 | %) | 13.84 | % | (0.87 | %) | 6.87 | % | 11.62 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,775 | $ | 10,508 | $ | 4,113 | $ | 6,524 | $ | 7,390 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.25 | %) | 0.76 | % | 0.88 | % | 0.35 | % | 0.51 | % | ||||||||||
Total expensesc | 1.72 | % | 1.72 | % | 1.62 | % | 1.60 | % | 1.56 | % | ||||||||||
Net expensesd | 1.67 | % | 1.65 | % | 1.61 | % | 1.60 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 460 | % | 299 | % | 116 | % | 124 | % | 255 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:3 reverse share split effective December 1, 2016. |
142 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVE: Seeks to provide security of principal, high current income, and liquidity.
For the year ended December 31, 2020, U.S. Government Money Market Fund returned 0.07%.
The U.S. Federal Reserve (“Fed”) reduced interest rates with two unscheduled actions in 2020 in quick succession. The first 50 basis point cut occurred on March 3 with the second 100 basis point cut happening on March 15. The Fed’s target rate at the start of the year was in the 1.50% to 1.75% range and ended the year in the 0.00% to 0.25% range. Along with the decrease in interest rates, the Fund’s yield declined as well.
The U.S. economy was hit hard due to the COVID-19 pandemic, with 2nd quarter GDP falling 31%. Most economic indicators improved over the second half of the year as March and April lockdowns were lifted. However, most indicators remain well below early 2020 levels. Additional government spending is required to assist people and small businesses affected by the pandemic. Prior to COVID-19, the Fed had indicated a willingness to tolerate higher inflation after a decade of undershooting their 2% target level. This new policy is described as “average inflation targeting.” The most recent dot plot in December 2020 indicated that no members of the Fed expected to raise interest rates in 2021.
Performance displayed represents past performance, which is no guarantee of future results.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
FADN – Federal Agency Discount Note
FAN – Federal Agency Note
Inception Date: May 7, 1997 |
The Fund invests principally in money market instruments issued or guaranteed as to principal and interest by the U.S. Government, its agencies or instrumentalities and enters into repurchase agreements fully collateralized by U.S. government securities.
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
U.S. Government Money Market Fund | 0.07% | 0.31% | 0.15% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 143 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
U.S. GOVERNMENT MONEY MARKET FUND |
| Face | Value | ||||||
FEDERAL AGENCY NOTES†† - 49.9% | ||||||||
Federal Home Loan Bank | ||||||||
0.06% (3 Month USD LIBOR - 0.17%, Rate Floor: 0.00%) due 01/08/211 | $ | 6,500,000 | $ | 6,499,942 | ||||
0.06% (3 Month USD LIBOR - 0.17%, Rate Floor: 0.00%) due 01/06/211 | 6,000,000 | 5,999,978 | ||||||
0.12% (U.S. Secured Overnight Financing Rate + 0.03%, Rate Floor: 0.00%) due 02/22/211 | 3,000,000 | 3,000,000 | ||||||
0.23% (U.S. Secured Overnight Financing Rate + 0.14%, Rate Floor: 0.00%) due 03/10/211 | 1,500,000 | 1,500,000 | ||||||
0.10% (3 Month USD LIBOR - 0.14%, Rate Floor: 0.00%) due 01/04/211 | 910,000 | 909,991 | ||||||
0.12% (U.S. Secured Overnight Financing Rate + 0.05%, Rate Floor: 0.00%) due 01/28/211 | 150,000 | 149,995 | ||||||
0.12% (U.S. Secured Overnight Financing Rate + 0.05%, Rate Floor: 0.00%) due 01/22/211 | 100,000 | 99,997 | ||||||
1.38% due 02/18/21 | 95,000 | 95,100 | ||||||
Federal Farm Credit Bank | ||||||||
0.28% (U.S. Prime Rate - 2.98%, Rate Floor: 0.00%) due 05/10/211 | 3,000,000 | 3,000,272 | ||||||
0.17% (U.S. Prime Rate - 3.08%, Rate Floor: 0.00%) due 06/29/211 | 1,000,000 | 999,850 | ||||||
0.15% (1 Month USD LIBOR, Rate Floor: 0.00%) due 08/09/211 | 500,000 | 500,064 | ||||||
0.19% (1 Month USD LIBOR + 0.05%, Rate Floor: 0.00%) due 03/01/211 | 250,000 | 250,025 | ||||||
0.17% (U.S. Secured Overnight Financing Rate + 0.10%, Rate Floor: 0.00%) due 05/07/211 | 60,000 | 60,000 | ||||||
Farmer Mac | ||||||||
0.23% (U.S. Prime Rate - 3.02%, Rate Floor: 0.00%) due 01/04/211 | 2,000,000 | 2,000,000 | ||||||
0.09% (3 Month USD LIBOR - 0.13%) due 08/13/211 | 370,000 | 369,944 | ||||||
Fannie Mae | ||||||||
2.50% due 04/13/21 | 671,000 | 675,508 | ||||||
0.17% (U.S. Secured Overnight Financing Rate + 0.10%, Rate Floor: 0.00%) due 12/03/211 | 240,000 | 240,134 | ||||||
0.11% (U.S. Secured Overnight Financing Rate + 0.04%, Rate Floor: 0.00%) due 01/29/211 | 100,000 | 99,995 | ||||||
Freddie Mac | ||||||||
1.13% due 08/12/21 | 796,000 | 800,969 | ||||||
Total Federal Agency Notes | ||||||||
(Cost $27,251,764) | 27,251,764 | |||||||
U.S. TREASURY BILLS†† - 18.3% | ||||||||
U.S. Treasury Bills | ||||||||
0.09% due 04/01/212 | 7,000,000 | 6,998,425 | ||||||
0.09% due 04/29/212 | 3,000,000 | 2,999,066 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $9,997,491) | 9,997,491 | |||||||
U.S. GOVERNMENT SECURITIES†† - 3.7% | ||||||||
U.S. Treasury Note | ||||||||
3.63% due 02/15/21 | 2,000,000 | 2,008,623 | ||||||
Total U.S. Government Securities | ||||||||
(Cost $2,008,623) | 2,008,623 | |||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 0.6% | ||||||||
Federal Home Loan Bank | ||||||||
0.09% due 01/04/212 | 200,000 | 199,999 | ||||||
0.09% due 01/06/212 | 154,000 | 153,998 | ||||||
Total Federal Agency Discount Notes | ||||||||
(Cost $353,997) | 353,997 | |||||||
REPURCHASE AGREEMENTS††,3 - 28.0% | ||||||||
J.P. Morgan Securities LLC | 8,497,158 | 8,497,158 | ||||||
Barclays Capital, Inc. | 3,540,007 | 3,540,007 | ||||||
BofA Securities, Inc. | 3,277,785 | 3,277,785 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $15,314,950) | 15,314,950 | |||||||
Total Investments - 100.5% | ||||||||
(Cost $54,926,825) | $ | 54,926,825 | ||||||
Other Assets & Liabilities, net - (0.5)% | (270,111 | ) | ||||||
Total Net Assets - 100.0% | $ | 54,656,714 |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Variable rate security. Rate indicated is the rate effective at December 31, 2020. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | Repurchase Agreements — See Note 6. |
LIBOR — London Interbank Offered Rate | |
See Sector Classification in Other Information section. |
144 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
U.S. GOVERNMENT MONEY MARKET FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Federal Agency Notes | $ | — | $ | 27,251,764 | $ | — | $ | 27,251,764 | ||||||||
U.S. Treasury Bills | — | 9,997,491 | — | 9,997,491 | ||||||||||||
U.S. Government Securities | — | 2,008,623 | — | 2,008,623 | ||||||||||||
Federal Agency Discount Notes | — | 353,997 | — | 353,997 | ||||||||||||
Repurchase Agreements | — | 15,314,950 | — | 15,314,950 | ||||||||||||
Total Assets | $ | — | $ | 54,926,825 | $ | — | $ | 54,926,825 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 145 |
U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value (cost $39,611,875) | $ | 39,611,875 | ||
Repurchase agreements, at value (cost $15,314,950) | 15,314,950 | |||
Receivables: | ||||
Interest | 40,564 | |||
Total assets | 54,967,389 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 199,950 | |||
Professional fees | 79,272 | |||
Trustees’ fees* | 858 | |||
Portfolio accounting fees | 38 | |||
Miscellaneous | 30,557 | |||
Total liabilities | 310,675 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 54,656,714 | ||
Net assets consist of: | ||||
Paid in capital | $ | 54,656,139 | ||
Total distributable earnings (loss) | 575 | |||
Net assets | $ | 54,656,714 | ||
Capital shares outstanding | 54,643,482 | |||
Net asset value per share | $ | 1.00 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Interest | $ | 281,030 | ||
Total investment income | 281,030 | |||
Expenses: | ||||
Management fees | 304,255 | |||
Investor service fees | 152,128 | |||
Transfer agent and administrative fees | 169,386 | |||
Professional fees | 110,646 | |||
Portfolio accounting fees | 60,850 | |||
Trustees’ fees* | 13,957 | |||
Custodian fees | 9,185 | |||
Miscellaneous | 45,482 | |||
Total expenses | 865,889 | |||
Less: | ||||
Expenses reimbursed by Adviser: | (279,764 | ) | ||
Expenses waived by Adviser | (335,593 | ) | ||
Total waived/reimbursed expenses | (615,357 | ) | ||
Net expenses | 250,532 | |||
Net investment income | 30,498 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 94 | |||
Net realized gain | 94 | |||
Net increase in net assets resulting from operations | $ | 30,592 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
146 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 30,498 | $ | 543,031 | ||||
Net realized gain on investments | 94 | 3,826 | ||||||
Net change in unrealized appreciation (depreciation) on investments | — | — | ||||||
Net increase in net assets resulting from operations | 30,592 | 546,857 | ||||||
Distributions to shareholders | (36,455 | ) | (540,419 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 229,042,427 | 162,304,140 | ||||||
Distributions reinvested | 36,455 | 540,419 | ||||||
Cost of shares redeemed | (223,649,451 | ) | (198,626,169 | ) | ||||
Net increase (decrease) from capital share transactions | 5,429,431 | (35,781,610 | ) | |||||
Net increase (decrease) in net assets | 5,423,568 | (35,775,172 | ) | |||||
Net assets: | ||||||||
Beginning of year | 49,233,146 | 85,008,318 | ||||||
End of year | $ | 54,656,714 | $ | 49,233,146 | ||||
Capital share activity: | ||||||||
Shares sold | 229,042,427 | 162,304,140 | ||||||
Shares issued from reinvestment of distributions | 36,455 | 540,419 | ||||||
Shares redeemed | (223,649,451 | ) | (198,626,169 | ) | ||||
Net increase (decrease) in shares | 5,429,431 | (35,781,610 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 147 |
U.S. GOVERNMENT MONEY MARKET FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | — | b | .01 | .01 | — | b | — | b | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | — | b | — | — | — | b | — | b | ||||||||||||
Total from investment operations | — | .01 | .01 | — | — | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (— | )b | (.01 | ) | (.01 | ) | (— | )b | (— | )b | ||||||||||
Net realized gains | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
Total distributions | (— | )b | (.01 | ) | (.01 | ) | (— | )b | (— | )b | ||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 0.07 | % | 0.87 | % | 0.58 | % | 0.01 | % | 0.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 54,657 | $ | 49,233 | $ | 85,008 | $ | 78,269 | $ | 61,704 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.05 | % | 0.88 | % | 0.57 | % | — | e | — | e | ||||||||||
Total expenses | 1.42 | % | 1.42 | % | 1.32 | % | 1.31 | % | 1.25 | % | ||||||||||
Net expensesd | 0.41 | % | 1.42 | % | 1.32 | % | 0.96 | % | 0.40 | % | ||||||||||
Portfolio turnover rate | — | — | — | — | — |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Less than $0.01 per share. |
c | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
d | Net expense information reflects the expense ratio after expense waivers, as applicable. |
e | Less than 0.01%. |
148 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust may issue an unlimited number of authorized shares. The Trust accounts for the assets of each Fund separately. At December 31, 2020, the Trust consisted of forty-nine funds. The Trust offers shares of the funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment |
Nova Fund | Non-diversified |
Inverse S&P 500® Strategy Fund | Non-diversified |
NASDAQ-100® Fund | Non-diversified |
Inverse NASDAQ-100® Strategy Fund | Non-diversified |
S&P 500® 2x Strategy Fund | Non-diversified |
NASDAQ-100® 2x Strategy Fund | Non-diversified |
Mid-Cap 1.5x Strategy Fund | Non-diversified |
Inverse Mid-Cap Strategy Fund | Non-diversified |
Russell 2000® 2x Strategy Fund | Non-diversified |
Russell 2000® 1.5x Strategy Fund | Non-diversified |
Inverse Russell 2000® Strategy Fund | Non-diversified |
Dow 2x Strategy Fund | Non-diversified |
Inverse Dow 2x Strategy Fund | Non-diversified |
Government Long Bond 1.2x Strategy Fund | Diversified |
Inverse Government Long Bond Strategy Fund | Diversified |
High Yield Strategy Fund | Non-diversified |
U.S. Government Money Market Fund | Diversified |
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributiors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
THE RYDEX FUNDS ANNUAL REPORT | 149 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds and closed-end investment companies are valued at the last quoted sale price.
The U.S. Government Money Market Fund values debt securities at amortized cost pursuant to Rule 2a-7 of the 1940 Act, which approximates market value.
With the exception of the U.S. Government Money Market Fund, U.S. government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The values of swap agreements entered into by a fund are accounted for using the unrealized appreciation or depreciation on the agreements that are determined by marking the agreements to the last quoted value of the index or other underlying position that the swaps pertain to at the close of the New York Stock Exchange (“NYSE”).
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis. In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Short Sales
When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales.
Fees, if any, paid to brokers to borrow securities in connection with short sales are recorded as interest expense. In addition, the Fund must pay out the dividend rate of the equity or coupon rate of the obligation to the lender and record this as an expense. Short dividend or interest expense is a cost associated with the investment objective of short sales transactions, rather than an operational cost associated with the day-to-day management of any mutual fund. The Fund may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
(d) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(e) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
150 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Upfront payments received or made by a Fund on credit default swap agreements and interest rate swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
(f) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2020, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(g) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(h) Distributions
Dividends from net investment income are declared daily in the Government Long Bond 1.2x Strategy Fund and the U.S. Government Money Market Fund. Distributions of net investment income in the remaining Funds and net realized gains, if any, are declared and paid at least annually. Normally, all distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(i) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.09% at December 31, 2020.
(j) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Financial Instruments and Derivatives
As part of their investment strategy, the Funds utilize short sales and a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized on the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Short Sales
A short sale is a transaction in which a Fund sells a security it does not own. If the security sold short decreases in price between the time the Fund sells the security and closes its short position, the Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, the Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
THE RYDEX FUNDS ANNUAL REPORT | 151 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Derivatives
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Liquidity: the ability to buy or sell exposure with little price/market impact.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Nova Fund | Index exposure, Leverage, Liquidity | $ | 4,438,139 | $ | — | ||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 282,343 | ||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 23,893,170 | — | ||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | 59,902 | 40,118 | ||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 5,461,979 | — | ||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 22,521,929 | — | ||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 1,438,474 | — | ||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 403,847 | — | ||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 540,014 | — | ||||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 78,864 | ||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 1,576,803 | — | ||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 10,601 | 183,982 | ||||||
Government Long Bond 1.2x Strategy Fund | Duration, Index exposure, Leverage, Liquidity | 18,389,669 | — | ||||||
Inverse Government Long Bond Strategy Fund | Duration, Index exposure, Liquidity | — | 773,148 | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 3,596,720 | — |
152 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing over-the-counter (“OTC”) swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally-cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Total return swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as an index) for a fixed or variable interest rate. Total return swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. When utilizing total return swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in value.
The following table represents the Funds’ use and volume of total return swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Nova Fund | Index exposure, Leverage, Liquidity | $ | 28,964,488 | $ | — | ||||
Inverse S&P 500® Strategy Fund | Index exposure, Liquidity | — | 3,359,742 | ||||||
NASDAQ-100® Fund | Index exposure, Liquidity | 19,979,636 | — | ||||||
Inverse NASDAQ-100® Strategy Fund | Index exposure, Liquidity | — | 1,437,957 | ||||||
S&P 500® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 39,163,624 | — | ||||||
NASDAQ-100® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 134,372,006 | — | ||||||
Mid-Cap 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 3,820,815 | — | ||||||
Inverse Mid-Cap Strategy Fund | Index exposure, Liquidity | — | 271,950 | ||||||
Russell 2000® 2x Strategy Fund | Index exposure, Leverage, Liquidity | 8,124,776 | — | ||||||
Russell 2000® 1.5x Strategy Fund | Index exposure, Leverage, Liquidity | 7,345,347 | — | ||||||
Inverse Russell 2000® Strategy Fund | Index exposure, Liquidity | — | 1,060,956 | ||||||
Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | 21,455,343 | — | ||||||
Inverse Dow 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 5,765,802 | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | 599,150 | — |
Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. A fund enters into credit default swaps as a “seller” or “buyer” of protection primarily to gain or reduce exposure to the investment grade and/or high yield bond market. A seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. The buyer in a credit default swap is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If a credit event occurs, as defined under the terms of the swap agreement, the seller will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The notional amount reflects the maximum potential amount the seller of credit protection could be required to pay to the buyer if a credit event occurs. The seller of protection receives periodic premium payments from the buyer and may also receive or pay an upfront premium adjustment to the stated periodic payments. In the event a credit default occurs on a credit default swap referencing an index, a factor adjustment will take place and the buyer of protection will receive a payment reflecting the par less the default recovery rate of the defaulted index component based on its weighting in the index. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the fund selling the credit protection. For a fund utilizing centrally cleared credit default swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. For OTC credit default swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which a fund is selling credit protection, the default of a third party issuer.
THE RYDEX FUNDS ANNUAL REPORT | 153 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The following table represents the Funds’ use and volume of credit default swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Protection Sold | Protection Purchased | ||||||
High Yield Strategy Fund | Duration, Index exposure, Liquidity | $ | — | $ | 4,254,958 |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2020:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Interest rate contracts | Variation margin on futures contracts | Variation margin on futures contracts |
Equity/Credit contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
Credit contracts | Variation margin on credit default swap agreements | |
Unamortized upfront premiums paid on credit default swap agreements |
The following tables set forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2020:
Asset Derivative Investments Value | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total Value at | |||||||||||||||
Nova Fund | $ | — | $ | 214,262 | $ | — | $ | — | $ | 214,262 | ||||||||||
NASDAQ-100® Fund | 865,635 | 52,535 | — | — | 918,170 | |||||||||||||||
S&P 500® 2x Strategy Fund | — | 359,444 | — | — | 359,444 | |||||||||||||||
NASDAQ-100® 2x Strategy Fund | 211,662 | 648,510 | — | — | 860,172 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | — | 21,093 | — | — | 21,093 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | — | 64 | — | — | 64 | |||||||||||||||
Russell 2000® 2x Strategy Fund | — | 25,711 | — | — | 25,711 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | — | 82,497 | — | — | 82,497 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | — | 1,696 | — | — | 1,696 | |||||||||||||||
Dow 2x Strategy Fund | 7,810 | 169,989 | — | — | 177,799 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | 3,798 | — | 3,798 | |||||||||||||||
High Yield Strategy Fund | — | — | 15,219 | 296,790 | 312,009 |
154 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Liability Derivative Investments Value | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total Value at | |||||||||||||||
Inverse S&P 500® Strategy Fund | $ | 1,645 | $ | 7,122 | $ | — | $ | — | $ | 8,767 | ||||||||||
Inverse NASDAQ-100® Strategy Fund | — | 1,721 | — | — | 1,721 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | — | 3,918 | — | — | 3,918 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | — | 876 | — | — | 876 | |||||||||||||||
Russell 2000® 2x Strategy Fund | — | 71,594 | — | — | 71,594 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | — | 64,229 | — | — | 64,229 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | — | 1,678 | — | — | 1,678 | |||||||||||||||
Inverse Dow 2x Strategy Fund | 2,607 | 56,586 | — | — | 59,193 | |||||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 2,992 | — | 2,992 |
* | Includes cumulative appreciation (depreciation) of futures contracts, OTC and centrally-cleared derivatives contracts as reported on the Schedules of Investments. Variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2020:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Interest rate contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
Equity/Credit contracts | Net realized gain (loss) on swap agreements |
| Net change in unrealized appreciation (depreciation) on swap agreements |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended December 31, 2020:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total | |||||||||||||||
Nova Fund | $ | 2,333,363 | $ | 2,667,349 | $ | — | $ | — | $ | 5,000,712 | ||||||||||
Inverse S&P 500® Strategy Fund | 22,557 | (1,776,617 | ) | — | — | (1,754,060 | ) | |||||||||||||
NASDAQ-100® Fund | 10,790,308 | 4,086,139 | — | — | 14,876,447 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | 88,982 | (1,028,129 | ) | — | — | (939,147 | ) | |||||||||||||
S&P 500® 2x Strategy Fund | (2,463,842 | ) | 513,865 | — | — | (1,949,977 | ) | |||||||||||||
NASDAQ-100® 2x Strategy Fund | 6,512,137 | 46,380,791 | — | — | 52,892,928 | |||||||||||||||
Mid-Cap 1.5x Strategy Fund | 174,855 | 774,504 | — | — | 949,359 | |||||||||||||||
Inverse Mid-Cap Strategy Fund | — | (87,996 | ) | — | — | (87,996 | ) | |||||||||||||
Russell 2000® 2x Strategy Fund | 353,836 | 2,971,841 | — | — | 3,325,677 | |||||||||||||||
Russell 2000® 1.5x Strategy Fund | 23,316 | 2,076,984 | — | — | 2,100,300 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | (20,496 | ) | (789,638 | ) | — | — | (810,134 | ) | ||||||||||||
Dow 2x Strategy Fund | (1,144,233 | ) | 521,553 | — | — | (622,680 | ) | |||||||||||||
Inverse Dow 2x Strategy Fund | 45,600 | (2,457,471 | ) | — | — | (2,411,871 | ) | |||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 222,255 | — | 222,255 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (38,028 | ) | — | (38,028 | ) | |||||||||||||
High Yield Strategy Fund | — | — | 225,715 | (515,264 | ) | (289,549 | ) |
THE RYDEX FUNDS ANNUAL REPORT | 155 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Total | |||||||||||||||
Nova Fund | $ | — | $ | 288,779 | $ | — | $ | — | $ | 288,779 | ||||||||||
Inverse S&P 500® Strategy Fund | (1,645 | ) | (7,579 | ) | — | — | (9,224 | ) | ||||||||||||
NASDAQ-100® Fund | 313,602 | 60,457 | — | — | 374,059 | |||||||||||||||
Inverse NASDAQ-100® Strategy Fund | — | (3,889 | ) | — | — | (3,889 | ) | |||||||||||||
S&P 500® 2x Strategy Fund | (436,792 | ) | 467,025 | — | — | 30,233 | ||||||||||||||
NASDAQ-100® 2x Strategy Fund | (136,461 | ) | 603,250 | — | — | 466,789 | ||||||||||||||
Mid-Cap 1.5x Strategy Fund | (54,602 | ) | 16,218 | — | — | (38,384 | ) | |||||||||||||
Inverse Mid-Cap Strategy Fund | — | (1,297 | ) | — | — | (1,297 | ) | |||||||||||||
Russell 2000® 2x Strategy Fund | (1,302 | ) | (33,094 | ) | — | — | (34,396 | ) | ||||||||||||
Russell 2000® 1.5x Strategy Fund | — | 16,528 | — | — | 16,528 | |||||||||||||||
Inverse Russell 2000® Strategy Fund | 1,656 | (1,975 | ) | — | — | (319 | ) | |||||||||||||
Dow 2x Strategy Fund | 8,216 | 150,505 | — | — | 158,721 | |||||||||||||||
Inverse Dow 2x Strategy Fund | (881 | ) | (56,717 | ) | — | — | (57,598 | ) | ||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 92,200 | — | 92,200 | |||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (19,469 | ) | — | (19,469 | ) | |||||||||||||
High Yield Strategy Fund | — | — | 31,721 | 96,575 | 128,296 |
In conjunction with short sales and the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
156 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Nova Fund | Swap equity contracts | $ | 214,262 | $ | — | $ | 214,262 | $ | — | $ | — | $ | 214,262 | ||||||||||||
NASDAQ-100® Fund | Swap equity contracts | 52,535 | — | 52,535 | — | — | 52,535 | ||||||||||||||||||
S&P 500® 2x Strategy Fund | Swap equity contracts | 359,444 | — | 359,444 | — | — | 359,444 | ||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | Swap equity contracts | 648,510 | — | 648,510 | — | — | 648,510 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | 21,093 | — | 21,093 | — | — | 21,093 | ||||||||||||||||||
Inverse Mid-Cap Strategy Fund | Swap equity contracts | 64 | — | 64 | — | — | 64 | ||||||||||||||||||
Russell 2000® 2x Strategy Fund | Swap equity contracts | 25,711 | — | 25,711 | — | — | 25,711 | ||||||||||||||||||
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | 82,497 | — | 82,497 | — | — | 82,497 | ||||||||||||||||||
Inverse Russell 2000® Strategy Fund | Swap equity contracts | 1,696 | — | 1,696 | — | — | 1,696 | ||||||||||||||||||
Dow 2x Strategy Fund | Swap equity contracts | 169,989 | — | 169,989 | — | — | 169,989 | ||||||||||||||||||
High Yield Strategy Fund | Credit Index Swap agreements | 1,155 | — | 1,155 | — | — | 1,155 |
THE RYDEX FUNDS ANNUAL REPORT | 157 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net Amount | ||||||||||||||||||
Inverse S&P 500® Strategy Fund | Swap equity contracts | $ | 7,122 | $ | — | $ | 7,122 | $ | (5,276 | ) | $ | (1,846 | ) | $ | — | ||||||||||
Inverse NASDAQ-100® Strategy Fund | Swap equity contracts | 1,721 | — | 1,721 | (339 | ) | — | 1,382 | |||||||||||||||||
Mid-Cap 1.5x Strategy Fund | Swap equity contracts | 3,918 | — | 3,918 | (3,918 | ) | — | — | |||||||||||||||||
Inverse Mid-Cap Strategy Fund | Swap equity contracts | 876 | — | 876 | (406 | ) | — | 470 | |||||||||||||||||
Russell 2000® 2x Strategy Fund | Swap equity contracts | 71,594 | — | 71,594 | — | (71,594 | ) | — | |||||||||||||||||
Russell 2000® 1.5x Strategy Fund | Swap equity contracts | 64,229 | — | 64,229 | — | (64,229 | ) | — | |||||||||||||||||
Inverse Russell 2000® Strategy Fund | Swap equity contracts | 1,678 | — | 1,678 | (693 | ) | — | 985 | |||||||||||||||||
Inverse Dow 2x Strategy Fund | Swap equity contracts | 56,586 | — | 56,586 | (56,586 | ) | — | — |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2020.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Inverse S&P 500® Strategy Fund | Barclays Bank plc | Total return swap agreements | $ | 30,000 | $ | — | ||||
| Goldman Sachs International | Futures contracts | 10,061 | — | ||||||
Inverse S&P 500® Strategy Fund Total |
|
| 40,061 | — | ||||||
S&P 500® 2x Strategy Fund | Barclays Bank plc | Total return swap agreements | 1,020,000 | — | ||||||
Russell 2000® 2x Strategy Fund | Barclays Bank plc | Total return swap agreements | 870,000 | — | ||||||
Russell 2000® 1.5x Strategy Fund | Barclays Bank plc | Total return swap agreements | 110,000 | — | ||||||
Government Long Bond 1.2x Strategy Fund | Goldman Sachs International | Futures contracts | 216,735 | — | ||||||
High Yield Strategy Fund | Barclays Bank plc | Credit default swap agreements | 375,205 | — |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
158 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees | |||
Nova Fund | 0.75 | % | ||
Inverse S&P 500® Strategy Fund | 0.90 | % | ||
NASDAQ-100® Fund | 0.75 | % | ||
Inverse NASDAQ-100® Strategy Fund | 0.90 | % | ||
S&P 500® 2x Strategy Fund | 0.90 | % | ||
NASDAQ-100® 2x Strategy Fund | 0.90 | % | ||
Mid-Cap 1.5x Strategy Fund | 0.90 | % | ||
Inverse Mid-Cap Strategy Fund | 0.90 | % | ||
Russell 2000® 2x Strategy Fund | 0.90 | % | ||
Russell 2000® 1.5x Strategy Fund | 0.90 | % | ||
Inverse Russell 2000® Strategy Fund | 0.90 | % | ||
Dow 2x Strategy Fund | 0.90 | % | ||
Inverse Dow 2x Strategy Fund | 0.90 | % | ||
Government Long Bond 1.2x Strategy Fund | 0.50 | % | ||
Inverse Government Long Bond Strategy Fund | 0.90 | % | ||
High Yield Strategy Fund | 0.75 | % | ||
U.S. Government Money Market Fund | 0.50 | % |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs.
GI and its affiliates have voluntarily agreed to waive their fees, including but not limited to accounting, shareholder investor services and investment advisory fees, in an attempt to maintain a positive net yield for the U.S. Government Money Market Fund. GI or its affiliates may terminate this voluntary waiver at any time upon notice to the Fund. When shareholder investor services fees are waived, dealer compensation will be reduced to the extent of such waiver.
THE RYDEX FUNDS ANNUAL REPORT | 159 |
NOTES TO FINANCIAL STATEMENTS (continued) |
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. Fee waivers will be calculated at the investing Fund level without regard to any expense cap in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2020, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Nova Fund | $ | 15,865 | ||
Inverse S&P 500® Strategy Fund | 2,565 | |||
NASDAQ-100® Fund | 39,126 | |||
Inverse NASDAQ-100® Strategy Fund | 747 | |||
S&P 500® 2x Strategy Fund | 13,961 | |||
NASDAQ-100® 2x Strategy Fund | 38,278 | |||
Mid-Cap 1.5x Strategy Fund | 2,859 | |||
Inverse Mid-Cap Strategy Fund | 191 | |||
Russell 2000® 2x Strategy Fund | 2,167 | |||
Russell 2000® 1.5x Strategy Fund | 3,306 | |||
Inverse Russell 2000® Strategy Fund | 789 | |||
Dow 2x Strategy Fund | 7,731 | |||
Inverse Dow 2x Strategy Fund | 1,635 | |||
Government Long Bond 1.2x Strategy Fund | 6,042 | |||
Inverse Government Long Bond Strategy Fund | 1,190 | |||
High Yield Strategy Fund | 3,160 |
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
December 31, 2020, GI and its affiliates owned over twenty percent of the outstanding shares of the Funds, as follows:
Fund | Percent of Outstanding Shares Owned | |||
High Yield Strategy Fund | 21 | % |
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
160 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Note | |||||||||||||||||
0.06% | 2.13% | |||||||||||||||||
Due 01/04/21 | $ | 52,863,147 | $ | 52,863,499 | 02/29/24 | $ | 50,484,000 | $ | 53,920,527 | |||||||||
Barclays Capital, Inc. | U.S. Treasury Note | |||||||||||||||||
0.06% | 1.63% | |||||||||||||||||
Due 01/04/21 | 22,023,354 | 22,023,501 | 11/15/22 | 21,811,900 | 22,463,921 | |||||||||||||
BofA Securities, Inc. | U.S. Treasury Bond | |||||||||||||||||
0.06% | 5.25% | |||||||||||||||||
Due 01/04/21 | 20,391,995 | 20,392,131 | 11/15/28 | 15,370,000 | 20,799,887 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
At December 31, 2020, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
Nova Fund | $ | 47 | $ | (47 | ) | $ | — | $ | 50 | $ | — | $ | 50 | ||||||||||||
NASDAQ-100® Fund | 124,680 | (124,680 | ) | — | 132,676 | — | 132,676 | ||||||||||||||||||
S&P 500® 2x Strategy Fund | 24,514 | (24,514 | ) | — | 25,113 | — | 25,113 | ||||||||||||||||||
NASDAQ-100® 2x Strategy Fund | 101,595 | (101,595 | ) | — | 108,111 | — | 108,111 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | 4,906 | (4,906 | ) | — | 5,152 | — | 5,152 | ||||||||||||||||||
High Yield Strategy Fund | 767,870 | (767,870 | ) | — | 786,010 | — | 786,010 |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
THE RYDEX FUNDS ANNUAL REPORT | 161 |
NOTES TO FINANCIAL STATEMENTS (continued) |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2020 was as follows:
Fund | Ordinary | Long-Term | Return of | Total | ||||||||||||
Nova Fund | $ | 3,551,997 | $ | — | $ | — | $ | 3,551,997 | ||||||||
Inverse S&P 500® Strategy Fund | 25,202 | — | — | 25,202 | ||||||||||||
NASDAQ-100® Fund | 12,636,620 | — | — | 12,636,620 | ||||||||||||
Inverse NASDAQ-100® Strategy Fund | 12,149 | — | — | 12,149 | ||||||||||||
S&P 500® 2x Strategy Fund | 6,283,511 | — | — | 6,283,511 | ||||||||||||
NASDAQ-100® 2x Strategy Fund | 18,829,665 | — | — | 18,829,665 | ||||||||||||
Mid-Cap 1.5x Strategy Fund | 43,218 | 161,089 | — | 204,307 | ||||||||||||
Inverse Mid-Cap Strategy Fund | 2,781 | — | — | 2,781 | ||||||||||||
Russell 2000® 2x Strategy Fund | 18,804 | — | — | 18,804 | ||||||||||||
Russell 2000® 1.5x Strategy Fund | 94,540 | 54,017 | — | 148,557 | ||||||||||||
Inverse Russell 2000® Strategy Fund | 9,218 | — | — | 9,218 | ||||||||||||
Dow 2x Strategy Fund | 1,605,976 | — | — | 1,605,976 | ||||||||||||
Inverse Dow 2x Strategy Fund | 20,050 | — | — | 20,050 | ||||||||||||
Government Long Bond 1.2x Strategy Fund | 13,020 | — | 16,202 | 29,222 | ||||||||||||
Inverse Government Long Bond Strategy Fund | 8,507 | — | — | 8,507 | ||||||||||||
High Yield Strategy Fund | 318,168 | 4,284 | — | 322,452 | ||||||||||||
U.S. Government Money Market Fund | 36,042 | 413 | — | 36,455 |
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Return of | Total | ||||||||||||
Nova Fund | $ | 297,044 | $ | — | $ | — | $ | 297,044 | ||||||||
Inverse S&P 500® Strategy Fund | 23,392 | — | — | 23,392 | ||||||||||||
NASDAQ-100® Fund | 660,763 | 1,122,922 | — | 1,783,685 | ||||||||||||
Inverse NASDAQ-100® Strategy Fund | 7,340 | — | — | 7,340 | ||||||||||||
NASDAQ-100® 2x Strategy Fund | 152,254 | — | — | 152,254 | ||||||||||||
Mid-Cap 1.5x Strategy Fund | 57,404 | — | — | 57,404 | ||||||||||||
Inverse Mid-Cap Strategy Fund | 1,261 | — | — | 1,261 | ||||||||||||
Russell 2000® 2x Strategy Fund | 17,289 | — | — | 17,289 | ||||||||||||
Inverse Russell 2000® Strategy Fund | 7,165 | — | — | 7,165 | ||||||||||||
Dow 2x Strategy Fund | 111,188 | — | — | 111,188 | ||||||||||||
Government Long Bond 1.2x Strategy Fund | 192,415 | — | — | 192,415 | ||||||||||||
High Yield Strategy Fund | 210,642 | — | — | 210,642 | ||||||||||||
U.S. Government Money Market Fund | 540,419 | — | — | 540,419 |
162 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2020 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Other | Total | ||||||||||||||||||
Nova Fund | $ | 2,129,223 | $ | — | $ | 1,551,789 | $ | — | $ | — | $ | 3,681,012 | ||||||||||||
Inverse S&P 500® Strategy Fund | — | — | (3,516 | ) | (16,495,534 | ) | — | (16,499,050 | ) | |||||||||||||||
NASDAQ-100® Fund | 9,244,565 | — | 29,041,221 | — | — | 38,285,786 | ||||||||||||||||||
Inverse NASDAQ-100® Strategy Fund | — | — | (1,332 | ) | (7,973,970 | ) | — | (7,975,302 | ) | |||||||||||||||
S&P 500® 2x Strategy Fund | — | — | 404,336 | (5,008,764 | ) | — | (4,604,428 | ) | ||||||||||||||||
NASDAQ-100® 2x Strategy Fund | 19,515,328 | — | 8,480,081 | — | — | 27,995,409 | ||||||||||||||||||
Mid-Cap 1.5x Strategy Fund | 866,881 | — | 309,370 | — | — | 1,176,251 | ||||||||||||||||||
Inverse Mid-Cap Strategy Fund | — | — | (26 | ) | (1,871,101 | ) | (1,871,127 | ) | ||||||||||||||||
Russell 2000® 2x Strategy Fund | 991,318 | — | (32,871 | ) | — | — | 958,447 | |||||||||||||||||
Russell 2000® 1.5x Strategy Fund | 1,625,256 | — | 32,608 | — | — | 1,657,864 | ||||||||||||||||||
Inverse Russell 2000® Strategy Fund | — | — | 2,366 | (7,657,246 | ) | — | (7,654,880 | ) | ||||||||||||||||
Dow 2x Strategy Fund | — | — | 639,496 | (335,444 | ) | — | 304,052 | |||||||||||||||||
Inverse Dow 2x Strategy Fund | — | — | (50,047 | ) | (21,368,679 | ) | — | (21,418,726 | ) | |||||||||||||||
Government Long Bond 1.2x Strategy Fund | — | — | 47,414 | (11,091,980 | ) | — | (11,044,566 | ) | ||||||||||||||||
Inverse Government Long Bond Strategy Fund | — | — | (176 | ) | (7,603,015 | ) | — | (7,603,191 | ) | |||||||||||||||
High Yield Strategy Fund | — | — | 357,138 | (218,575 | ) | — | 138,563 | |||||||||||||||||
U.S. Government Money Market Fund | 575 | — | — | — | — | 575 |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. The Funds are permitted to carry forward capital losses for an unlimited period and such capital loss carryforwards retain their character as either short-term or long-term capital losses. As of December 31, 2020, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Inverse S&P 500® Strategy Fund | $ | (14,755,393 | ) | $ | (1,740,141 | ) | $ | (16,495,534 | ) | |||
Inverse NASDAQ-100® Strategy Fund | (7,145,368 | ) | (828,602 | ) | (7,973,970 | ) | ||||||
S&P 500® 2x Strategy Fund | (3,085,275 | ) | (1,923,489 | ) | (5,008,764 | ) | ||||||
Inverse Mid-Cap Strategy Fund | (1,741,811 | ) | (129,290 | ) | (1,871,101 | )* | ||||||
Inverse Russell 2000® Strategy Fund | (6,813,314 | ) | (843,932 | ) | (7,657,246 | ) | ||||||
Dow 2x Strategy Fund | — | (335,444 | ) | (335,444 | ) | |||||||
Inverse Dow 2x Strategy Fund | (19,188,041 | ) | (2,180,638 | ) | (21,368,679 | ) | ||||||
Government Long Bond 1.2x Strategy Fund | (8,750,903 | ) | (2,341,077 | ) | (11,091,980 | ) | ||||||
Inverse Government Long Bond Strategy Fund | (5,718,526 | ) | (1,884,489 | ) | (7,603,015 | ) | ||||||
High Yield Strategy Fund | (218,575 | ) | — | (218,575 | ) |
* | In accordance with Section 382 of the Internal Revenue Code, a portion of certain Fund losses are subject to an annual limitation. This annual limitation is generally applicable to all of the capital loss carryforwards shown with respect to each Fund. |
For the year ended December 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
Russell 2000® 2x Strategy Fund | $ | 297,226 |
THE RYDEX FUNDS ANNUAL REPORT | 163 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, losses deferred due to wash sales, investments in swaps, the “mark-to-market” of certain derivatives, distributions in connection with redemption of fund shares, return of capital distributions received, and the “mark-to-market,” recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax treatment of net operating losses and distribution reclasses. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2020 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Nova Fund | $ | 2,864,175 | $ | (2,864,175 | ) | |||
Inverse S&P 500® Strategy Fund | (46,354 | ) | 46,354 | |||||
NASDAQ-100® Fund | 13,805,163 | (13,805,163 | ) | |||||
Inverse NASDAQ-100® Strategy Fund | (14,358 | ) | 14,358 | |||||
S&P 500® 2x Strategy Fund | (139,970 | ) | 139,970 | |||||
NASDAQ-100® 2x Strategy Fund | 39,203,131 | (39,203,131 | ) | |||||
Mid-Cap 1.5x Strategy Fund | 74,505 | (74,505 | ) | |||||
Inverse Mid-Cap Strategy Fund | (3,335 | ) | 3,335 | |||||
Russell 2000® 2x Strategy Fund | 1,979,843 | (1,979,843 | ) | |||||
Russell 2000® 1.5x Strategy Fund | 410,268 | (410,268 | ) | |||||
Inverse Russell 2000® Strategy Fund | (12,877 | ) | 12,877 | |||||
Dow 2x Strategy Fund | (57,889 | ) | 57,889 | |||||
Inverse Dow 2x Strategy Fund | (32,650 | ) | 32,650 | |||||
Inverse Government Long Bond Strategy Fund | (62,913 | ) | 62,913 | |||||
High Yield Strategy Fund | (76,258 | ) | 76,258 |
At December 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net Tax | ||||||||||||
Nova Fund | $ | 43,285,596 | $ | 1,551,789 | $ | — | $ | 1,551,789 | ||||||||
Inverse S&P 500® Strategy Fund | 1,339,408 | 3,606 | (7,122 | ) | (3,516 | ) | ||||||||||
NASDAQ-100® Fund | 85,354,177 | 29,089,098 | (47,877 | ) | 29,041,221 | |||||||||||
Inverse NASDAQ-100® Strategy Fund | 468,518 | 389 | (1,721 | ) | (1,332 | ) | ||||||||||
S&P 500® 2x Strategy Fund | 37,432,396 | 404,614 | (278 | ) | 404,336 | |||||||||||
NASDAQ-100® 2x Strategy Fund | 123,628,731 | 8,514,174 | (34,093 | ) | 8,480,081 | |||||||||||
Mid-Cap 1.5x Strategy Fund | 6,369,035 | 313,817 | (4,447 | ) | 309,370 | |||||||||||
Inverse Mid-Cap Strategy Fund | 139,676 | 850 | (876 | ) | (26 | ) | ||||||||||
Russell 2000® 2x Strategy Fund | 17,338,635 | 38,723 | (71,594 | ) | (32,871 | ) | ||||||||||
Russell 2000® 1.5x Strategy Fund | 12,529,185 | 96,837 | (64,229 | ) | 32,608 | |||||||||||
Inverse Russell 2000® Strategy Fund | 530,626 | 4,044 | (1,678 | ) | 2,366 | |||||||||||
Dow 2x Strategy Fund | 14,056,491 | 644,395 | (4,899 | ) | 639,496 | |||||||||||
Inverse Dow 2x Strategy Fund | 3,465,987 | 6,539 | (56,586 | ) | (50,047 | ) | ||||||||||
Government Long Bond 1.2x Strategy Fund | 16,661,277 | 47,416 | (2 | ) | 47,414 | |||||||||||
Inverse Government Long Bond Strategy Fund | 1,586,966 | — | (176 | ) | (176 | ) | ||||||||||
High Yield Strategy Fund | 11,197,449 | 357,138 | — | 357,138 | ||||||||||||
U.S. Government Money Market Fund | 54,926,825 | — | — | — |
164 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Securities Transactions
For the year ended December 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
Nova Fund | $ | 175,811,469 | $ | 164,797,212 | ||||
Inverse S&P 500® Strategy Fund | 24,031,106 | 24,257,000 | ||||||
NASDAQ-100® Fund | 128,854,511 | 123,341,331 | ||||||
Inverse NASDAQ-100® Strategy Fund | 3,565,987 | 3,555,000 | ||||||
S&P 500® 2x Strategy Fund | 576,042,035 | 586,342,801 | ||||||
NASDAQ-100® 2x Strategy Fund | 511,547,825 | 488,745,658 | ||||||
Mid-Cap 1.5x Strategy Fund | 17,671,224 | 17,892,323 | ||||||
Inverse Mid-Cap Strategy Fund | 349,162 | 423,000 | ||||||
Russell 2000® 2x Strategy Fund | 9,565,645 | 6,535,000 | ||||||
Russell 2000® 1.5x Strategy Fund | 3,904,077 | 3,225,000 | ||||||
Inverse Russell 2000® Strategy Fund | 1,338,424 | 1,510,000 | ||||||
Dow 2x Strategy Fund | 57,978,246 | 58,811,187 | ||||||
Inverse Dow 2x Strategy Fund | 7,806,154 | 7,860,000 | ||||||
Government Long Bond 1.2x Strategy Fund | 20,226,134 | 19,570,000 | ||||||
Inverse Government Long Bond Strategy Fund | 1,240,805 | 1,325,000 | ||||||
High Yield Strategy Fund | 15,760,626 | 12,423,409 |
For the year ended December 31, 2020, the cost of purchases and proceeds from sales of government securities were as follows:
Fund | Purchases | Sales | ||||||
Government Long Bond 1.2x Strategy Fund | $ | 420,485,406 | $ | 414,901,219 | ||||
Inverse Government Long Bond Strategy Fund | 69,834,274 | 69,761,024 |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized | |||||||||
Nova Fund | $ | 75,945,182 | $ | 51,681,150 | $ | 561,224 | ||||||
NASDAQ-100® Fund | 62,377,843 | 42,259,704 | 9,618 | |||||||||
S&P 500® 2x Strategy Fund | 185,581,558 | 292,548,029 | (204,677 | ) | ||||||||
NASDAQ-100® 2x Strategy Fund | 194,867,378 | 185,236,793 | (1,707,913 | ) | ||||||||
Mid-Cap 1.5x Strategy Fund | 3,107,317 | 3,550,223 | (39,848 | ) | ||||||||
Dow 2x Strategy Fund | 18,447,382 | 10,455,886 | (171,914 | ) | ||||||||
U.S. Government Money Market Fund | — | 4,999,125 | (866 | ) |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expired June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. On June 8, 2020, the line of credit agreement was renewed at the increased $150,000,000 amount and expires on June 7, 2021. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 1.54% for the year ended December 31, 2020. The Funds did not have any borrowings outstanding under this agreement at December 31, 2020.
THE RYDEX FUNDS ANNUAL REPORT | 165 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended December 31, 2020, were as follows:
Fund | Average Daily Balance | |||
Nova Fund | $ | 16,393 | ||
NASDAQ-100® Fund | 96 | |||
S&P 500® 2x Strategy Fund | 16,962 | |||
NASDAQ-100® 2x Strategy Fund | 154,410 | |||
Mid-Cap 1.5x Strategy Fund | 500 | |||
Russell 2000® 2x Strategy Fund | 407 | |||
Russell 2000® 1.5x Strategy Fund | 68 | |||
Dow 2x Strategy Fund | 1,295 | |||
Inverse Dow 2x Strategy Fund | 320 | |||
Government Long Bond 1.2x Strategy Fund | 1,456 |
11 – Reverse Share Split
Share Splits
Effective on August 24, 2020, reverse share splits occurred for the following Funds:
Fund | Split Type |
Mid-Cap 1.5x Strategy Fund | One-for-Ten Reverse Split |
Inverse Dow 2x Strategy Fund | One-for-Five Reverse Split |
The effect of these transactions was to divide the number of outstanding shares of the Mid-Cap 1.5x Strategy Fund and Inverse Dow 2x Strategy Fund by their respective reverse share split ratios, resulting in a corresponding increase in the NAV. The share transactions presented in the Statement of Changes in Net Assets and the Per Share Data in the Financial Highlights for each of the periods presented prior to the effective date, have been restated to reflect these reverse share splits. There were no change in net assets, result of operations or total return of these transactions.
Note 12 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
166 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020. On July 6, 2020, plaintiffs filed a new petition for a writ of certiorari in the U.S. Supreme Court. In that petition, plaintiffs stated that “[t]o make it more likely that there will be a quorum for this petition,” they have “abandon[ed] the case and let the judgment below stand” with respect to certain defendants. That list did not include Rydex Variable Trust. Defendants filed an opposition to the petition for certiorari on August 26, 2020, and plaintiffs filed a reply in support of the petition for certiorari on September 8, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020. Plaintiff filed a reply brief on May 18, 2020. The Court held oral argument on August 24, 2020.
THE RYDEX FUNDS ANNUAL REPORT | 167 |
NOTES TO FINANCIAL STATEMENTS (concluded) |
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 13 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 14 – Subsequent Events
On February 10, 2021, the Trust, along with other affiliated trusts, increased the line of credit agreement with U.S. Bank, N.A. from $150,000,000 to $200,000,000.
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events, other than disclosed above, that would require adjustment to or disclosure in the Funds’ financial statements.
168 | THE RYDEX FUNDS ANNUAL REPORT |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of Nova Fund, Inverse S&P 500® Strategy Fund, NASDAQ-100® Fund, Inverse NASDAQ-100® Strategy Fund, S&P 500® 2x Strategy Fund, NASDAQ-100® 2x Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 2x Strategy Fund, Russell 2000® 1.5x Strategy Fund, Inverse Russell 2000® Strategy Fund, Dow 2x Strategy Fund, Inverse Dow 2x Strategy Fund, Government Long Bond 1.2x Strategy Fund, Inverse Government Long Bond Strategy Fund, High Yield Strategy Fund and U.S. Government Money Market Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Nova Fund, Inverse S&P 500® Strategy Fund, NASDAQ-100® Fund, Inverse NASDAQ-100® Strategy Fund, S&P 500® 2x Strategy Fund, NASDAQ-100® 2x Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 2x Strategy Fund, Russell 2000® 1.5x Strategy Fund, Inverse Russell 2000® Strategy Fund, Dow 2x Strategy Fund, Inverse Dow 2x Strategy Fund, Government Long Bond 1.2x Strategy Fund, Inverse Government Long Bond Strategy Fund, High Yield Strategy Fund and U.S. Government Money Market Fund (collectively referred to as the “Funds”), (seventeen of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2020, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (seventeen of the funds constituting Rydex Variable Trust) at December 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 26, 2021
THE RYDEX FUNDS ANNUAL REPORT | 169 |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2020, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
Nova Fund | 3.66 | % | ||
NASDAQ-100® Fund | 1.88 | % | ||
S&P 500® 2x Strategy Fund | 1.45 | % | ||
NASDAQ-100® 2x Strategy Fund | 0.75 | % | ||
Mid-Cap 1.5x Strategy Fund | 15.70 | % | ||
Russell 2000® 2x Strategy Fund | 0.93 | % | ||
Russell 2000® 1.5x Strategy Fund | 3.18 | % | ||
Dow 2x Strategy Fund | 4.50 | % | ||
High Yield Strategy Fund | 0.02 | % |
With respect to the taxable year ended December 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term | From long-term capital | ||||||
Nova Fund | $ | — | $ | 1,163,202 | ||||
NASDAQ-100® Fund | — | 11,983,420 | ||||||
NASDAQ-100® 2x Strategy Fund | — | 3,860,742 | ||||||
Mid-Cap 1.5x Strategy Fund | 161,089 | 61,501 | ||||||
Russell 2000® 2x Strategy Fund | — | 214,153 | ||||||
Russell 2000® 1.5x Strategy Fund | 54,017 | 6,518 | ||||||
High Yield Strategy Fund | 4,284 | — | ||||||
U.S. Government Money Market Fund | 413 | — |
170 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited)(concluded) |
Delivery of Shareholder Reports
Paper copies of the Funds’ annual and semi-annual shareholder reports are not sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract or from your financial intermediary. Instead, the reports are made available on a website, and you are notified by mail each time a report is posted and provided with a website address to access the report.
You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper may apply to all portfolio companies available under your contract.
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filedsuch information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
THE RYDEX FUNDS ANNUAL REPORT | 171 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 (Trustee)
Since 2020 (Chair of the Valuation Oversight Committee) | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Bowhead Insurance GP, LLC (2020-present); Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946)1 | Trustee | Since 2019 | Current: Retired.
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946)1 | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946)1 | Trustee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Chair of the Contracts Review Committee | Since 2005 (Trustee)
Since 2020 (Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
172 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Of Counsel, Momkus LLP (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (3) (2018-present); Edward-Elmhurst Healthcare System (2012-present).
Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee)
Since 2019 (Chair of the Audit Committee) | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (81) (2018-present); SPDR Index Shares Funds (30) (2018-present); SSGA Active Trust (14) (2018-present).
Former: SSGA Master Trust (1) (2018-2020). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
THE RYDEX FUNDS ANNUAL REPORT | 173 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INTERESTED TRUSTEE |
|
|
|
| |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2019 | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. |
*** | Each Trustee also serves on the Boards of Trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the Board of Trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
1 | Under the Funds’ Independent Trustees Retirement Policy, Messrs. Chubb, Farley and Friedrich are expected to retire in 2021. |
174 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
THE RYDEX FUNDS ANNUAL REPORT | 175 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
THE RYDEX FUNDS ANNUAL REPORT | 179 |
LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited) |
In compliance with SEC Rule 22e-4 under the U.S. Investment Company Act of 1940 (the “Liquidity Rule”), the Rydex Variable Trust (the “Trust”) has adopted and implemented a written liquidity risk management program (the “Program”) for each series of the Trust (each, a “Fund” and, collectively, the “Funds”). The Trust’s Board of Trustees (the “Board”) previously approved the designation of a Program administrator (the “Administrator”).
The Liquidity Rule requires that the Program be reasonably designed to assess and manage each Fund’s liquidity risk. A Fund’s “liquidity risk” is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of the remaining investors’ interests in the Fund. The Program includes a number of elements that support the assessment, management and review of liquidity risk. In accordance with the Program, each Fund’s liquidity risk is assessed no less frequently than annually taking into consideration a variety of factors, including, as applicable, the Fund’s investment strategy and liquidity of portfolio investments, cash flow projections, and holdings of cash and cash equivalents, as well as borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions. There is no guarantee that the Program will achieve its objective under all circumstances.
Under the Program, each Fund portfolio investment is classified into one of four liquidity categories based on a determination of the number of days it is reasonably expected to take to convert the investment to cash, or sell or dispose of the investment, in current market conditions without significantly changing the investment’s market value. The Program is reasonably designed to meet Liquidity Rule requirements relating to “highly liquid investment minimums” (i.e., the minimum amount of Fund net assets to be invested in highly liquid investments that are assets) and to monitor compliance with the Liquidity Rule’s limitations on a Fund’s investments in illiquid investments. Under the Liquidity Rule, a Fund is prohibited from acquiring any illiquid investment if, immediately after the acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments that are assets.
During the period covered by this shareholder report, the Board received a written report (the “Report”) prepared by the Administrator addressing the Program’s operation and assessing the adequacy and effectiveness of its implementation for the period from December 1, 2018, through March 31, 2020. The Report concluded that the Program operated effectively, the Program had been and continued to be reasonably designed to assess and manage each Fund’s liquidity risk and the Program has been adequately and effectively implemented to monitor and respond to the Funds’ liquidity developments, as applicable.
Please refer to your Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
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12.31.2020
Rydex Variable Trust Funds Annual Report
Domestic Equity Funds |
S&P 500® Pure Growth Fund |
S&P 500® Pure Value Fund |
S&P MidCap 400® Pure Growth Fund |
S&P MidCap 400® Pure Value Fund |
S&P SmallCap 600® Pure Growth Fund |
S&P SmallCap 600® Pure Value Fund |
International Equity Funds |
Europe 1.25x Strategy Fund |
Japan 2x Strategy Fund |
Specialty Funds |
Strengthening Dollar 2x Strategy Fund |
Weakening Dollar 2x Strategy Fund |
GuggenheimInvestments.com | RVATB2-ANN-2-1220x1221 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS | 6 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
S&P 500® PURE GROWTH FUND | 9 |
S&P 500® PURE VALUE FUND | 16 |
S&P MIDCAP 400® PURE GROWTH FUND | 24 |
S&P MIDCAP 400® PURE VALUE FUND | 31 |
S&P SMALLCAP 600® PURE GROWTH FUND | 38 |
S&P SMALLCAP 600® PURE VALUE FUND | 46 |
EUROPE 1.25x STRATEGY FUND | 54 |
JAPAN 2x STRATEGY FUND | 62 |
STRENGTHENING DOLLAR 2x STRATEGY FUND | 69 |
WEAKENING DOLLAR 2x STRATEGY FUND | 76 |
NOTES TO FINANCIAL STATEMENTS | 83 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 98 |
OTHER INFORMATION | 99 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 101 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 106 |
LIQUIDITY RISK MANAGEMENT PROGRAM | 109 |
THE RYDEX FUNDS ANNUAL REPORT | 1 |
| December 31, 2020 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for ten funds that are part of the Rydex Variable Trust (the “Funds”). This report covers performance of the Funds for the annual period ended December 31, 2020.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
January 31, 2021
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Inverse and leveraged Funds are not suitable for all investors. ● These Funds should be utilized only by investors who (a) understand the risks associated with the use of leverage, (b) understand the consequences of seeking daily leveraged investment results, (c) understand the risk of shorting, and (d) intend to actively monitor and manage their investments. ● The more a Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● Inverse Funds involve certain risks, which include increased volatility due to the Funds’ possible use of short sales of securities and derivatives, such as options and futures. ● The Funds’ use of derivatives, such as futures, options, and swap agreements, may expose the Funds’ shareholders to additional risks that they would not be subject to if they invested directly in the securities underlying those derivatives. ● Short-selling involves increased risks and costs. You risk paying more for a security than you received from its sale. ● Leveraged and inverse Funds seek to provide investment results that match the performance of a specific benchmark, before fees and expenses, on a daily basis. Because the Funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those Funds that use leverage as part of their investment strategy, may prevent a Fund from correlating with the monthly, quarterly, annual, or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse Funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. For those Funds that consistently apply leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. The Funds rebalance their portfolios on a daily basis, increasing exposure in response to that day’s gains or reducing exposure in response to that day’s losses. Daily rebalancing will impair a Fund’s performance if the benchmark experiences volatility. Investors should monitor their leveraged and inverse Funds’ holdings consistent with their strategies, as frequently as daily. ● For more on these and other risks, please read the prospectus.
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| December 31, 2020 |
Pure Style Funds may not be suitable for all investors. ● The funds are subject to the risk that large, medium and small-capitalization stocks may under-perform other segments of the equity market or the equity market as a whole ● Value stocks are subject to the risk that the intrinsic value of the stock may never be realized by the market or that the price goes down. Growth stocks typically invest a high portion of their earnings back into their business and may lack the dividend yield that could cushion their decline in a market downturn. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing company. ● The funds are subject to the risk that unanticipated early closings of securities exchanges and other financial markets may result in the funds’ inability to buy or sell securities or other financial instruments on that day. In certain circumstances, it may be difficult for the funds to purchase and sell particular investments within a reasonable time at a fair price. ● Unlike many investment companies, the funds are not actively “managed.” This means that based on market and economic conditions, the funds’ performance could be lower than other types of funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline ● The funds are subject to active trading and tracking error risks, which may increase volatility, impact the funds’ ability to achieve its investment objective and may decrease the fund’s performance. ● These funds are considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. ● Securities are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. ● Please read the prospectus for more detailed information regarding these and other risks.
The Strengthening Dollar 2x Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures and swap agreements may expose the fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund’s exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. These risks may cause the Fund to experience higher losses and/or volatility than a Fund that does not invest in derivatives, use leverage or have exposure to foreign currencies. ● Also, the Fund is subject to active trading and tracking error risks that may increase volatility, decrease performance and impact the Fund’s ability to achieve its investment objective. This fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. ● For more on these and other risks, please read the prospectus.
The Weakening Dollar 2x Strategy Fund is subject to a number of risks and may not be suitable for all investors. ● The Fund’s use of derivatives such as futures and swap agreements may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● The Fund’s indirect exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. ● The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. These risks may cause the Fund to experience higher losses and/or volatility than a fund that does not invest in derivatives, use leverage or have exposure to foreign currencies. ● Also, the Fund is subject to active trading and tracking error risks that may increase volatility, decrease performance and impact the Fund’s ability to achieve its investment objective. This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. ● For more on these and other risks, please read the prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2020 |
In what could have been one of the worst years on record for equity investors due to the devastating human and economic cost of the COVID-19 pandemic combined with political unrest in the U.S., the 12-month period ended December 31, 2020, witnessed the Standard & Poor’s 500® (“S&P 500®”) Index reach a record high of 3,756.07 from 3,234.85 at the start of the year. This was despite plummeting to 2,237.40 on March 23, 2020 as the effects of the pandemic caused the U.S. economy to stall. This dramatic change in fortune for equity markets was due in large part by a swift, sweeping response to the economic shutdown in March 2020 by the U.S. Federal Reserve (the “Fed”), which has continued to signal its intention to use ultra-accommodative monetary policy to strive toward full employment and 2% inflation via unprecedented measures. The central bank’s commitment to keeping interest rates near zero and its bond-buying program to lessen the risk of corporate defaults resulted in bountiful debt issuance by corporate borrowers and a growing confidence among equity investors that the investment environment would remain benign for the foreseeable future.
As such, our economic outlook for the coming year is positive, owing to another round of COVID-19 relief and more planned by the new administration, plus the expectation for a successful vaccine distribution. The new package, titled the Coronavirus Response and Relief Supplemental Appropriations Act, delivers a $900 billion injection into the economy, bringing total COVID-related aid to over $3.5 trillion including the 2020 bill, or roughly 8.5% of 2020–2021 gross domestic product (“GDP”). On this measure, it is already 3.5x more than the stimulus delivered in the five years following the financial crisis.
The latest round of fiscal stimulus should cause a surge in personal income during the first quarter, and a significant percentage of the population should be vaccinated or immune from prior infection by mid-2021. It is likely that local governments will be able to begin to relax restrictions even before herd immunity is reached since hospitalizations should fall once the elderly are vaccinated. As we move through the year, consumer spending growth should start to accelerate, spurred on by elevated personal savings and strong gains in household net worth. Elsewhere, the housing market will continue to benefit from tight supply and low interest rates, and business investment should rebound as corporations look to put to work record levels of precautionary cash. As a result, we expect real GDP growth to be well above potential for the year.
If the unemployment rate continues to fall at its recent pace and inflation picks up with its usual six-quarter lag behind economic activity, the experience of prior cycles would suggest that the Fed could start its hiking cycle as early as late-2022. However, the change in the Fed’s playbook will keep it sidelined for years as it looks to make up for shortfalls related to its 2% inflation target and no longer worries about an overly tight labor market.
This means the Fed is likely to keep rates at zero for several years beyond the late-2023 liftoff currently priced into the bond market. Similarly, the odds are low of a tapering of the Fed’s bond purchases in 2021. While we believe the government response to the pandemic was necessary and appropriate, investors are already paying some price with more elevated valuations due in part to the Fed’s aggressive relaunch of quantitative easing. Under these circumstances, investors will likely continue to take on more risk as long as more fiscal support is underway and while the Fed remains willing to backstop credit markets to support financial conditions.
For the 12-month period ended December 31, 2020, the S&P 500® Index* returned 18.40%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 7.82%. The return of the MSCI Emerging Markets Index* was 15.84%.
In the bond market, the Bloomberg Barclays U.S. Aggregate Bond Index* posted a 7.51% return for the 12-month period, while the Bloomberg Barclays U.S. Corporate High Yield Index* returned 7.11%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.67% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
4 | THE RYDEX FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2020 |
Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
Nikkei-225 Stock Average Index is a price-weighted index comprised of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P 500® Pure Growth Index is narrow in focus, containing only those S&P 500 Index companies with strong growth characteristics as selected by S&P. The S&P 500 Index is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues).
S&P 500® Pure Value Index is narrow in focus, containing only those S&P 500 Index companies with strong value characteristics as selected by S&P. The S&P 500 Index is a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues).
S&P MidCap 400® Pure Growth Index is narrow in focus, containing only those S&P MidCap 400 Index companies with strong growth characteristics as selected by S&P. The S&P MidCap 400 Index measures the performance of the mid-capitalization sector of the U.S. equity market.
S&P MidCap 400® Pure Value Index is narrow in focus, containing only those S&P MidCap 400 Index companies with strong value characteristics as selected by S&P. The S&P MidCap 400 Index measures the performance of the mid-capitalization sector of the U.S. equity market.
S&P SmallCap 600® Pure Growth Index is narrow in focus, containing only those S&P SmallCap 600 Index companies with strong growth characteristics as selected by S&P. The S&P SmallCap 600 Index measures the performance of the small-capitalization sector of the U.S. equity market.
S&P SmallCap 600® Pure Value Index is narrow in focus, containing only those S&P SmallCap 600 Index companies with strong value characteristics as selected by S&P. The S&P SmallCap 600 Index measures the performance of the small-capitalization sector of the U.S. equity market.
STOXX Europe 50® Index provides a blue-chip representation of supersector leaders in Europe. The index covers 50 stocks from 17 European countries: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
USD or U.S. Dollar Index® (USDX) is an index that determines the relative value of the United States dollar to a basket of foreign currencies. This formulated “basket” of currencies comprises the weighting of six other currencies as follows: Euro (EUR), 57.6% + Japanese Yen (JPY), 13.6% + Pound Sterling (GBP), 11.9% + Canadian Dollar (CAD), 9.1% + Swedish Krona (SEK), 4.2% + Swiss Franc (CHF) 3.6%.
THE RYDEX FUNDS ANNUAL REPORT | 5 |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) |
|
Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in-line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period on a cumulative basis. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods.
An Example of Compounding
For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6.0% gain and an expectation that the fund will rise by 9.0%. On the same day, the fund’s net asset value per share (“NAV”) increases from $10.00 to $10.90 for a gain of 9.0% — in line with its benchmark.
On day two, assume the index falls from 106 to 99 for a loss of about 6.6%. The fund, as expected, falls 9.9% to a price of $9.82. On each day, the fund performed exactly in line with its benchmark, but for the two-day period, the fund was down 1.8%, while the index was down only 1.0%. Without taking into account the daily compounding of returns, one would expect the fund to lose 1.5% and would see the fund as trailing by 0.3% when in fact it had performed perfectly. This example is summarized in the table below.
| Index | Index | Fund | Fund | Fund | Assessment |
Start | 100 |
|
| $ 10.00 |
|
|
Day 1 | 106 | 6.0% | 9.0% | $ 10.90 | 9.0% | In line |
Day 2 | 99 | -6.6% | -9.9% | $ 9.82 | -9.9% | In line |
Cumulative |
| -1.0% | -1.5% | -1.8% | -0.3% |
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
6 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
|
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2020 and ending December 31, 2020.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE RYDEX FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
|
| Expense | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
S&P 500® Pure Growth Fund | 1.71% | 24.96% | $ 1,000.00 | $ 1,249.60 | $ 9.70 |
S&P 500® Pure Value Fund | 1.71% | 28.81% | 1,000.00 | 1,288.10 | 9.86 |
S&P MidCap 400® Pure Growth Fund | 1.71% | 33.83% | 1,000.00 | 1,338.30 | 10.08 |
S&P MidCap 400® Pure Value Fund | 1.71% | 45.07% | 1,000.00 | 1,450.70 | 10.56 |
S&P SmallCap 600® Pure Growth Fund | 1.71% | 36.66% | 1,000.00 | 1,366.60 | 10.20 |
S&P SmallCap 600® Pure Value Fund | 1.71% | 40.13% | 1,000.00 | 1,401.30 | 10.35 |
Europe 1.25x Strategy Fund | 1.84% | 17.05% | 1,000.00 | 1,170.50 | 10.07 |
Japan 2x Strategy Fund | 1.67% | 64.00% | 1,000.00 | 1,640.00 | 11.11 |
Strengthening Dollar 2x Strategy Fund | 1.94% | (15.17%) | 1,000.00 | 848.30 | 9.04 |
Weakening Dollar 2x Strategy Fund | 1.95% | 15.84% | 1,000.00 | 1,158.40 | 10.61 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
S&P 500® Pure Growth Fund | 1.71% | 5.00% | $ 1,000.00 | $ 1,016.59 | $ 8.69 |
S&P 500® Pure Value Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
S&P MidCap 400® Pure Growth Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
S&P MidCap 400® Pure Value Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
S&P SmallCap 600® Pure Growth Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
S&P SmallCap 600® Pure Value Fund | 1.71% | 5.00% | 1,000.00 | 1,016.59 | 8.69 |
Europe 1.25x Strategy Fund | 1.84% | 5.00% | 1,000.00 | 1,015.93 | 9.35 |
Japan 2x Strategy Fund | 1.67% | 5.00% | 1,000.00 | 1,016.79 | 8.49 |
Strengthening Dollar 2x Strategy Fund | 1.94% | 5.00% | 1,000.00 | 1,015.43 | 9.86 |
Weakening Dollar 2x Strategy Fund | 1.95% | 5.00% | 1,000.00 | 1,015.38 | 9.91 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2020 to December 31, 2020. |
8 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
S&P 500® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for large-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P 500® Pure Growth Index (the “underlying index”).
For the year ended December 31, 2020, S&P 500® Pure Growth Fund returned 27.32%, compared with a return of 29.58% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
Information Technology was the sector contributing the most to the return of the underlying index for the period, followed by Health Care and Communication Services. The Energy and Utilities sectors were the largest detractors from return.
Stocks contributing the most to return of the underlying index for the period were ServiceNow, Inc., PayPal Holdings Inc., and NVIDIA Corp. Xerox Holdings Corp., Synchrony Financial, and ConocoPhillips were the largest detractors from performance of the underlying index.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Tesla, Inc. | 2.7% |
Etsy, Inc. | 2.6% |
PayPal Holdings, Inc. | 2.6% |
ServiceNow, Inc. | 2.4% |
Align Technology, Inc. | 2.3% |
Teradyne, Inc. | 2.3% |
Amazon.com, Inc. | 2.2% |
NVIDIA Corp. | 2.1% |
SVB Financial Group | 2.0% |
Netflix, Inc. | 2.0% |
Top Ten Total | 23.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
S&P 500® Pure Growth Fund | 27.32% | 14.18% | 13.32% |
S&P 500 Pure Growth Index | 29.58% | 16.18% | 15.31% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
10 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
S&P 500® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.9% | ||||||||
Technology - 37.6% | ||||||||
ServiceNow, Inc.* | 1,520 | $ | 836,653 | |||||
Teradyne, Inc. | 6,640 | 796,070 | ||||||
NVIDIA Corp. | 1,440 | 751,968 | ||||||
Autodesk, Inc.* | 2,314 | 706,557 | ||||||
Advanced Micro Devices, Inc.* | 7,117 | 652,700 | ||||||
Paycom Software, Inc.* | 1,439 | 650,788 | ||||||
Adobe, Inc.* | 1,300 | 650,156 | ||||||
Apple, Inc. | 4,820 | 639,566 | ||||||
Take-Two Interactive Software, Inc.* | 2,863 | 594,903 | ||||||
KLA Corp. | 2,209 | 571,932 | ||||||
salesforce.com, Inc.* | 2,521 | 560,998 | ||||||
Cadence Design Systems, Inc.* | 4,069 | 555,134 | ||||||
QUALCOMM, Inc. | 3,550 | 540,807 | ||||||
Fortinet, Inc.* | 3,604 | 535,302 | ||||||
MSCI, Inc. — Class A | 1,197 | 534,496 | ||||||
Synopsys, Inc.* | 1,957 | 507,333 | ||||||
Lam Research Corp. | 1,070 | 505,329 | ||||||
Microsoft Corp. | 2,110 | 469,306 | ||||||
Qorvo, Inc.* | 2,452 | 407,694 | ||||||
Intuit, Inc. | 1,046 | 397,323 | ||||||
ANSYS, Inc.* | 1,044 | 379,807 | ||||||
Applied Materials, Inc. | 4,110 | 354,693 | ||||||
Xilinx, Inc. | 2,430 | 344,501 | ||||||
Tyler Technologies, Inc.* | 738 | 322,152 | ||||||
Total Technology | 13,266,168 | |||||||
Consumer, Non-cyclical - 28.8% | ||||||||
PayPal Holdings, Inc.* | 3,867 | 905,651 | ||||||
Align Technology, Inc.* | 1,528 | 816,532 | ||||||
DaVita, Inc.* | 5,620 | 659,788 | ||||||
IDEXX Laboratories, Inc.* | 1,310 | 654,830 | ||||||
DexCom, Inc.* | 1,675 | 619,281 | ||||||
West Pharmaceutical Services, Inc. | 2,080 | 589,285 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 990 | 577,111 | ||||||
ABIOMED, Inc.* | 1,700 | 551,140 | ||||||
Catalent, Inc.* | 5,270 | 548,449 | ||||||
Regeneron Pharmaceuticals, Inc.* | 1,110 | 536,252 | ||||||
United Rentals, Inc.* | 2,269 | 526,204 | ||||||
MarketAxess Holdings, Inc. | 852 | 486,117 | ||||||
Vertex Pharmaceuticals, Inc.* | 1,847 | 436,520 | ||||||
Thermo Fisher Scientific, Inc. | 934 | 435,038 | ||||||
Rollins, Inc. | 10,830 | 423,128 | ||||||
Monster Beverage Corp.* | 4,460 | 412,461 | ||||||
ResMed, Inc. | 1,730 | 367,729 | ||||||
Verisk Analytics, Inc. — Class A | 1,570 | 325,916 | ||||||
S&P Global, Inc. | 872 | 286,653 | ||||||
Total Consumer, Non-cyclical | 10,158,085 | |||||||
Communications - 14.4% | ||||||||
Etsy, Inc.* | 5,240 | 932,248 | ||||||
Amazon.com, Inc.* | 240 | 781,663 | ||||||
Netflix, Inc.* | 1,308 | 707,275 | ||||||
Facebook, Inc. — Class A* | 1,981 | 541,130 | ||||||
eBay, Inc. | 9,050 | 454,763 | ||||||
Charter Communications, Inc. — Class A* | 640 | 423,392 | ||||||
Arista Networks, Inc.* | 1,290 | 374,835 | ||||||
Twitter, Inc.* | 6,750 | 365,513 | ||||||
Alphabet, Inc. — Class A* | 148 | 259,391 | ||||||
Alphabet, Inc. — Class C* | 140 | 245,263 | ||||||
Total Communications | 5,085,473 | |||||||
Consumer, Cyclical - 11.0% | ||||||||
Tesla, Inc.* | 1,360 | 959,711 | ||||||
Pool Corp. | 1,520 | 566,200 | ||||||
Domino’s Pizza, Inc. | 1,394 | 534,543 | ||||||
Tractor Supply Co. | 3,730 | 524,363 | ||||||
Dollar General Corp. | 2,220 | 466,866 | ||||||
Chipotle Mexican Grill, Inc. — Class A* | 326 | 452,068 | ||||||
Copart, Inc.* | 3,072 | 390,912 | ||||||
Total Consumer, Cyclical | 3,894,663 | |||||||
Industrial - 3.3% | ||||||||
PerkinElmer, Inc. | 2,930 | 420,455 | ||||||
Old Dominion Freight Line, Inc. | 1,986 | 387,627 | ||||||
Mettler-Toledo International, Inc.* | 310 | 353,301 | ||||||
Total Industrial | 1,161,383 | |||||||
Basic Materials - 2.8% | ||||||||
Albemarle Corp. | 3,480 | 513,370 | ||||||
FMC Corp. | 3,955 | 454,548 | ||||||
Total Basic Materials | 967,918 | |||||||
Financial - 2.0% | ||||||||
SVB Financial Group* | 1,840 | 713,607 | ||||||
Total Common Stocks | ||||||||
(Cost $25,862,133) | 35,247,297 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,1 - 0.9% | ||||||||
J.P. Morgan Securities LLC | $ | 176,524 | 176,524 | |||||
Barclays Capital, Inc. | 73,542 | 73,542 | ||||||
BofA Securities, Inc. | 68,094 | 68,094 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $318,160) | 318,160 | |||||||
Total Investments - 100.8% | ||||||||
(Cost $26,180,293) | $ | 35,565,457 | ||||||
Other Assets & Liabilities, net - (0.8)% | (273,401 | ) | ||||||
Total Net Assets - 100.0% | $ | 35,292,056 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
S&P 500® PURE GROWTH FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 35,247,297 | $ | — | $ | — | $ | 35,247,297 | ||||||||
Repurchase Agreements | — | 318,160 | — | 318,160 | ||||||||||||
Total Assets | $ | 35,247,297 | $ | 318,160 | $ | — | $ | 35,565,457 |
12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value (cost $25,862,133) | $ | 35,247,297 | ||
Repurchase agreements, at value (cost $318,160) | 318,160 | |||
Cash | 1,067 | |||
Receivables: | ||||
Securities sold | 191,629 | |||
Dividends | 8,385 | |||
Total assets | 35,766,538 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 356,595 | |||
Management fees | 22,585 | |||
Transfer agent and administrative fees | 8,101 | |||
Investor service fees | 7,528 | |||
Portfolio accounting fees | 3,011 | |||
Trustees’ fees* | 550 | |||
Miscellaneous | 76,112 | |||
Total liabilities | 474,482 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 35,292,056 | ||
Net assets consist of: | ||||
Paid in capital | $ | 26,354,523 | ||
Total distributable earnings (loss) | 8,937,533 | |||
Net assets | $ | 35,292,056 | ||
Capital shares outstanding | 639,642 | |||
Net asset value per share | $ | 55.17 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends | $ | 257,012 | ||
Interest | 911 | |||
Income from securities lending, net | 4 | |||
Total investment income | 257,927 | |||
Expenses: | ||||
Management fees | 245,538 | |||
Investor service fees | 81,846 | |||
Transfer agent and administrative fees | 108,594 | |||
Professional fees | 60,235 | |||
Portfolio accounting fees | 32,738 | |||
Trustees’ fees* | 8,131 | |||
Custodian fees | 4,987 | |||
Line of credit fees | 72 | |||
Miscellaneous | 22,727 | |||
Total expenses | 564,868 | |||
Net investment loss | (306,941 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 4,989,774 | |||
Net realized gain | 4,989,774 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,637,839 | |||
Net change in unrealized appreciation (depreciation) | 3,637,839 | |||
Net realized and unrealized gain | 8,627,613 | |||
Net increase in net assets resulting from operations | $ | 8,320,672 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
S&P 500® PURE GROWTH FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (306,941 | ) | $ | (174,687 | ) | ||
Net realized gain on investments | 4,989,774 | 9,219,238 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 3,637,839 | 740,571 | ||||||
Net increase in net assets resulting from operations | 8,320,672 | 9,785,122 | ||||||
Distributions to shareholders | (6,865,286 | ) | (893,743 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 47,158,985 | 64,113,779 | ||||||
Distributions reinvested | 6,865,286 | 893,743 | ||||||
Cost of shares redeemed | (62,244,297 | ) | (73,667,137 | ) | ||||
Net decrease from capital share transactions | (8,220,026 | ) | (8,659,615 | ) | ||||
Net increase (decrease) in net assets | (6,764,640 | ) | 231,764 | |||||
Net assets: | ||||||||
Beginning of year | 42,056,696 | 41,824,932 | ||||||
End of year | $ | 35,292,056 | $ | 42,056,696 | ||||
Capital share activity: | ||||||||
Shares sold | 941,377 | 1,281,107 | ||||||
Shares issued from reinvestment of distributions | 146,600 | 17,017 | ||||||
Shares redeemed | (1,220,094 | ) | (1,477,477 | ) | ||||
Net decrease in shares | (132,117 | ) | (179,353 | ) |
14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE GROWTH FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 54.49 | $ | 43.97 | $ | 50.27 | $ | 42.31 | $ | 43.72 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.48 | ) | (.22 | ) | (.44 | ) | (.38 | ) | (.23 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 13.22 | 11.87 | (1.68 | ) | 10.51 | 1.38 | ||||||||||||||
Total from investment operations | 12.74 | 11.65 | (2.12 | ) | 10.13 | 1.15 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (12.06 | ) | (1.13 | ) | (4.18 | ) | (2.17 | ) | (2.56 | ) | ||||||||||
Total distributions | (12.06 | ) | (1.13 | ) | (4.18 | ) | (2.17 | ) | (2.56 | ) | ||||||||||
Net asset value, end of period | $ | 55.17 | $ | 54.49 | $ | 43.97 | $ | 50.27 | $ | 42.31 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 27.32 | % | 26.60 | % | (5.63 | %) | 24.39 | % | 2.58 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 35,292 | $ | 42,057 | $ | 41,825 | $ | 55,023 | $ | 43,908 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.94 | %) | (0.42 | %) | (0.85 | %) | (0.80 | %) | (0.54 | %) | ||||||||||
Total expenses | 1.73 | % | 1.72 | % | 1.62 | % | 1.67 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 159 | % | 190 | % | 203 | % | 303 | % | 265 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
S&P 500® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for large-cap value securities on a daily basis. The Fund’s current benchmark is the S&P 500® Pure Value Index (the “underlying index”).
For the year ended December 31, 2020, S&P 500® Pure Value Fund returned -10.56%, compared with a return of -8.67% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Materials sector was the leading contributor to performance of the underlying index for the period, followed by the Health Care sector and the Communication Services sector. The Energy, Consumer Discretionary, and Financials sectors were the sectors that detracted most from performance.
The strongest contributors to performance of the underlying index for the year included L Brands, Inc., FedEx Corp., and Corteva Inc. The stocks detracting most from performance of the underlying index were Macy’s Inc., Kohl’s Corp., and American Airlines Group, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Berkshire Hathaway, Inc. — Class B | 2.2% |
Unum Group | 2.1% |
Lincoln National Corp. | 1.8% |
Lumen Technologies, Inc. | 1.7% |
Prudential Financial, Inc. | 1.7% |
HollyFrontier Corp. | 1.7% |
Xerox Holdings Corp. | 1.7% |
MetLife, Inc. | 1.7% |
CVS Health Corp. | 1.6% |
Valero Energy Corp. | 1.5% |
Top Ten Total | 17.7% |
“Ten Largest Holdings” excludes any temporary cash investments. |
16 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
S&P 500® Pure Value Fund | (10.56%) | 5.39% | 8.43% |
S&P 500 Pure Value Index | (8.67%) | 7.25% | 10.49% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 17 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
S&P 500® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.7% | ||||||||
Financial - 42.9% | ||||||||
Berkshire Hathaway, Inc. — Class B* | 2,511 | $ | 582,226 | |||||
Unum Group | 24,125 | 553,428 | ||||||
Lincoln National Corp. | 9,262 | 465,971 | ||||||
Prudential Financial, Inc. | 5,568 | 434,694 | ||||||
MetLife, Inc. | 9,190 | 431,470 | ||||||
Hartford Financial Services Group, Inc. | 7,512 | 367,938 | ||||||
Principal Financial Group, Inc. | 6,821 | 338,390 | ||||||
Invesco Ltd. | 18,519 | 322,786 | ||||||
Citigroup, Inc. | 4,961 | 305,895 | ||||||
Allstate Corp. | 2,766 | 304,066 | ||||||
Everest Re Group Ltd. | 1,254 | 293,549 | ||||||
Loews Corp. | 6,141 | 276,468 | ||||||
Bank of New York Mellon Corp. | 6,383 | 270,894 | ||||||
People’s United Financial, Inc. | 20,634 | 266,798 | ||||||
Citizens Financial Group, Inc. | 7,382 | 263,980 | ||||||
Wells Fargo & Co. | 8,738 | 263,713 | ||||||
Assurant, Inc. | 1,914 | 260,725 | ||||||
American International Group, Inc. | 6,818 | 258,129 | ||||||
Aflac, Inc. | 5,771 | 256,636 | ||||||
Capital One Financial Corp. | 2,589 | 255,923 | ||||||
Travelers Companies, Inc. | 1,730 | 242,840 | ||||||
Fifth Third Bancorp | 8,661 | 238,784 | ||||||
Comerica, Inc. | 4,172 | 233,048 | ||||||
Goldman Sachs Group, Inc. | 859 | 226,527 | ||||||
Zions Bancorp North America | 5,190 | 225,454 | ||||||
KeyCorp | 12,917 | 211,968 | ||||||
Regions Financial Corp. | 12,900 | 207,948 | ||||||
Franklin Resources, Inc. | 8,180 | 204,418 | ||||||
State Street Corp. | 2,719 | 197,889 | ||||||
Bank of America Corp. | 6,515 | 197,470 | ||||||
M&T Bank Corp. | 1,544 | 196,551 | ||||||
SL Green Realty Corp. REIT | 3,200 | 190,656 | ||||||
Morgan Stanley | 2,636 | 180,645 | ||||||
Truist Financial Corp. | 3,748 | 179,642 | ||||||
Cincinnati Financial Corp. | 2,000 | 174,740 | ||||||
Globe Life, Inc. | 1,753 | 166,465 | ||||||
Chubb Ltd. | 998 | 153,612 | ||||||
Kimco Realty Corp. REIT | 9,620 | 144,396 | ||||||
Huntington Bancshares, Inc. | 11,187 | 141,292 | ||||||
PNC Financial Services Group, Inc. | 890 | 132,610 | ||||||
Raymond James Financial, Inc. | 1,213 | 116,048 | ||||||
CBRE Group, Inc. — Class A* | 1,750 | 109,760 | ||||||
U.S. Bancorp | 2,350 | 109,486 | ||||||
Synchrony Financial | 2,890 | 100,312 | ||||||
JPMorgan Chase & Co. | 745 | 94,667 | ||||||
Total Financial | 11,150,907 | |||||||
Consumer, Non-cyclical - 17.6% | ||||||||
CVS Health Corp. | 5,984 | 408,707 | ||||||
Viatris, Inc.* | 21,310 | 399,350 | ||||||
Centene Corp.* | 6,480 | 388,994 | ||||||
Archer-Daniels-Midland Co. | 7,314 | 368,699 | ||||||
Kroger Co. | 10,880 | 345,549 | ||||||
Molson Coors Beverage Co. — Class B | 7,139 | 322,611 | ||||||
Cigna Corp. | 1,501 | 312,478 | ||||||
Tyson Foods, Inc. — Class A | 4,490 | 289,336 | ||||||
McKesson Corp. | 1,573 | 273,576 | ||||||
Kraft Heinz Co. | 7,049 | 244,318 | ||||||
Cardinal Health, Inc. | 4,330 | 231,915 | ||||||
Anthem, Inc. | 618 | 198,434 | ||||||
Universal Health Services, Inc. — Class B | 1,230 | 169,125 | ||||||
Perrigo Company plc | 3,655 | 163,452 | ||||||
Corteva, Inc. | 3,564 | 137,998 | ||||||
J M Smucker Co. | 1,078 | 124,617 | ||||||
Henry Schein, Inc.* | 1,540 | 102,964 | ||||||
AmerisourceBergen Corp. — Class A | 986 | 96,391 | ||||||
Total Consumer, Non-cyclical | 4,578,514 | |||||||
Consumer, Cyclical - 9.9% | ||||||||
Ford Motor Co. | 44,891 | 394,592 | ||||||
Walgreens Boots Alliance, Inc. | 8,572 | 341,851 | ||||||
General Motors Co. | 6,932 | 288,648 | ||||||
Mohawk Industries, Inc.* | 1,911 | 269,355 | ||||||
Lennar Corp. — Class A | 2,916 | 222,287 | ||||||
Whirlpool Corp. | 902 | 162,802 | ||||||
LKQ Corp.* | 4,090 | 144,132 | ||||||
BorgWarner, Inc. | 3,698 | 142,891 | ||||||
Hanesbrands, Inc. | 9,080 | 132,387 | ||||||
PVH Corp. | 1,307 | 122,714 | ||||||
CarMax, Inc.* | 1,130 | 106,740 | ||||||
Advance Auto Parts, Inc. | 610 | 96,081 | ||||||
Walmart, Inc. | 592 | 85,337 | ||||||
Gap, Inc. | 3,808 | 76,883 | ||||||
Total Consumer, Cyclical | 2,586,700 | |||||||
Energy - 9.0% | ||||||||
HollyFrontier Corp. | 16,743 | 432,807 | ||||||
Valero Energy Corp. | 7,079 | 400,459 | ||||||
Phillips 66 | 4,680 | 327,319 | ||||||
Exxon Mobil Corp. | 7,148 | 294,641 | ||||||
Marathon Petroleum Corp. | 4,410 | 182,398 | ||||||
TechnipFMC plc | 18,448 | 173,411 | ||||||
Kinder Morgan, Inc. | 9,996 | 136,645 | ||||||
Marathon Oil Corp. | 18,906 | 126,103 | ||||||
Pioneer Natural Resources Co. | 810 | 92,251 | ||||||
Chevron Corp. | 1,083 | 91,459 | ||||||
EOG Resources, Inc. | 1,560 | 77,797 | ||||||
Total Energy | 2,335,290 | |||||||
Communications - 6.2% | ||||||||
Lumen Technologies, Inc. | 45,010 | 438,847 | ||||||
ViacomCBS, Inc. — Class B | 5,890 | 219,461 | ||||||
AT&T, Inc. | 6,670 | 191,829 | ||||||
DISH Network Corp. — Class A* | 4,554 | 147,276 | ||||||
Juniper Networks, Inc. | 5,560 | 125,156 | ||||||
Fox Corp. — Class A | 3,540 | 103,085 | ||||||
Discovery, Inc. — Class C* | 3,740 | 97,951 | ||||||
Interpublic Group of Companies, Inc. | 3,750 | 88,200 | ||||||
News Corp. — Class A | 3,777 | 67,873 | ||||||
Discovery, Inc. — Class A*,1 | 1,940 | 58,375 | ||||||
Fox Corp. — Class B | 1,630 | 47,074 |
18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P 500® PURE VALUE FUND |
| Shares | Value | ||||||
News Corp. — Class B | 1,178 | $ | 20,933 | |||||
Total Communications | 1,606,060 | |||||||
Technology - 4.9% | ||||||||
Xerox Holdings Corp. | 18,620 | 431,798 | ||||||
Hewlett Packard Enterprise Co. | 31,550 | 373,867 | ||||||
Western Digital Corp. | 3,740 | 207,159 | ||||||
HP, Inc. | 6,432 | 158,163 | ||||||
DXC Technology Co. | 3,726 | 95,944 | ||||||
Total Technology | 1,266,931 | |||||||
Industrial - 4.4% | ||||||||
Westrock Co. | 6,174 | 268,754 | ||||||
Textron, Inc. | 3,333 | 161,084 | ||||||
Huntington Ingalls Industries, Inc. | 890 | 151,727 | ||||||
Howmet Aerospace, Inc. | 5,200 | 148,408 | ||||||
Raytheon Technologies Corp. | 1,818 | 130,005 | ||||||
Westinghouse Air Brake Technologies Corp. | 1,620 | 118,584 | ||||||
General Dynamics Corp. | 610 | 90,781 | ||||||
General Electric Co. | 7,765 | 83,862 | ||||||
Total Industrial | 1,153,205 | |||||||
Utilities - 3.1% | ||||||||
Exelon Corp. | 4,949 | 208,947 | ||||||
Consolidated Edison, Inc. | 1,700 | 122,859 | ||||||
Evergy, Inc. | 1,910 | 106,024 | ||||||
FirstEnergy Corp. | 3,150 | 96,421 | ||||||
Pinnacle West Capital Corp. | 1,200 | 95,940 | ||||||
PPL Corp. | 3,210 | 90,522 | ||||||
Edison International | 1,340 | 84,179 | ||||||
Total Utilities | 804,892 | |||||||
Basic Materials - 1.7% | ||||||||
Nucor Corp. | 3,366 | 179,038 | ||||||
Mosaic Co. | 7,555 | 173,841 | ||||||
International Paper Co. | 1,938 | 96,357 | ||||||
Total Basic Materials | 449,236 | |||||||
Total Common Stocks | ||||||||
(Cost $21,299,833) | 25,931,735 |
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
J.P. Morgan Securities LLC | $ | 85,981 | 85,981 | |||||
Barclays Capital, Inc. | 35,820 | 35,820 | ||||||
BofA Securities, Inc. | 33,167 | 33,167 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $154,968) | 154,968 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.2% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 41,349 | 41,349 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $41,349) | 41,349 | |||||||
Total Investments - 100.5% | ||||||||
(Cost $21,496,150) | $ | 26,128,052 | ||||||
Other Assets & Liabilities, net - (0.5)% | (128,923 | ) | ||||||
Total Net Assets - 100.0% | $ | 25,999,129 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
S&P 500® PURE VALUE FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 25,931,735 | $ | — | $ | — | $ | 25,931,735 | ||||||||
Repurchase Agreements | — | 154,968 | — | 154,968 | ||||||||||||
Securities Lending Collateral | 41,349 | — | — | 41,349 | ||||||||||||
Total Assets | $ | 25,973,084 | $ | 154,968 | $ | — | $ | 26,128,052 |
20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $40,622 of securities loaned (cost $21,341,182) | $ | 25,973,084 | ||
Repurchase agreements, at value (cost $154,968) | 154,968 | |||
Receivables: | ||||
Dividends | 30,665 | |||
Securities lending income | 46 | |||
Total assets | 26,158,763 | |||
Liabilities: | ||||
Payable for: | ||||
Return of securities lending collateral | 41,349 | |||
Fund shares redeemed | 40,883 | |||
Professional fees | 25,011 | |||
Management fees | 14,888 | |||
Printing fees | 10,607 | |||
Transfer agent and administrative fees | 5,340 | |||
Investor service fees | 4,963 | |||
Portfolio accounting fees | 1,985 | |||
Trustees’ fees* | 361 | |||
Miscellaneous | 14,247 | |||
Total liabilities | 159,634 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 25,999,129 | ||
Net assets consist of: | ||||
Paid in capital | $ | 24,121,309 | ||
Total distributable earnings (loss) | 1,877,820 | |||
Net assets | $ | 25,999,129 | ||
Capital shares outstanding | 556,031 | |||
Net asset value per share | $ | 46.76 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends | $ | 535,866 | ||
Interest | 469 | |||
Income from securities lending, net | 2,776 | |||
Total investment income | 539,111 | |||
Expenses: | ||||
Management fees | 143,993 | |||
Investor service fees | 47,998 | |||
Transfer agent and administrative fees | 66,132 | |||
Professional fees | 35,924 | |||
Portfolio accounting fees | 19,199 | |||
Trustees’ fees* | 5,883 | |||
Custodian fees | 3,232 | |||
Miscellaneous | 9,061 | |||
Total expenses | 331,422 | |||
Net investment income | 207,689 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (342,346 | ) | ||
Net realized loss | (342,346 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (485,148 | ) | ||
Net change in unrealized appreciation (depreciation) | (485,148 | ) | ||
Net realized and unrealized loss | (827,494 | ) | ||
Net decrease in net assets resulting from operations | $ | (619,805 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
S&P 500® PURE VALUE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 207,689 | $ | 370,715 | ||||
Net realized gain (loss) on investments | (342,346 | ) | 3,213,291 | |||||
Net change in unrealized appreciation (depreciation) on investments | (485,148 | ) | 3,562,491 | |||||
Net increase (decrease) in net assets resulting from operations | (619,805 | ) | 7,146,497 | |||||
Distributions to shareholders | (1,768,964 | ) | (674,374 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 27,521,313 | 43,355,945 | ||||||
Distributions reinvested | 1,768,964 | 674,374 | ||||||
Cost of shares redeemed | (33,633,141 | ) | (50,882,754 | ) | ||||
Net decrease from capital share transactions | (4,342,864 | ) | (6,852,435 | ) | ||||
Net decrease in net assets | (6,731,633 | ) | (380,312 | ) | ||||
Net assets: | ||||||||
Beginning of year | 32,730,762 | 33,111,074 | ||||||
End of year | $ | 25,999,129 | $ | 32,730,762 | ||||
Capital share activity: | ||||||||
Shares sold | 678,561 | 809,655 | ||||||
Shares issued from reinvestment of distributions | 47,135 | 12,210 | ||||||
Shares redeemed | (733,904 | ) | (947,155 | ) | ||||
Net decrease in shares | (8,208 | ) | (125,290 | ) |
22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P 500® PURE VALUE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 58.01 | $ | 48.02 | $ | 61.83 | $ | 56.45 | $ | 50.08 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .46 | .59 | .53 | .35 | .83 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (7.59 | ) | 10.53 | (7.82 | ) | 8.28 | 9.87 | |||||||||||||
Total from investment operations | (7.13 | ) | 11.12 | (7.29 | ) | 8.63 | 10.70 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.85 | ) | (.45 | ) | (.53 | ) | (.46 | ) | (1.23 | ) | ||||||||||
Net realized gains | (3.27 | ) | (.68 | ) | (5.99 | ) | (2.79 | ) | (3.10 | ) | ||||||||||
Total distributions | (4.12 | ) | (1.13 | ) | (6.52 | ) | (3.25 | ) | (4.33 | ) | ||||||||||
Net asset value, end of period | $ | 46.76 | $ | 58.01 | $ | 48.02 | $ | 61.83 | $ | 56.45 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (10.56 | %) | 23.27 | % | (13.32 | %) | 15.86 | % | 17.40 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 25,999 | $ | 32,731 | $ | 33,111 | $ | 44,496 | $ | 44,849 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.08 | % | 1.10 | % | 0.91 | % | 0.61 | % | 0.88 | % | ||||||||||
Total expenses | 1.73 | % | 1.72 | % | 1.63 | % | 1.61 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 157 | % | 144 | % | 197 | % | 127 | % | 207 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 2:1 share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
S&P MIDCAP 400® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for mid-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P MidCap 400® Pure Growth Index (the “underlying index”).
For the year ended December 31, 2020, S&P MidCap 400® Pure Growth Fund returned 30.47%, compared with a return of 32.54% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Information Technology sector contributed the most to the return of the underlying index for the period, followed by the Health Care and the Consumer Discretionary sectors. The Energy, Real Estate, and Financials sectors were the leading detractors from return.
SolarEdge Technologies, Inc., Repligen Corp., and RH added the most to return of the underlying index for the year. WPX Energy, Inc., Matador Resources Co., and LendingTree, Inc. detracted the most from performance of the underlying index for the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Enphase Energy, Inc. | 2.5% |
SolarEdge Technologies, Inc. | 2.5% |
Monolithic Power Systems, Inc. | 2.4% |
Repligen Corp. | 2.3% |
Boston Beer Company, Inc. — Class A | 2.2% |
II-VI, Inc. | 2.2% |
Quidel Corp. | 2.1% |
RH | 2.1% |
Scotts Miracle-Gro Co. — Class A | 2.1% |
Sunrun, Inc. | 2.1% |
Top Ten Total | 22.5% |
“Ten Largest Holdings” excludes any temporary cash investments. |
24 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
S&P MidCap 400® Pure Growth Fund | 30.47% | 9.36% | 9.20% |
S&P MidCap 400 Pure Growth Index | 32.54% | 11.22% | 10.87% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 25 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
S&P MIDCAP 400® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Consumer, Non-cyclical - 34.0% | ||||||||
Repligen Corp.* | 2,458 | $ | 471,027 | |||||
Boston Beer Company, Inc. — Class A* | 470 | 467,316 | ||||||
Quidel Corp.* | 2,490 | 447,328 | ||||||
Paylocity Holding Corp.* | 1,910 | 393,288 | ||||||
Medpace Holdings, Inc.* | 2,797 | 389,342 | ||||||
Emergent BioSolutions, Inc.* | 4,120 | 369,152 | ||||||
Halozyme Therapeutics, Inc.* | 7,207 | 307,811 | ||||||
Avanos Medical, Inc.* | 6,670 | 306,020 | ||||||
Charles River Laboratories International, Inc.* | 1,200 | 299,832 | ||||||
Syneos Health, Inc.* | 4,316 | 294,049 | ||||||
Darling Ingredients, Inc.* | 4,840 | 279,171 | ||||||
Amedisys, Inc.* | 945 | 277,197 | ||||||
Exelixis, Inc.* | 12,421 | 249,289 | ||||||
Masimo Corp.* | 905 | 242,884 | ||||||
HealthEquity, Inc.* | 3,440 | 239,802 | ||||||
CoreLogic, Inc. | 3,050 | 235,826 | ||||||
Helen of Troy Ltd.* | 960 | 213,302 | ||||||
ASGN, Inc.* | 2,380 | 198,801 | ||||||
Bio-Techne Corp. | 582 | 184,814 | ||||||
Penumbra, Inc.* | 1,054 | 184,450 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 2,201 | 168,883 | ||||||
PRA Health Sciences, Inc.* | 1,331 | 166,961 | ||||||
LHC Group, Inc.* | 770 | 164,257 | ||||||
FTI Consulting, Inc.* | 1,369 | 152,945 | ||||||
Insperity, Inc. | 1,730 | 140,857 | ||||||
Jazz Pharmaceuticals plc* | 761 | 125,603 | ||||||
Chemed Corp. | 220 | 117,174 | ||||||
Total Consumer, Non-cyclical | 7,087,381 | |||||||
Industrial - 17.3% | ||||||||
II-VI, Inc.* | 5,950 | 451,962 | ||||||
Generac Holdings, Inc.* | 1,767 | 401,834 | ||||||
Trex Company, Inc.* | 4,428 | 370,712 | ||||||
TopBuild Corp.* | 1,970 | 362,638 | ||||||
Axon Enterprise, Inc.* | 2,853 | 349,578 | ||||||
Knight-Swift Transportation Holdings, Inc. | 5,947 | 248,703 | ||||||
Trimble, Inc.* | 3,030 | 202,313 | ||||||
Timken Co. | 2,418 | 187,056 | ||||||
Simpson Manufacturing Company, Inc. | 1,710 | 159,800 | ||||||
Mercury Systems, Inc.* | 1,798 | 158,332 | ||||||
Tetra Tech, Inc. | 1,199 | 138,820 | ||||||
Graco, Inc. | 1,800 | 130,230 | ||||||
Cognex Corp. | 1,584 | 127,172 | ||||||
Toro Co. | 1,279 | 121,300 | ||||||
Universal Display Corp. | 489 | 112,372 | ||||||
Lincoln Electric Holdings, Inc. | 825 | 95,906 | ||||||
Total Industrial | 3,618,728 | |||||||
Consumer, Cyclical - 17.2% | ||||||||
RH* | 979 | 438,122 | ||||||
Scotts Miracle-Gro Co. — Class A | 2,184 | 434,922 | ||||||
Wingstop, Inc. | 2,800 | 371,140 | ||||||
Lithia Motors, Inc. — Class A | 1,170 | 342,424 | ||||||
Ollie’s Bargain Outlet Holdings, Inc.* | 3,520 | 287,830 | ||||||
Fox Factory Holding Corp.* | 2,690 | 284,360 | ||||||
Churchill Downs, Inc. | 1,459 | 284,199 | ||||||
Deckers Outdoor Corp.* | 870 | 249,499 | ||||||
Williams-Sonoma, Inc. | 2,410 | 245,434 | ||||||
Five Below, Inc.* | 1,264 | 221,175 | ||||||
Tempur Sealy International, Inc.* | 4,830 | 130,410 | ||||||
Mattel, Inc.* | 6,070 | 105,921 | ||||||
Texas Roadhouse, Inc. — Class A | 1,280 | 100,045 | ||||||
Jack in the Box, Inc. | 950 | 88,160 | ||||||
Total Consumer, Cyclical | 3,583,641 | |||||||
Energy - 10.2% | ||||||||
Enphase Energy, Inc.* | 3,030 | 531,674 | ||||||
SolarEdge Technologies, Inc.* | 1,633 | 521,123 | ||||||
Sunrun, Inc.* | 6,190 | 429,462 | ||||||
First Solar, Inc.* | 3,060 | 302,695 | ||||||
Antero Midstream Corp. | 29,860 | 230,221 | ||||||
CNX Resources Corp.* | 10,600 | 114,480 | ||||||
Total Energy | 2,129,655 | |||||||
Technology - 9.2% | ||||||||
Monolithic Power Systems, Inc. | 1,349 | 494,045 | ||||||
Sailpoint Technologies Holdings, Inc.* | 5,510 | 293,352 | ||||||
CMC Materials, Inc. | 1,634 | 247,224 | ||||||
Qualys, Inc.* | 1,760 | 214,491 | ||||||
Fair Isaac Corp.* | 405 | 206,971 | ||||||
Lumentum Holdings, Inc.* | 1,924 | 182,395 | ||||||
PTC, Inc.* | 1,490 | 178,219 | ||||||
MKS Instruments, Inc. | 687 | 103,359 | ||||||
Total Technology | 1,920,056 | |||||||
Financial - 8.0% | ||||||||
Kinsale Capital Group, Inc. | 2,050 | 410,267 | ||||||
Brighthouse Financial, Inc.* | 11,220 | 406,220 | ||||||
SLM Corp. | 24,630 | 305,166 | ||||||
Brown & Brown, Inc. | 3,440 | 163,090 | ||||||
Primerica, Inc. | 1,055 | 141,296 | ||||||
Interactive Brokers Group, Inc. — Class A | 2,050 | 124,886 | ||||||
Eaton Vance Corp. | 1,730 | 117,519 | ||||||
Total Financial | 1,668,444 | |||||||
Communications - 3.6% | ||||||||
Grubhub, Inc.* | 4,750 | 352,783 | ||||||
Cable One, Inc. | 90 | 200,495 | ||||||
FactSet Research Systems, Inc. | 370 | 123,025 | ||||||
New York Times Co. — Class A | 1,690 | 87,491 | ||||||
Total Communications | 763,794 | |||||||
Total Common Stocks | ||||||||
(Cost $16,573,923) | 20,771,699 |
26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
S&P MIDCAP 400® PURE GROWTH FUND |
| Face | Value | ||||||
REPURCHASE AGREEMENTS††,1 - 0.8% | ||||||||
J.P. Morgan Securities LLC | $ | 89,233 | $ | 89,233 | ||||
Barclays Capital, Inc. | 37,175 | 37,175 | ||||||
BofA Securities, Inc. | 34,422 | 34,422 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $160,830) | 160,830 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $16,734,753) | $ | 20,932,529 | ||||||
Other Assets & Liabilities, net - (0.3)% | (62,871 | ) | ||||||
Total Net Assets - 100.0% | $ | 20,869,658 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Repurchase Agreements — See Note 6. |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 20,771,699 | $ | — | $ | — | $ | 20,771,699 | ||||||||
Repurchase Agreements | — | 160,830 | — | 160,830 | ||||||||||||
Total Assets | $ | 20,771,699 | $ | 160,830 | $ | — | $ | 20,932,529 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
S&P MIDCAP 400® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value (cost $16,573,923) | $ | 20,771,699 | ||
Repurchase agreements, at value (cost $160,830) | 160,830 | |||
Cash | 502 | |||
Receivables: | ||||
Fund shares sold | 11,084 | |||
Dividends | 4,254 | |||
Securities lending income | 123 | |||
Total assets | 20,948,492 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 18,625 | |||
Management fees | 13,114 | |||
Fund shares redeemed | 11,627 | |||
Printing fees | 7,899 | |||
Transfer agent and administrative fees | 4,704 | |||
Investor service fees | 4,371 | |||
Portfolio accounting fees | 1,749 | |||
Trustees’ fees* | 312 | |||
Miscellaneous | 16,433 | |||
Total liabilities | 78,834 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 20,869,658 | ||
Net assets consist of: | ||||
Paid in capital | $ | 15,605,202 | ||
Total distributable earnings (loss) | 5,264,456 | |||
Net assets | $ | 20,869,658 | ||
Capital shares outstanding | 460,554 | |||
Net asset value per share | $ | 45.31 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends | $ | 83,518 | ||
Interest | 293 | |||
Income from securities lending, net | 841 | |||
Total investment income | 84,652 | |||
Expenses: | ||||
Management fees | 107,228 | |||
Investor service fees | 35,743 | |||
Transfer agent and administrative fees | 45,892 | |||
Professional fees | 25,359 | |||
Portfolio accounting fees | 14,297 | |||
Trustees’ fees* | 2,906 | |||
Custodian fees | 2,113 | |||
Line of credit fees | 31 | |||
Miscellaneous | 13,016 | |||
Total expenses | 246,585 | |||
Net investment loss | (161,933 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,838,567 | |||
Net realized gain | 1,838,567 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 3,082,718 | |||
Net change in unrealized appreciation (depreciation) | 3,082,718 | |||
Net realized and unrealized gain | 4,921,285 | |||
Net increase in net assets resulting from operations | $ | 4,759,352 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE GROWTH FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (161,933 | ) | $ | (109,888 | ) | ||
Net realized gain on investments | 1,838,567 | 1,664,662 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 3,082,718 | 442,373 | ||||||
Net increase in net assets resulting from operations | 4,759,352 | 1,997,147 | ||||||
Distributions to shareholders | (549,822 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 23,579,335 | 15,348,447 | ||||||
Distributions reinvested | 549,822 | — | ||||||
Cost of shares redeemed | (20,206,916 | ) | (18,818,025 | ) | ||||
Net increase (decrease) from capital share transactions | 3,922,241 | (3,469,578 | ) | |||||
Net increase (decrease) in net assets | 8,131,771 | (1,472,431 | ) | |||||
Net assets: | ||||||||
Beginning of year | 12,737,887 | 14,210,318 | ||||||
End of year | $ | 20,869,658 | $ | 12,737,887 | ||||
Capital share activity: | ||||||||
Shares sold | 651,346 | 441,408 | ||||||
Shares issued from reinvestment of distributions | 15,320 | — | ||||||
Shares redeemed | (558,244 | ) | (542,670 | ) | ||||
Net increase (decrease) in shares | 108,422 | (101,262 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
S&P MIDCAP 400® PURE GROWTH FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 36.17 | $ | 31.34 | $ | 39.31 | $ | 33.11 | $ | 32.23 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.41 | ) | (.27 | ) | (.28 | ) | (.25 | ) | (.22 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 11.04 | 5.10 | (4.97 | ) | 6.45 | 1.10 | ||||||||||||||
Total from investment operations | 10.63 | 4.83 | (5.25 | ) | 6.20 | .88 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (1.49 | ) | — | (2.72 | ) | — | — | |||||||||||||
Total distributions | (1.49 | ) | — | (2.72 | ) | — | — | |||||||||||||
Net asset value, end of period | $ | 45.31 | $ | 36.17 | $ | 31.34 | $ | 39.31 | $ | 33.11 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 30.47 | % | 15.41 | % | (14.83 | %) | 18.73 | % | 2.70 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 20,870 | $ | 12,738 | $ | 14,210 | $ | 20,394 | $ | 19,061 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.13 | %) | (0.77 | %) | (0.72 | %) | (0.70 | %) | (0.71 | %) | ||||||||||
Total expenses | 1.72 | % | 1.73 | % | 1.62 | % | 1.61 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 204 | % | 176 | % | 183 | % | 233 | % | 296 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
S&P MIDCAP 400® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for mid-cap value securities on a daily basis. The Fund’s current benchmark is the S&P MidCap 400® Pure Value Index (the “underlying index”).
For the year ended December 31, 2020, S&P MidCap 400® Pure Value Fund returned 7.42%, compared with a return of 9.61% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Consumer Discretionary sector contributed the most to the return of the underlying index for the period, followed by the Materials and the Information Technology sectors. The Financials, Real Estate, and Energy sectors were the leading detractors from return.
Penn National Gaming, Inc., CNX Resources Corp., and United States Steel Corp. added the most to return of the underlying index for the year. Chesapeake Energy Corp., Dillard’s, Inc. — Class A, and PBF Energy, Inc. — Class A detracted the most from performance of the underlying index for the year.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Avnet, Inc. | 2.2% |
Telephone & Data Systems, Inc. | 2.2% |
World Fuel Services Corp. | 2.1% |
Genworth Financial, Inc. — Class A | 2.0% |
Domtar Corp. | 2.0% |
Reinsurance Group of America, Inc. — Class A | 1.9% |
Graham Holdings Co. — Class B | 1.8% |
Taylor Morrison Home Corp. — Class A | 1.7% |
Commercial Metals Co. | 1.7% |
Kohl’s Corp. | 1.7% |
Top Ten Total | 19.3% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE RYDEX FUNDS ANNUAL REPORT | 31 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
S&P MidCap 400® Pure Value Fund | 7.42% | 9.22% | 7.99% |
S&P MidCap 400 Pure Value Index | 9.61% | 11.17% | 10.05% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P MidCap 400 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
32 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Financial - 40.1% | ||||||||
Genworth Financial, Inc. — Class A* | 86,002 | $ | 325,088 | |||||
Reinsurance Group of America, Inc. — Class A | 2,635 | 305,396 | ||||||
CNO Financial Group, Inc. | 10,932 | 243,018 | ||||||
Jefferies Financial Group, Inc. | 9,527 | 234,364 | ||||||
Old Republic International Corp. | 11,456 | 225,798 | ||||||
Navient Corp. | 22,112 | 217,140 | ||||||
Mercury General Corp. | 4,041 | 210,981 | ||||||
Associated Banc-Corp. | 11,004 | 187,618 | ||||||
First American Financial Corp. | 3,520 | 181,738 | ||||||
FNB Corp. | 17,804 | 169,138 | ||||||
Sterling Bancorp | 8,877 | 159,608 | ||||||
Jones Lang LaSalle, Inc.* | 1,070 | 158,756 | ||||||
New York Community Bancorp, Inc. | 15,020 | 158,461 | ||||||
Wintrust Financial Corp. | 2,570 | 157,001 | ||||||
Alleghany Corp. | 260 | 156,959 | ||||||
Kemper Corp. | 2,011 | 154,505 | ||||||
Fulton Financial Corp. | 11,500 | 146,280 | ||||||
Valley National Bancorp | 14,583 | 142,184 | ||||||
Trustmark Corp. | 5,060 | 138,189 | ||||||
Washington Federal, Inc. | 5,330 | 137,194 | ||||||
Hanover Insurance Group, Inc. | 1,170 | 136,796 | ||||||
First Horizon National Corp. | 10,536 | 134,439 | ||||||
MGIC Investment Corp. | 10,590 | 132,904 | ||||||
United Bankshares, Inc. | 3,990 | 129,276 | ||||||
Macerich Co. REIT1 | 12,100 | 129,107 | ||||||
Bank OZK | 4,051 | 126,675 | ||||||
Pinnacle Financial Partners, Inc. | 1,959 | 126,160 | ||||||
Hancock Whitney Corp. | 3,641 | 123,867 | ||||||
Cathay General Bancorp | 3,760 | 121,034 | ||||||
TCF Financial Corp. | 3,125 | 115,687 | ||||||
International Bancshares Corp. | 3,070 | 114,941 | ||||||
BancorpSouth Bank | 4,130 | 113,327 | ||||||
Prosperity Bancshares, Inc. | 1,560 | 108,202 | ||||||
American Financial Group, Inc. | 1,230 | 107,773 | ||||||
Synovus Financial Corp. | 3,210 | 103,908 | ||||||
Service Properties Trust REIT | 8,730 | 100,308 | ||||||
Alliance Data Systems Corp. | 1,320 | 97,812 | ||||||
Webster Financial Corp. | 2,060 | 86,829 | ||||||
Pebblebrook Hotel Trust REIT | 4,356 | 81,893 | ||||||
East West Bancorp, Inc. | 1,510 | 76,572 | ||||||
Selective Insurance Group, Inc. | 1,120 | 75,018 | ||||||
UMB Financial Corp. | 1,070 | 73,819 | ||||||
Sabra Health Care REIT, Inc. | 4,190 | 72,780 | ||||||
Texas Capital Bancshares, Inc.* | 1,221 | 72,650 | ||||||
Janus Henderson Group plc | 2,110 | 68,596 | ||||||
Cousins Properties, Inc. REIT | 2,040 | 68,340 | ||||||
CIT Group, Inc. | 1,850 | 66,415 | ||||||
Total Financial | 6,574,544 | |||||||
Consumer, Cyclical - 19.7% | ||||||||
World Fuel Services Corp. | 11,266 | 351,048 | ||||||
Taylor Morrison Home Corp. — Class A* | 10,973 | 281,457 | ||||||
Kohl’s Corp. | 6,710 | 273,030 | ||||||
AutoNation, Inc.* | 3,767 | 262,899 | ||||||
Dana, Inc. | 12,214 | 238,417 | ||||||
TRI Pointe Group, Inc.* | 13,128 | 226,458 | ||||||
Univar Solutions, Inc.* | 11,570 | 219,946 | ||||||
Foot Locker, Inc. | 4,894 | 197,913 | ||||||
KB Home | 5,430 | 182,014 | ||||||
Dick’s Sporting Goods, Inc. | 2,917 | 163,965 | ||||||
Lear Corp. | 888 | 141,219 | ||||||
BJ’s Wholesale Club Holdings, Inc.* | 3,654 | 136,221 | ||||||
Thor Industries, Inc. | 1,280 | 119,027 | ||||||
Goodyear Tire & Rubber Co. | 10,213 | 111,424 | ||||||
Adient plc* | 2,721 | 94,609 | ||||||
KAR Auction Services, Inc. | 4,357 | 81,084 | ||||||
Urban Outfitters, Inc.* | 3,022 | 77,363 | ||||||
HNI Corp. | 1,780 | 61,339 | ||||||
Total Consumer, Cyclical | 3,219,433 | |||||||
Industrial - 15.9% | ||||||||
Avnet, Inc. | 10,486 | 368,163 | ||||||
Arrow Electronics, Inc.* | 2,773 | 269,813 | ||||||
SYNNEX Corp. | 2,887 | 235,117 | ||||||
Ryder System, Inc. | 3,330 | 205,661 | ||||||
Jabil, Inc. | 4,220 | 179,477 | ||||||
O-I Glass, Inc. | 12,730 | 151,487 | ||||||
Greif, Inc. — Class A | 3,132 | 146,828 | ||||||
EMCOR Group, Inc. | 1,440 | 131,703 | ||||||
MasTec, Inc.* | 1,840 | 125,451 | ||||||
MDU Resources Group, Inc. | 4,390 | 115,633 | ||||||
Dycom Industries, Inc.* | 1,387 | 104,746 | ||||||
Oshkosh Corp. | 1,160 | 99,841 | ||||||
AECOM* | 1,953 | 97,220 | ||||||
KBR, Inc. | 2,550 | 78,872 | ||||||
Trinity Industries, Inc. | 2,944 | 77,692 | ||||||
Kirby Corp.* | 1,470 | 76,190 | ||||||
Colfax Corp.* | 1,880 | 71,891 | ||||||
GATX Corp. | 740 | 61,553 | ||||||
Total Industrial | 2,597,338 | |||||||
Consumer, Non-cyclical - 10.3% | ||||||||
Graham Holdings Co. — Class B | 560 | 298,693 | ||||||
Pilgrim’s Pride Corp.* | 10,780 | 211,396 | ||||||
ManpowerGroup, Inc. | 2,319 | 209,127 | ||||||
Sprouts Farmers Market, Inc.* | 9,953 | 200,055 | ||||||
TreeHouse Foods, Inc.* | 4,196 | 178,288 | ||||||
Adtalem Global Education, Inc.* | 4,071 | 138,211 | ||||||
Tenet Healthcare Corp.* | 2,988 | 119,311 | ||||||
Edgewell Personal Care Co. | 3,170 | 109,619 | ||||||
Ingredion, Inc. | 1,160 | 91,257 | ||||||
Prestige Consumer Healthcare, Inc.* | 2,050 | 71,483 | ||||||
Strategic Education, Inc. | 700 | 66,731 | ||||||
Total Consumer, Non-cyclical | 1,694,171 | |||||||
Basic Materials - 6.0% | ||||||||
Domtar Corp. | 10,155 | 321,406 | ||||||
Commercial Metals Co. | 13,319 | 273,572 | ||||||
Reliance Steel & Aluminum Co. | 1,000 | 119,750 | ||||||
Steel Dynamics, Inc. | 2,680 | 98,812 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | ||||||
United States Steel Corp. | 5,217 | $ | 87,489 | |||||
Minerals Technologies, Inc. | 1,303 | 80,942 | ||||||
Total Basic Materials | 981,971 | |||||||
Communications - 3.0% | ||||||||
Telephone & Data Systems, Inc. | 19,565 | 363,322 | ||||||
ViaSat, Inc.* | 4,170 | 136,151 | ||||||
Total Communications | 499,473 | |||||||
Technology - 1.7% | ||||||||
NCR Corp.* | 3,970 | 149,153 | ||||||
NetScout Systems, Inc.* | 4,784 | 131,177 | ||||||
Total Technology | 280,330 | |||||||
Utilities - 1.5% | ||||||||
Southwest Gas Holdings, Inc. | 1,640 | 99,630 | ||||||
UGI Corp. | 2,140 | 74,814 | ||||||
ALLETE, Inc. | 1,090 | 67,515 | ||||||
Total Utilities | 241,959 | |||||||
Energy - 1.2% | ||||||||
Murphy USA, Inc. | 1,480 | 193,688 | ||||||
Total Common Stocks | ||||||||
(Cost $13,914,802) | 16,282,907 |
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 62,737 | 62,737 | |||||
Barclays Capital, Inc. | 26,137 | 26,137 | ||||||
BofA Securities, Inc. | 24,201 | 24,201 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $113,075) | 113,075 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 0.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 94,481 | 94,481 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $94,481) | 94,481 | |||||||
Total Investments - 100.7% | ||||||||
(Cost $14,122,358) | $ | 16,490,463 | ||||||
Other Assets & Liabilities, net - (0.7)% | (122,286 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,368,177 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 16,282,907 | $ | — | $ | — | $ | 16,282,907 | ||||||||
Repurchase Agreements | — | 113,075 | — | 113,075 | ||||||||||||
Securities Lending Collateral | 94,481 | — | — | 94,481 | ||||||||||||
Total Assets | $ | 16,377,388 | $ | 113,075 | $ | — | $ | 16,490,463 |
34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $91,261 of securities loaned (cost $14,009,283) | $ | 16,377,388 | ||
Repurchase agreements, at value (cost $113,075) | 113,075 | |||
Receivables: | ||||
Securities sold | 660,895 | |||
Dividends | 8,469 | |||
Securities lending income | 434 | |||
Total assets | 17,160,261 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 1,068 | |||
Payable for: | ||||
Fund shares redeemed | 643,576 | |||
Return of securities lending collateral | 94,481 | |||
Management fees | 10,146 | |||
Transfer agent and administrative fees | 3,639 | |||
Investor service fees | 3,382 | |||
Portfolio accounting fees | 1,353 | |||
Trustees’ fees* | 250 | |||
Miscellaneous | 34,189 | |||
Total liabilities | 792,084 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 16,368,177 | ||
Net assets consist of: | ||||
Paid in capital | $ | 14,775,896 | ||
Total distributable earnings (loss) | 1,592,281 | |||
Net assets | $ | 16,368,177 | ||
Capital shares outstanding | 378,576 | |||
Net asset value per share | $ | 43.24 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends | $ | 160,190 | ||
Interest | 180 | |||
Income from securities lending, net | 3,609 | |||
Total investment income | 163,979 | |||
Expenses: | ||||
Management fees | 61,656 | |||
Investor service fees | 20,552 | |||
Transfer agent and administrative fees | 26,862 | |||
Professional fees | 14,656 | |||
Portfolio accounting fees | 8,221 | |||
Trustees’ fees* | 1,897 | |||
Custodian fees | 1,236 | |||
Miscellaneous | 6,538 | |||
Total expenses | 141,618 | |||
Net investment income | 22,361 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 101,276 | |||
Net realized gain | 101,276 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,081,423 | |||
Net change in unrealized appreciation (depreciation) | 1,081,423 | |||
Net realized and unrealized gain | 1,182,699 | |||
Net increase in net assets resulting from operations | $ | 1,205,060 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
S&P MIDCAP 400® PURE VALUE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 22,361 | $ | 35,206 | ||||
Net realized gain on investments | 101,276 | 846,642 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,081,423 | 1,093,223 | ||||||
Net increase in net assets resulting from operations | 1,205,060 | 1,975,071 | ||||||
Distributions to shareholders | (307,126 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 24,813,296 | 15,114,260 | ||||||
Distributions reinvested | 307,126 | — | ||||||
Cost of shares redeemed | (19,068,103 | ) | (16,656,592 | ) | ||||
Net increase (decrease) from capital share transactions | 6,052,319 | (1,542,332 | ) | |||||
Net increase in net assets | 6,950,253 | 432,739 | ||||||
Net assets: | ||||||||
Beginning of year | 9,417,924 | 8,985,185 | ||||||
End of year | $ | 16,368,177 | $ | 9,417,924 | ||||
Capital share activity: | ||||||||
Shares sold | 687,958 | 377,132 | ||||||
Shares issued from reinvestment of distributions | 9,769 | — | ||||||
Shares redeemed | (542,587 | ) | (414,713 | ) | ||||
Net increase (decrease) in shares | 155,140 | (37,581 | ) |
36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P MIDCAP 400® PURE VALUE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 42.15 | $ | 34.42 | $ | 49.79 | $ | 54.35 | $ | 42.30 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .09 | .14 | (.01 | ) | (.05 | ) | (.06 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.49 | 7.59 | (7.95 | ) | 6.13 | 12.41 | ||||||||||||||
Total from investment operations | 2.58 | 7.73 | (7.96 | ) | 6.08 | 12.35 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.15 | ) | — | — | — | (.30 | ) | |||||||||||||
Net realized gains | (1.34 | ) | — | (7.41 | ) | (10.64 | ) | — | ||||||||||||
Total distributions | (1.49 | ) | — | (7.41 | ) | (10.64 | ) | (.30 | ) | |||||||||||
Net asset value, end of period | $ | 43.24 | $ | 42.15 | $ | 34.42 | $ | 49.79 | $ | 54.35 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 7.42 | % | 22.46 | % | (18.98 | %) | 13.15 | % | 28.89 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,368 | $ | 9,418 | $ | 8,985 | $ | 17,415 | $ | 30,207 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.27 | % | 0.35 | % | (0.03 | %) | (0.10 | %) | (0.07 | %) | ||||||||||
Total expenses | 1.72 | % | 1.73 | % | 1.62 | % | 1.61 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 320 | % | 188 | % | 145 | % | 144 | % | 282 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 2:1 share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for small-cap growth securities on a daily basis. The Fund’s current benchmark is the S&P SmallCap 600® Pure Growth Index (the “underlying index”).
For the year ended December 31, 2020, S&P SmallCap 600® Pure Growth Fund return was 15.76%, compared with a return of 18.12% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The Consumer Discretionary, Information Technology, and Real Estate sectors contributed the most to the return of the underlying index for the period. The Energy, Financials, and Industrials sectors detracted the most from return.
The best-performing stocks of the underlying index for the period were Innovative Industrial Properties, Inc. REIT, Kinsale Capital Group, Inc., and Wingstop, Inc. The weakest performers of the underlying index were Talos Energy, Inc., Par Pacific Holdings, Inc., and Granite Point Mortgage Trust, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Mr Cooper Group, Inc. | 2.1% |
Renewable Energy Group, Inc. | 1.8% |
Alarm.com Holdings, Inc. | 1.6% |
Innovative Industrial Properties, Inc. REIT | 1.6% |
Trupanion, Inc. | 1.6% |
Fulgent Genetics, Inc. | 1.6% |
MarineMax, Inc. | 1.6% |
St. Joe Co. | 1.5% |
Vista Outdoor, Inc. | 1.4% |
Medifast, Inc. | 1.4% |
Top Ten Total | 16.2% |
“Ten Largest Holdings” excludes any temporary cash investments. |
38 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
S&P SmallCap 600® Pure Growth Fund | 15.76% | 10.31% | 10.16% |
S&P SmallCap 600 Pure Growth Index | 18.12% | 12.35% | 12.17% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P SmallCap 600 Pure Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 39 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.4% | ||||||||
Consumer, Non-cyclical - 27.9% | ||||||||
Alarm.com Holdings, Inc.* | 2,551 | $ | 263,901 | |||||
Fulgent Genetics, Inc.*,1 | 4,810 | 250,601 | ||||||
Medifast, Inc. | 1,121 | 220,097 | ||||||
Corcept Therapeutics, Inc.* | 8,346 | 218,331 | ||||||
Coherus Biosciences, Inc.* | 11,610 | 201,782 | ||||||
R1 RCM, Inc.* | 8,140 | 195,523 | ||||||
Pennant Group, Inc.* | 3,197 | 185,618 | ||||||
NeoGenomics, Inc.* | 3,030 | 163,135 | ||||||
Green Dot Corp. — Class A* | 2,900 | 161,820 | ||||||
Meridian Bioscience, Inc.* | 8,550 | 159,799 | ||||||
Community Health Systems, Inc.* | 21,140 | 157,070 | ||||||
Zynex, Inc.*,1 | 11,112 | 149,567 | ||||||
Innoviva, Inc.* | 11,108 | 137,628 | ||||||
Merit Medical Systems, Inc.* | 2,380 | 132,114 | ||||||
National Beverage Corp.1 | 1,530 | 129,897 | ||||||
Pacira BioSciences, Inc.* | 2,100 | 125,664 | ||||||
Supernus Pharmaceuticals, Inc.* | 4,850 | 122,026 | ||||||
B&G Foods, Inc.1 | 4,370 | 121,180 | ||||||
Ensign Group, Inc. | 1,630 | 118,860 | ||||||
Rent-A-Center, Inc. | 3,029 | 115,981 | ||||||
Xencor, Inc.* | 2,630 | 114,747 | ||||||
BioTelemetry, Inc.* | 1,540 | 111,003 | ||||||
Arlo Technologies, Inc.* | 13,820 | 107,658 | ||||||
Providence Service Corp.* | 750 | 103,972 | ||||||
REGENXBIO, Inc.* | 2,202 | 99,883 | ||||||
Addus HomeCare Corp.* | 647 | 75,757 | ||||||
Cytokinetics, Inc.* | 3,470 | 72,107 | ||||||
Omnicell, Inc.* | 530 | 63,611 | ||||||
EVERTEC, Inc. | 1,495 | 58,783 | ||||||
WD-40 Co. | 200 | 53,136 | ||||||
HMS Holdings Corp.* | 1,420 | 52,185 | ||||||
Luminex Corp. | 2,230 | 51,558 | ||||||
Forrester Research, Inc.* | 1,100 | 46,090 | ||||||
Tactile Systems Technology, Inc.* | 990 | 44,491 | ||||||
LeMaitre Vascular, Inc. | 1,064 | 43,092 | ||||||
Heska Corp.* | 270 | 39,325 | ||||||
Total Consumer, Non-cyclical | 4,467,992 | |||||||
Financial - 17.3% | ||||||||
Mr Cooper Group, Inc.* | 10,650 | 330,470 | ||||||
Innovative Industrial Properties, Inc. REIT | 1,433 | 262,425 | ||||||
Trupanion, Inc.* | 2,110 | 252,588 | ||||||
St. Joe Co. | 5,592 | 237,380 | ||||||
Safehold, Inc. REIT | 2,744 | 198,913 | ||||||
StoneX Group, Inc.* | 3,140 | 181,806 | ||||||
Palomar Holdings, Inc.* | 1,860 | 165,242 | ||||||
Brightsphere Investment Group, Inc. | 8,170 | 157,518 | ||||||
Virtus Investment Partners, Inc. | 584 | 126,728 | ||||||
Axos Financial, Inc.* | 3,110 | 116,718 | ||||||
eHealth, Inc.* | 1,370 | 96,736 | ||||||
Walker & Dunlop, Inc. | 1,040 | 95,701 | ||||||
Triumph Bancorp, Inc.* | 1,840 | 89,332 | ||||||
HCI Group, Inc. | 1,700 | 88,910 | ||||||
Essential Properties Realty Trust, Inc. REIT | 4,094 | 86,793 | ||||||
PRA Group, Inc.* | 2,040 | 80,906 | ||||||
ServisFirst Bancshares, Inc. | 1,880 | 75,745 | ||||||
NMI Holdings, Inc. — Class A* | 3,164 | 71,665 | ||||||
Community Healthcare Trust, Inc. REIT | 1,213 | 57,144 | ||||||
Total Financial | 2,772,720 | |||||||
Consumer, Cyclical - 16.8% | ||||||||
MarineMax, Inc.* | 7,100 | 248,713 | ||||||
Vista Outdoor, Inc.* | 9,700 | 230,472 | ||||||
Big Lots, Inc. | 5,070 | 217,655 | ||||||
iRobot Corp.*,1 | 2,680 | 215,177 | ||||||
Century Communities, Inc.* | 4,270 | 186,941 | ||||||
Hibbett Sports, Inc.* | 3,660 | 169,019 | ||||||
LGI Homes, Inc.* | 1,591 | 168,407 | ||||||
Sleep Number Corp.* | 2,039 | 166,913 | ||||||
Lumber Liquidators Holdings, Inc.* | 5,200 | 159,848 | ||||||
Installed Building Products, Inc.* | 1,500 | 152,895 | ||||||
YETI Holdings, Inc.* | 2,175 | 148,922 | ||||||
Crocs, Inc.* | 2,320 | 145,371 | ||||||
Meritage Homes Corp.* | 1,470 | 121,745 | ||||||
PetMed Express, Inc. | 2,330 | 74,700 | ||||||
Dine Brands Global, Inc. | 1,200 | 69,600 | ||||||
LCI Industries | 490 | 63,543 | ||||||
Tupperware Brands Corp.* | 1,680 | 54,415 | ||||||
Dorman Products, Inc.* | 600 | 52,092 | ||||||
Shake Shack, Inc. — Class A* | 564 | 47,816 | ||||||
Total Consumer, Cyclical | 2,694,244 | |||||||
Technology - 14.8% | ||||||||
Glu Mobile, Inc.* | 24,205 | 218,087 | ||||||
Simulations Plus, Inc. | 2,830 | 203,534 | ||||||
SPS Commerce, Inc.* | 1,631 | 177,110 | ||||||
MicroStrategy, Inc. — Class A* | 420 | 163,191 | ||||||
Brooks Automation, Inc. | 2,350 | 159,447 | ||||||
FormFactor, Inc.* | 2,946 | 126,737 | ||||||
LivePerson, Inc.* | 1,860 | 115,748 | ||||||
TTEC Holdings, Inc. | 1,481 | 108,009 | ||||||
Ebix, Inc. | 2,780 | 105,557 | ||||||
Power Integrations, Inc. | 1,218 | 99,705 | ||||||
8x8, Inc.* | 2,637 | 90,897 | ||||||
CEVA, Inc.* | 1,950 | 88,725 | ||||||
Onto Innovation, Inc.* | 1,820 | 86,541 | ||||||
Diodes, Inc.* | 1,195 | 84,248 | ||||||
Ultra Clean Holdings, Inc.* | 2,477 | 77,159 | ||||||
Virtusa Corp.* | 1,493 | 76,337 | ||||||
Allscripts Healthcare Solutions, Inc.* | 4,880 | 70,467 | ||||||
Cohu, Inc. | 1,830 | 69,869 | ||||||
Agilysys, Inc.* | 1,781 | 68,355 | ||||||
ExlService Holdings, Inc.* | 791 | 67,338 | ||||||
Tabula Rasa HealthCare, Inc.* | 1,380 | 59,119 | ||||||
OneSpan, Inc.* | 2,160 | 44,669 | ||||||
Total Technology | 2,360,849 | |||||||
Industrial - 11.8% | ||||||||
Chart Industries, Inc.* | 1,490 | 175,507 | ||||||
Vicor Corp.* | 1,704 | 157,143 | ||||||
Advanced Energy Industries, Inc.* | 1,584 | 153,601 |
40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | ||||||
Saia, Inc.* | 815 | $ | 147,352 | |||||
Patrick Industries, Inc. | 1,772 | 121,116 | ||||||
Comfort Systems USA, Inc. | 2,220 | 116,905 | ||||||
AeroVironment, Inc.* | 1,320 | 114,708 | ||||||
Proto Labs, Inc.* | 690 | 105,846 | ||||||
PGT Innovations, Inc.* | 5,180 | 105,361 | ||||||
AAON, Inc. | 1,450 | 96,614 | ||||||
Matson, Inc. | 1,450 | 82,607 | ||||||
Exponent, Inc. | 810 | 72,924 | ||||||
Marten Transport Ltd. | 4,170 | 71,849 | ||||||
Alamo Group, Inc. | 520 | 71,734 | ||||||
Forward Air Corp. | 893 | 68,618 | ||||||
Gibraltar Industries, Inc.* | 910 | 65,465 | ||||||
Federal Signal Corp. | 1,799 | 59,673 | ||||||
Badger Meter, Inc. | 590 | 55,495 | ||||||
Franklin Electric Company, Inc. | 741 | 51,285 | ||||||
Total Industrial | 1,893,803 | |||||||
Communications - 5.8% | ||||||||
Stamps.com, Inc.* | 980 | 192,266 | ||||||
TechTarget, Inc.* | 3,079 | 182,000 | ||||||
Shutterstock, Inc. | 1,661 | 119,094 | ||||||
QuinStreet, Inc.* | 4,418 | 94,722 | ||||||
Vonage Holdings Corp.* | 7,080 | 91,155 | ||||||
Cincinnati Bell, Inc.* | 5,850 | 89,388 | ||||||
Perficient, Inc.* | 1,354 | 64,518 | ||||||
Viavi Solutions, Inc.* | 3,397 | 50,870 | ||||||
NIC, Inc. | 1,589 | 41,044 | ||||||
Total Communications | 925,057 | |||||||
Energy - 3.0% | ||||||||
Renewable Energy Group, Inc.* | 4,090 | 289,654 | ||||||
Bonanza Creek Energy, Inc.* | 7,360 | 142,269 | ||||||
DMC Global, Inc. | 1,204 | 52,073 | ||||||
Total Energy | 483,996 | |||||||
Basic Materials - 2.0% | ||||||||
Quaker Chemical Corp. | 490 | 124,161 | ||||||
Livent Corp.* | 5,610 | 105,692 | ||||||
Cleveland-Cliffs, Inc. | 5,940 | 86,487 | ||||||
Total Basic Materials | 316,340 | |||||||
Total Common Stocks | ||||||||
(Cost $13,250,185) | 15,915,001 |
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.7% | ||||||||
J.P. Morgan Securities LLC | $ | 61,187 | 61,187 | |||||
Barclays Capital, Inc. | 25,491 | 25,491 | ||||||
BofA Securities, Inc. | 23,603 | 23,603 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $110,281) | 110,281 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 3.6% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 577,649 | 577,649 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $577,649) | 577,649 | |||||||
Total Investments - 103.7% | ||||||||
(Cost $13,938,115) | $ | 16,602,931 | ||||||
Other Assets & Liabilities, net - (3.7)% | (588,794 | ) | ||||||
Total Net Assets - 100.0% | $ | 16,014,137 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
REIT – Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
S&P SMALLCAP 600® PURE GROWTH FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 15,915,001 | $ | — | $ | — | $ | 15,915,001 | ||||||||
Repurchase Agreements | — | 110,281 | — | 110,281 | ||||||||||||
Securities Lending Collateral | 577,649 | — | — | 577,649 | ||||||||||||
Total Assets | $ | 16,492,650 | $ | 110,281 | $ | — | $ | 16,602,931 |
42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE GROWTH FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $555,893 of securities loaned (cost $13,827,834) | $ | 16,492,650 | ||
Repurchase agreements, at value (cost $110,281) | 110,281 | |||
Receivables: | ||||
Fund shares sold | 1,304,553 | |||
Dividends | 8,923 | |||
Securities lending income | 413 | |||
Total assets | 17,916,820 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 1,279,350 | |||
Return of securities lending collateral | 577,649 | |||
Management fees | 9,066 | |||
Transfer agent and administrative fees | 3,252 | |||
Investor service fees | 3,022 | |||
Portfolio accounting fees | 1,209 | |||
Fund shares redeemed | 606 | |||
Trustees’ fees* | 206 | |||
Miscellaneous | 28,323 | |||
Total liabilities | 1,902,683 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 16,014,137 | ||
Net assets consist of: | ||||
Paid in capital | $ | 13,772,025 | ||
Total distributable earnings (loss) | 2,242,112 | |||
Net assets | $ | 16,014,137 | ||
Capital shares outstanding | 263,410 | |||
Net asset value per share | $ | 60.80 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends | $ | 74,439 | ||
Interest | 299 | |||
Income from securities lending, net | 1,440 | |||
Total investment income | 76,178 | |||
Expenses: | ||||
Management fees | 71,466 | |||
Investor service fees | 23,822 | |||
Transfer agent and administrative fees | 31,399 | |||
Professional fees | 17,366 | |||
Portfolio accounting fees | 9,528 | |||
Trustees’ fees* | 2,290 | |||
Custodian fees | 1,441 | |||
Line of credit fees | 143 | |||
Miscellaneous | 6,870 | |||
Total expenses | 164,325 | |||
Net investment loss | (88,147 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 167,890 | |||
Net realized gain | 167,890 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,703,710 | |||
Net change in unrealized appreciation (depreciation) | 1,703,710 | |||
Net realized and unrealized gain | 1,871,600 | |||
Net increase in net assets resulting from operations | $ | 1,783,453 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
S&P SMALLCAP 600® PURE GROWTH FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (88,147 | ) | $ | (81,181 | ) | ||
Net realized gain on investments | 167,890 | 2,382,069 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,703,710 | (722,819 | ) | |||||
Net increase in net assets resulting from operations | 1,783,453 | 1,578,069 | ||||||
Distributions to shareholders | (448,156 | ) | — | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 19,287,441 | 16,580,571 | ||||||
Distributions reinvested | 448,156 | — | ||||||
Cost of shares redeemed | (17,379,693 | ) | (22,841,246 | ) | ||||
Net increase (decrease) from capital share transactions | 2,355,904 | (6,260,675 | ) | |||||
Net increase (decrease) in net assets | 3,691,201 | (4,682,606 | ) | |||||
Net assets: | ||||||||
Beginning of year | 12,322,936 | 17,005,542 | ||||||
End of year | $ | 16,014,137 | $ | 12,322,936 | ||||
Capital share activity: | ||||||||
Shares sold | 387,331 | 316,090 | ||||||
Shares issued from reinvestment of distributions | 9,650 | — | ||||||
Shares redeemed | (356,659 | ) | (439,562 | ) | ||||
Net increase (decrease) in shares | 40,322 | (123,472 | ) |
44 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE GROWTH FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 55.24 | $ | 49.07 | $ | 54.95 | $ | 49.86 | $ | 42.01 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.45 | ) | (.36 | ) | (.60 | ) | (.47 | ) | (.14 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 8.42 | 6.53 | (4.12 | ) | 8.25 | 7.99 | ||||||||||||||
Total from investment operations | 7.97 | 6.17 | (4.72 | ) | 7.78 | 7.85 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (2.41 | ) | — | (1.16 | ) | (2.69 | ) | — | ||||||||||||
Total distributions | (2.41 | ) | — | (1.16 | ) | (2.69 | ) | — | ||||||||||||
Net asset value, end of period | $ | 60.80 | $ | 55.24 | $ | 49.07 | $ | 54.95 | $ | 49.86 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 15.76 | % | 12.57 | % | (9.03 | %) | 16.08 | % | 18.69 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 16,014 | $ | 12,323 | $ | 17,006 | $ | 20,438 | $ | 20,844 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.93 | %) | (0.69 | %) | (1.01 | %) | (0.90 | %) | (0.32 | %) | ||||||||||
Total expenses | 1.72 | % | 1.73 | % | 1.63 | % | 1.61 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 258 | % | 190 | % | 313 | % | 280 | % | 475 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a benchmark for small-cap value securities on a daily basis. The Fund’s current benchmark is the S&P SmallCap 600® Pure Value Index (the “underlying index”).
For the year ended December 31, 2020, S&P SmallCap 600® Pure Value Fund returned -5.97%, compared with a return of -4.20% for the underlying index. The Fund maintained a daily correlation of over 99% to its benchmark for the period.
The sectors contributing the most to the return of the underlying index for the year were the Industrials, Consumer Staples, and Consumer Discretionary sectors. The Energy, Real Estate, and Communication Services sectors detracted the most from return.
The stocks contributing the most to return of the underlying index were Atlas Air Worldwide Holdings, Inc., Renewable Energy Group, Inc., and Southwestern Energy Company. Those detracting the most from return of the underlying index were Denbury Resources, Inc., Whiting Petroleum Corp., and Gannett Co., Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 3, 2004 |
Ten Largest Holdings (% of Total Net Assets) | |
Aaron’s Company, Inc. | 1.4% |
CONSOL Energy, Inc. | 1.3% |
Veritiv Corp. | 1.2% |
Greenbrier Companies, Inc. | 1.2% |
Andersons, Inc. | 1.2% |
G-III Apparel Group Ltd. | 1.2% |
Seneca Foods Corp. — Class A | 1.2% |
QEP Resources, Inc. | 1.2% |
Fresh Del Monte Produce, Inc. | 1.1% |
SpartanNash Co. | 1.1% |
Top Ten Total | 12.1% |
“Ten Largest Holdings” excludes any temporary cash investments. |
46 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
S&P SmallCap 600® Pure Value Fund | (5.97%) | 3.44% | 4.91% |
S&P SmallCap 600 Pure Value Index | (4.20%) | 5.28% | 6.72% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P SmallCap 600 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.5% | ||||||||
Financial - 25.6% | ||||||||
CoreCivic, Inc. REIT | 13,028 | $ | 85,333 | |||||
Universal Insurance Holdings, Inc. | 4,930 | 74,492 | ||||||
Stewart Information Services Corp. | 1,391 | 67,269 | ||||||
EZCORP, Inc. — Class A* | 13,984 | 66,983 | ||||||
Realogy Holdings Corp.* | 5,082 | 66,676 | ||||||
GEO Group, Inc. REIT1 | 7,291 | 64,598 | ||||||
American Equity Investment Life Holding Co. | 2,221 | 61,433 | ||||||
Encore Capital Group, Inc.* | 1,495 | 58,230 | ||||||
United Insurance Holdings Corp. | 10,180 | 58,229 | ||||||
Employers Holdings, Inc. | 1,640 | 52,792 | ||||||
Third Point Reinsurance Ltd.* | 5,200 | 49,504 | ||||||
United Fire Group, Inc. | 1,957 | 49,121 | ||||||
Customers Bancorp, Inc.* | 2,744 | 47,912 | ||||||
Hanmi Financial Corp. | 4,040 | 45,814 | ||||||
Boston Private Financial Holdings, Inc. | 5,390 | 45,546 | ||||||
Enova International, Inc.* | 1,800 | 44,586 | ||||||
First Midwest Bancorp, Inc. | 2,610 | 41,551 | ||||||
Office Properties Income Trust REIT | 1,820 | 41,350 | ||||||
Simmons First National Corp. — Class A | 1,909 | 41,215 | ||||||
Hope Bancorp, Inc. | 3,769 | 41,120 | ||||||
First Financial Bancorp | 2,280 | 39,969 | ||||||
Assured Guaranty Ltd. | 1,252 | 39,425 | ||||||
Provident Financial Services, Inc. | 2,170 | 38,973 | ||||||
Central Pacific Financial Corp. | 2,050 | 38,971 | ||||||
Horace Mann Educators Corp. | 869 | 36,533 | ||||||
RPT Realty REIT | 4,170 | 36,071 | ||||||
Diversified Healthcare Trust REIT | 8,613 | 35,486 | ||||||
Dime Community Bancshares, Inc. | 2,240 | 35,325 | ||||||
Ready Capital Corp. REIT | 2,792 | 34,760 | ||||||
First BanCorp | 3,770 | 34,759 | ||||||
Northfield Bancorp, Inc. | 2,810 | 34,647 | ||||||
PennyMac Mortgage Investment Trust REIT | 1,880 | 33,069 | ||||||
First Commonwealth Financial Corp. | 2,870 | 31,398 | ||||||
OFG Bancorp | 1,660 | 30,776 | ||||||
Banner Corp. | 660 | 30,749 | ||||||
Renasant Corp. | 907 | 30,548 | ||||||
Franklin Street Properties Corp. REIT | 6,850 | 29,935 | ||||||
Ameris Bancorp | 780 | 29,695 | ||||||
S&T Bancorp, Inc. | 1,150 | 28,566 | ||||||
Allegiance Bancshares, Inc. | 830 | 28,328 | ||||||
Old National Bancorp | 1,640 | 27,158 | ||||||
Veritex Holdings, Inc. | 1,020 | 26,173 | ||||||
BankUnited, Inc. | 740 | 25,737 | ||||||
Waddell & Reed Financial, Inc. — Class A | 1,000 | 25,470 | ||||||
Safety Insurance Group, Inc. | 310 | 24,149 | ||||||
HomeStreet, Inc. | 700 | 23,625 | ||||||
Eagle Bancorp, Inc. | 560 | 23,128 | ||||||
Apollo Commercial Real Estate Finance, Inc. REIT | 1,970 | 22,005 | ||||||
Whitestone REIT — Class B | 2,680 | 21,360 | ||||||
Independent Bank Group, Inc. | 340 | 21,257 | ||||||
Acadia Realty Trust REIT | 1,440 | 20,434 | ||||||
First Bancorp | 580 | 19,621 | ||||||
DiamondRock Hospitality Co. REIT | 2,240 | 18,480 | ||||||
Total Financial | 2,080,334 | |||||||
Consumer, Cyclical - 21.2% | ||||||||
Veritiv Corp.* | 4,886 | 101,580 | ||||||
G-III Apparel Group Ltd.* | 3,996 | 94,865 | ||||||
Conn’s, Inc.* | 7,318 | 85,547 | ||||||
M/I Homes, Inc.* | 1,730 | 76,622 | ||||||
Daktronics, Inc. | 16,359 | 76,560 | ||||||
Cato Corp. — Class A | 7,738 | 74,207 | ||||||
Group 1 Automotive, Inc. | 560 | 73,438 | ||||||
ODP Corp.* | 2,489 | 72,928 | ||||||
Vera Bradley, Inc.* | 8,130 | 64,715 | ||||||
ScanSource, Inc.* | 2,266 | 59,777 | ||||||
Foundation Building Materials, Inc.* | 2,990 | 57,438 | ||||||
Asbury Automotive Group, Inc.* | 380 | 55,381 | ||||||
Resideo Technologies, Inc.* | 2,571 | 54,659 | ||||||
GMS, Inc.* | 1,750 | 53,340 | ||||||
PC Connection, Inc.* | 1,050 | 49,655 | ||||||
Core-Mark Holding Company, Inc. | 1,656 | 48,637 | ||||||
Unifi, Inc.* | 2,669 | 47,348 | ||||||
Bed Bath & Beyond, Inc.1 | 2,656 | 47,171 | ||||||
Genesco, Inc.* | 1,513 | 45,526 | ||||||
Signet Jewelers Ltd. | 1,627 | 44,368 | ||||||
Abercrombie & Fitch Co. — Class A | 2,110 | 42,960 | ||||||
Barnes & Noble Education, Inc.* | 8,556 | 39,785 | ||||||
Shoe Carnival, Inc. | 987 | 38,671 | ||||||
SkyWest, Inc. | 950 | 38,295 | ||||||
Sonic Automotive, Inc. — Class A | 975 | 37,606 | ||||||
Sally Beauty Holdings, Inc.* | 2,790 | 36,382 | ||||||
Michaels Companies, Inc.* | 2,695 | 35,062 | ||||||
Interface, Inc. — Class A | 3,320 | 34,860 | ||||||
Cooper Tire & Rubber Co. | 761 | 30,820 | ||||||
Chico’s FAS, Inc. | 17,270 | 27,459 | ||||||
Motorcar Parts of America, Inc.* | 1,290 | 25,310 | ||||||
Ethan Allen Interiors, Inc. | 1,230 | 24,858 | ||||||
Marcus Corp. | 1,840 | 24,803 | ||||||
Total Consumer, Cyclical | 1,720,633 | |||||||
Industrial - 18.5% | ||||||||
Greenbrier Companies, Inc. | 2,745 | 99,863 | ||||||
Bel Fuse, Inc. — Class B | 5,660 | 85,070 | ||||||
Benchmark Electronics, Inc. | 3,130 | 84,541 | ||||||
Olympic Steel, Inc. | 5,715 | 76,181 | ||||||
Sanmina Corp.* | 2,320 | 73,985 | ||||||
Granite Construction, Inc. | 2,649 | 70,755 | ||||||
Powell Industries, Inc. | 2,320 | 68,417 | ||||||
US Concrete, Inc.* | 1,705 | 68,149 | ||||||
ArcBest Corp. | 1,595 | 68,059 | ||||||
Griffon Corp. | 3,280 | 66,846 | ||||||
Boise Cascade Co. | 1,286 | 61,471 | ||||||
TTM Technologies, Inc.* | 4,376 | 60,367 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 1,099 | 59,939 | ||||||
DXP Enterprises, Inc.* | 2,680 | 59,576 | ||||||
Apogee Enterprises, Inc. | 1,840 | 58,291 | ||||||
AAR Corp. | 1,580 | 57,228 | ||||||
Comtech Telecommunications Corp. | 2,670 | 55,242 |
48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND |
| Shares | Value | ||||||
SEACOR Holdings, Inc.* | 1,220 | $ | 50,569 | |||||
Haynes International, Inc. | 2,070 | 49,349 | ||||||
Hub Group, Inc. — Class A* | 734 | 41,838 | ||||||
Aegion Corp. — Class A* | 2,186 | 41,512 | ||||||
Encore Wire Corp. | 530 | 32,102 | ||||||
Trinseo S.A. | 546 | 27,961 | ||||||
Matthews International Corp. — Class A | 900 | 26,460 | ||||||
Bristow Group, Inc.* | 982 | 25,846 | ||||||
TimkenSteel Corp.* | 5,048 | 23,574 | ||||||
Tredegar Corp. | 840 | 14,028 | ||||||
Total Industrial | 1,507,219 | |||||||
Consumer, Non-cyclical - 12.7% | ||||||||
Aaron’s Company, Inc.* | 5,920 | 112,243 | ||||||
Andersons, Inc. | 4,054 | 99,364 | ||||||
Seneca Foods Corp. — Class A* | 2,364 | 94,324 | ||||||
Fresh Del Monte Produce, Inc. | 3,836 | 92,332 | ||||||
SpartanNash Co. | 5,220 | 90,880 | ||||||
Kelly Services, Inc. — Class A | 3,684 | 75,780 | ||||||
Magellan Health, Inc.* | 909 | 75,302 | ||||||
Lannett Company, Inc.* | 10,383 | 67,697 | ||||||
Invacare Corp. | 7,272 | 65,084 | ||||||
Universal Corp. | 1,337 | 64,992 | ||||||
Resources Connection, Inc. | 3,990 | 50,154 | ||||||
ABM Industries, Inc. | 1,209 | 45,748 | ||||||
Cross Country Healthcare, Inc.* | 4,410 | 39,117 | ||||||
TrueBlue, Inc.* | 1,568 | 29,306 | ||||||
Deluxe Corp. | 960 | 28,032 | ||||||
Total Consumer, Non-cyclical | 1,030,355 | |||||||
Energy - 10.7% | ||||||||
CONSOL Energy, Inc.* | 14,574 | 105,079 | ||||||
QEP Resources, Inc. | 39,360 | 94,070 | ||||||
SunCoke Energy, Inc. | 18,428 | 80,162 | ||||||
Matrix Service Co.* | 7,272 | 80,137 | ||||||
ProPetro Holding Corp.* | 9,566 | 70,693 | ||||||
Helix Energy Solutions Group, Inc.* | 15,850 | 66,570 | ||||||
Green Plains, Inc.* | 4,900 | 64,533 | ||||||
Talos Energy, Inc.* | 5,420 | 44,661 | ||||||
US Silica Holdings, Inc. | 4,625 | 32,467 | ||||||
SM Energy Co. | 4,910 | 30,049 | ||||||
Oil States International, Inc.* | 5,410 | 27,158 | ||||||
NOW, Inc.* | 3,765 | 27,033 | ||||||
Exterran Corp.* | 6,090 | 26,918 | ||||||
Callon Petroleum Co.*,1 | 1,970 | 25,925 | ||||||
PBF Energy, Inc. — Class A | 3,470 | 24,637 | ||||||
Warrior Met Coal, Inc. | 1,154 | 24,603 | ||||||
Nabors Industries Ltd. | 405 | 23,583 | ||||||
Penn Virginia Corp.* | 2,230 | 22,635 | ||||||
Total Energy | 870,913 | |||||||
Basic Materials - 5.5% | ||||||||
Clearwater Paper Corp.* | 2,234 | 84,334 | ||||||
Koppers Holdings, Inc.* | 2,180 | 67,929 | ||||||
AdvanSix, Inc.* | 3,326 | 66,487 | ||||||
Mercer International, Inc. | 6,220 | 63,755 | ||||||
Rayonier Advanced Materials, Inc.* | 9,157 | 59,703 | ||||||
Carpenter Technology Corp. | 1,950 | 56,784 | ||||||
Allegheny Technologies, Inc.* | 1,930 | 32,366 | ||||||
Glatfelter Corp. | 1,250 | 20,475 | ||||||
Total Basic Materials | 451,833 | |||||||
Communications - 4.2% | ||||||||
Consolidated Communications Holdings, Inc.* | 15,829 | 77,404 | ||||||
Scholastic Corp. | 2,692 | 67,300 | ||||||
EW Scripps Co. — Class A | 3,620 | 55,350 | ||||||
Spok Holdings, Inc. | 3,712 | 41,315 | ||||||
AMC Networks, Inc. — Class A*,1 | 820 | 29,332 | ||||||
NETGEAR, Inc.* | 648 | 26,328 | ||||||
Gannett Company, Inc.* | 6,912 | 23,224 | ||||||
ePlus, Inc.* | 250 | 21,987 | ||||||
Total Communications | 342,240 | |||||||
Technology - 1.1% | ||||||||
Insight Enterprises, Inc.* | 810 | 61,633 | ||||||
MTS Systems Corp. | 440 | 25,590 | ||||||
Megalith Financial Acquisition Corp. — Class A* | 138 | 1,974 | ||||||
Total Technology | 89,197 | |||||||
Total Common Stocks | ||||||||
(Cost $7,013,116) | 8,092,724 | |||||||
Face | ||||||||
REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
J.P. Morgan Securities LLC | $ | 26,074 | 26,074 | |||||
Barclays Capital, Inc. | 10,862 | 10,862 | ||||||
BofA Securities, Inc. | 10,058 | 10,058 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $46,994) | 46,994 | |||||||
Shares | ||||||||
SECURITIES LENDING COLLATERAL†,3 - 1.3% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%4 | 107,897 | 107,897 | ||||||
Total Securities Lending Collateral | ||||||||
(Cost $107,897) | 107,897 | |||||||
Total Investments - 101.4% | ||||||||
(Cost $7,168,007) | $ | 8,247,615 | ||||||
Other Assets & Liabilities, net - (1.4)% | (117,163 | ) | ||||||
Total Net Assets - 100.0% | $ | 8,130,452 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
S&P SMALLCAP 600® PURE VALUE FUND |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Repurchase Agreements — See Note 6. |
3 | Securities lending collateral — See Note 7. |
4 | Rate indicated is the 7-day yield as of December 31, 2020. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 8,092,724 | $ | — | $ | — | $ | 8,092,724 | ||||||||
Repurchase Agreements | — | 46,994 | — | 46,994 | ||||||||||||
Securities Lending Collateral | 107,897 | — | — | 107,897 | ||||||||||||
Total Assets | $ | 8,200,621 | $ | 46,994 | $ | — | $ | 8,247,615 |
50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments, at value - including $101,964 of securities loaned (cost $7,121,013) | $ | 8,200,621 | ||
Repurchase agreements, at value (cost $46,994) | 46,994 | |||
Receivables: | ||||
Securities sold | 744,101 | |||
Fund shares sold | 9,516 | |||
Dividends | 8,110 | |||
Securities lending income | 276 | |||
Total assets | 9,009,618 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 179 | |||
Payable for: | ||||
Fund shares redeemed | 745,116 | |||
Return of securities lending collateral | 107,897 | |||
Management fees | 4,624 | |||
Securities purchased | 1,974 | |||
Transfer agent and administrative fees | 1,658 | |||
Investor service fees | 1,541 | |||
Portfolio accounting fees | 616 | |||
Trustees’ fees* | 113 | |||
Miscellaneous | 15,448 | |||
Total liabilities | 879,166 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 8,130,452 | ||
Net assets consist of: | ||||
Paid in capital | $ | 11,025,384 | ||
Total distributable earnings (loss) | (2,894,932 | ) | ||
Net assets | $ | 8,130,452 | ||
Capital shares outstanding | 136,154 | |||
Net asset value per share | $ | 59.72 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $134) | $ | 46,149 | ||
Interest | 169 | |||
Income from securities lending, net | 6,435 | |||
Total investment income | 52,753 | |||
Expenses: | ||||
Management fees | 36,686 | |||
Investor service fees | 12,229 | |||
Transfer agent and administrative fees | 16,826 | |||
Professional fees | 9,315 | |||
Portfolio accounting fees | 4,891 | |||
Trustees’ fees* | 1,496 | |||
Custodian fees | 773 | |||
Line of credit fees | 14 | |||
Miscellaneous | 2,037 | |||
Total expenses | 84,267 | |||
Net investment loss | (31,514 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | (703,672 | ) | ||
Net realized loss | (703,672 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (105,869 | ) | ||
Net change in unrealized appreciation (depreciation) | (105,869 | ) | ||
Net realized and unrealized loss | (809,541 | ) | ||
Net decrease in net assets resulting from operations | $ | (841,055 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 51 |
S&P SMALLCAP 600® PURE VALUE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (31,514 | ) | $ | (24,134 | ) | ||
Net realized gain (loss) on investments | (703,672 | ) | 361,026 | |||||
Net change in unrealized appreciation (depreciation) on investments | (105,869 | ) | 1,305,177 | |||||
Net increase (decrease) in net assets resulting from operations | (841,055 | ) | 1,642,069 | |||||
Distributions to shareholders | — | (22,849 | ) | |||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 13,118,125 | 18,171,779 | ||||||
Distributions reinvested | — | 22,849 | ||||||
Cost of shares redeemed | (13,223,227 | ) | (19,151,588 | ) | ||||
Net decrease from capital share transactions | (105,102 | ) | (956,960 | ) | ||||
Net increase (decrease) in net assets | (946,157 | ) | 662,260 | |||||
Net assets: | ||||||||
Beginning of year | 9,076,609 | 8,414,349 | ||||||
End of year | $ | 8,130,452 | $ | 9,076,609 | ||||
Capital share activity: | ||||||||
Shares sold | 253,112 | 308,030 | ||||||
Shares issued from reinvestment of distributions | — | 401 | ||||||
Shares redeemed | (259,881 | ) | (324,852 | ) | ||||
Net decrease in shares | (6,769 | ) | (16,421 | ) |
52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
S&P SMALLCAP 600® PURE VALUE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 63.51 | $ | 52.81 | $ | 66.48 | $ | 69.13 | $ | 52.48 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.31 | ) | (.17 | ) | .08 | (.23 | ) | (.45 | ) | |||||||||||
Net gain (loss) on investments (realized and unrealized) | (3.48 | ) | 11.06 | (13.75 | ) | (.20 | ) | 17.10 | ||||||||||||
Total from investment operations | (3.79 | ) | 10.89 | (13.67 | ) | (.43 | ) | 16.65 | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.19 | ) | — | — | — | ||||||||||||||
Net realized gains | — | — | — | (2.22 | ) | — | ||||||||||||||
Total distributions | — | (.19 | ) | — | (2.22 | ) | — | |||||||||||||
Net asset value, end of period | $ | 59.72 | $ | 63.51 | $ | 52.81 | $ | 66.48 | $ | 69.13 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (5.97 | %) | 20.68 | % | (20.58 | %) | (0.28 | %) | 31.74 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,130 | $ | 9,077 | $ | 8,414 | $ | 17,748 | $ | 28,408 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.64 | %) | (0.28 | %) | 0.12 | % | (0.35 | %) | (0.44 | %) | ||||||||||
Total expenses | 1.72 | % | 1.73 | % | 1.62 | % | 1.61 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 305 | % | 248 | % | 194 | % | 204 | % | 303 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 2:1 share split effective December 1, 2016. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
EUROPE 1.25x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark. The Fund’s current benchmark is 125% of the fair value of the STOXX Europe 50® Index (the “underlying index”).
For the one-year period ended December 31, 2020, Europe 1.25x Strategy Fund maintained a daily correlation of over 98% to its benchmark of 125% of the daily price movement of the underlying index. Europe 1.25x Strategy Fund returned 0.24% while the underlying index returned 2.19% over the same period.
The sectors contributing the most to the return of the underlying index for the period were the Information Technology, Consumer Discretionary, and Materials sectors. The Financials, Energy, and Communication Services sectors detracted from performance.
The stocks contributing the most to performance of the underlying index were ASML Holding N.G - Class G, LVMH Moet Hennessy Louis Vuitton SE, and Linde plc. Those detracting the most from return of the underlying index were Airbus SE, Banco Santander SA, and Societe Generale SA - Class A.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s positive performance.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
54 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 21.5% |
Guggenheim Strategy Fund II | 17.0% |
Nestle S.A. ADR | 0.5% |
Roche Holding AG ADR | 0.4% |
Novartis AG ADR | 0.4% |
ASML Holding N.V. — Class G | 0.3% |
LVMH Moet Hennessy Louis Vuitton SE ADR | 0.3% |
Unilever plc ADR | 0.2% |
SAP SE ADR | 0.2% |
Linde plc | 0.2% |
Top Ten Total | 41.0% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. |
Country Diversification
Country | % of Long-Term | |||
United Kingdom | 28.5 | % | ||
Switzerland | 21.0 | % | ||
France | 20.9 | % | ||
Germany | 14.4 | % | ||
Netherlands | 5.9 | % | ||
Italy | 2.6 | % | ||
Denmark | 2.6 | % | ||
Other | 4.1 | % | ||
Total Long–Term Investments | 100.0 | % |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Europe 1.25x Strategy Fund | 0.24% | 4.84% | 2.78% |
STOXX Europe 50 Index | 2.19% | 5.79% | 4.30% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The STOXX Europe 50 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 55 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
EUROPE 1.25x STRATEGY FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 7.3% | ||||||||
Consumer, Non-cyclical - 3.1% | ||||||||
Nestle S.A. ADR | 113 | $ | 13,311 | |||||
Roche Holding AG ADR | 221 | 9,689 | ||||||
Novartis AG ADR | 97 | 9,160 | ||||||
Unilever plc ADR | 103 | 6,217 | ||||||
AstraZeneca plc ADR | 103 | 5,149 | ||||||
Novo Nordisk A/S ADR | 67 | 4,680 | ||||||
Sanofi ADR | 90 | 4,373 | ||||||
L’Oreal S.A. ADR | 48 | 3,655 | ||||||
Diageo plc ADR | 23 | 3,653 | ||||||
GlaxoSmithKline plc ADR | 98 | 3,606 | ||||||
British American Tobacco plc ADR | 90 | 3,374 | ||||||
Reckitt Benckiser Group plc ADR | 143 | 2,591 | ||||||
Adyen N.V. ADR* | 55 | 2,552 | ||||||
Anheuser-Busch InBev S.A. ADR | 33 | 2,307 | ||||||
Bayer AG ADR | 155 | 2,300 | ||||||
RELX plc ADR | 78 | 1,924 | ||||||
Total Consumer, Non-cyclical | 78,541 | |||||||
Financial - 0.8% | ||||||||
HSBC Holdings plc ADR*,1 | 163 | 4,223 | ||||||
Allianz SE ADR | 163 | 4,018 | ||||||
Zurich Insurance Group AG ADR1 | 59 | 2,491 | ||||||
BNP Paribas S.A. ADR* | 91 | 2,422 | ||||||
UBS Group AG | 141 | 1,992 | ||||||
AXA S.A. ADR | 82 | 1,964 | ||||||
Prudential plc ADR1 | 51 | 1,883 | ||||||
Intesa Sanpaolo SpA ADR* | 120 | 1,698 | ||||||
Total Financial | 20,691 | |||||||
Basic Materials - 0.7% | ||||||||
Linde plc | 21 | 5,534 | ||||||
Rio Tinto plc ADR | 42 | 3,160 | ||||||
Air Liquide S.A. ADR | 93 | 3,059 | ||||||
BASF SE ADR | 145 | 2,853 | ||||||
BHP Group plc ADR | 39 | 2,068 | ||||||
Total Basic Materials | 16,674 | |||||||
Industrial - 0.6% | ||||||||
Siemens AG ADR | 59 | 4,236 | ||||||
Schneider Electric SE ADR | 112 | 3,242 | ||||||
Airbus SE ADR* | 91 | 2,486 | ||||||
Vinci S.A. ADR | 89 | 2,218 | ||||||
ABB Ltd. ADR | 71 | 1,985 | ||||||
Safran S.A. ADR* | 55 | 1,951 | ||||||
Total Industrial | 16,118 | |||||||
Technology - 0.6% | ||||||||
ASML Holding N.V. — Class G | 17 | 8,291 | ||||||
SAP SE ADR1 | 43 | 5,607 | ||||||
Total Technology | 13,898 | |||||||
Consumer, Cyclical - 0.6% | ||||||||
LVMH Moet Hennessy Louis Vuitton SE ADR | 52 | 6,486 | ||||||
adidas AG ADR*,1 | 15 | 2,745 | ||||||
Daimler AG ADR | 132 | 2,313 | ||||||
Kering S.A. ADR | 29 | 2,101 | ||||||
Total Consumer, Cyclical | 13,645 | |||||||
Energy - 0.4% | ||||||||
TOTAL SE ADR | 105 | 4,401 | ||||||
Royal Dutch Shell plc — Class A ADR | 81 | 2,846 | ||||||
BP plc ADR | 133 | 2,729 | ||||||
Total Energy | 9,976 | |||||||
Utilities - 0.3% | ||||||||
Iberdrola S.A. ADR | 57 | 3,277 | ||||||
Enel SpA ADR | 307 | 3,116 | ||||||
National Grid plc ADR | 28 | 1,653 | ||||||
Total Utilities | 8,046 | |||||||
Communications - 0.2% | ||||||||
Deutsche Telekom AG ADR | 127 | 2,320 | ||||||
Prosus N.V. ADR | 88 | 1,909 | ||||||
Vodafone Group plc ADR | 105 | 1,730 | ||||||
Total Communications | 5,959 | |||||||
Total Common Stocks | ||||||||
(Cost $124,666) | 183,548 | |||||||
MUTUAL FUNDS† - 38.5% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class2 | 54,416 | 543,073 | ||||||
Guggenheim Strategy Fund II2 | 17,191 | 429,079 | ||||||
Total Mutual Funds | ||||||||
(Cost $967,504) | 972,152 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 10.4% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/213,4 | $ | 262,000 | 261,990 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $261,985) | 261,990 | |||||||
REPURCHASE AGREEMENTS††,5 - 40.1% | ||||||||
J.P. Morgan Securities LLC | 560,788 | 560,788 | ||||||
Barclays Capital, Inc. | 233,630 | 233,630 | ||||||
BofA Securities, Inc. | 216,325 | 216,325 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,010,743) | 1,010,743 |
56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2020 |
EUROPE 1.25x STRATEGY FUND |
| Shares | Value | ||||||
SECURITIES LENDING COLLATERAL†,6 - 0.5% | ||||||||
Money Market Fund | ||||||||
First American Government Obligations Fund — Class Z, 0.03%7 | 12,966 | $ | 12,966 | |||||
Total Securities Lending Collateral | ||||||||
(Cost $12,966) | 12,966 | |||||||
Total Investments - 96.8% | ||||||||
(Cost $2,377,864) | $ | 2,441,399 | ||||||
Other Assets & Liabilities, net - 3.2% | 81,468 | |||||||
Total Net Assets - 100.0% | $ | 2,522,867 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased†† | ||||||||||||||||
STOXX Europe 50 Index Futures Contracts | 78 | Mar 2021 | $ | 2,959,015 | $ | 12,531 | ||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Euro FX Futures Contracts | 19 | Mar 2021 | 2,906,050 | 7,865 |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is on loan at December 31, 2020 — See Note 7. |
2 | Affiliated issuer. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
4 | Rate indicated is the effective yield at the time of purchase. |
5 | Repurchase Agreements — See Note 6. |
6 | Securities lending collateral — See Note 7. |
7 | Rate indicated is the 7-day yield as of December 31, 2020. |
ADR — American Depositary Receipt | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 183,548 | $ | — | $ | — | $ | 183,548 | ||||||||
Mutual Funds | 972,152 | — | — | 972,152 | ||||||||||||
U.S. Treasury Bills | — | 261,990 | — | 261,990 | ||||||||||||
Repurchase Agreements | — | 1,010,743 | — | 1,010,743 | ||||||||||||
Securities Lending Collateral | 12,966 | — | — | 12,966 | ||||||||||||
Equity Futures Contracts** | — | 12,531 | — | 12,531 | ||||||||||||
Currency Futures Contracts** | 7,865 | — | — | 7,865 | ||||||||||||
Total Assets | $ | 1,176,531 | $ | 1,285,264 | $ | — | $ | 2,461,795 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
EUROPE 1.25x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,040,436 | $ | 837,741 | $ | (1,447,000 | ) | $ | (7,782 | ) | $ | 5,684 | $ | 429,079 | 17,191 | $ | 7,757 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 909,864 | 1,006,613 | (1,375,000 | ) | (921 | ) | 2,517 | 543,073 | 54,416 | 6,626 | ||||||||||||||||||||||
$ | 1,950,300 | $ | 1,844,354 | $ | (2,822,000 | ) | $ | (8,703 | ) | $ | 8,201 | $ | 972,152 | $ | 14,383 |
58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EUROPE 1.25x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value - including $12,607 of securities loaned (cost $399,617) | $ | 458,504 | ||
Investments in affiliated issuers, at value (cost $967,504) | 972,152 | |||
Repurchase agreements, at value (cost $1,010,743) | 1,010,743 | |||
Segregated cash with broker | 110,562 | |||
Receivables: | ||||
Foreign tax reclaims | 7,573 | |||
Dividends | 981 | |||
Securities lending income | 30 | |||
Interest | 1 | |||
Total assets | 2,560,546 | |||
Liabilities: | ||||
Overdraft due to custodian bank | 314 | |||
Payable for: | ||||
Return of securities lending collateral | 12,966 | |||
Variation margin on futures contracts | 11,796 | |||
Fund shares redeemed | 4,347 | |||
Management fees | 1,507 | |||
Securities purchased | 756 | |||
Transfer agent and administrative fees | 473 | |||
Investor service fees | 439 | |||
Portfolio accounting fees | 176 | |||
Trustees’ fees* | 27 | |||
Miscellaneous | 4,878 | |||
Total liabilities | 37,679 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 2,522,867 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,453,707 | ||
Total distributable earnings (loss) | (930,840 | ) | ||
Net assets | $ | 2,522,867 | ||
Capital shares outstanding | 23,845 | |||
Net asset value per share | $ | 105.80 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers (net of foreign withholding tax of $774) | $ | 7,022 | ||
Dividends from securities of affiliated issuers | 14,383 | |||
Interest from securities of unaffiliated issuers | 2,423 | |||
Income from securities lending, net | 150 | |||
Total investment income | 23,978 | |||
Expenses: | ||||
Management fees | 18,216 | |||
Investor service fees | 5,060 | |||
Transfer agent and administrative fees | 7,317 | |||
Professional fees | 4,014 | |||
Portfolio accounting fees | 2,024 | |||
Custodian fees | 929 | |||
Trustees’ fees* | 782 | |||
Miscellaneous | 283 | |||
Total expenses | 38,625 | |||
Less: | ||||
Expenses waived by Adviser | (1,067 | ) | ||
Net expenses | 37,558 | |||
Net investment loss | (13,580 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (18,556 | ) | ||
Investments in affiliated issuers | (8,703 | ) | ||
Futures contracts | (13,888 | ) | ||
Foreign currency transactions | 21,066 | |||
Net realized loss | (20,081 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (60,467 | ) | ||
Investments in affiliated issuers | 8,201 | |||
Futures contracts | (35,148 | ) | ||
Foreign currency translations | (381 | ) | ||
Net change in unrealized appreciation (depreciation) | (87,795 | ) | ||
Net realized and unrealized loss | (107,876 | ) | ||
Net decrease in net assets resulting from operations | $ | (121,456 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
EUROPE 1.25x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (13,580 | ) | $ | 36,366 | |||
Net realized gain (loss) on investments | (20,081 | ) | 678,245 | |||||
Net change in unrealized appreciation (depreciation) on investments | (87,795 | ) | 145,354 | |||||
Net increase (decrease) in net assets resulting from operations | (121,456 | ) | 859,965 | |||||
Distributions to shareholders | (34,978 | ) | (73,007 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,584,974 | 26,408,052 | ||||||
Distributions reinvested | 34,978 | 73,007 | ||||||
Cost of shares redeemed | (6,930,469 | ) | (25,965,356 | ) | ||||
Net increase (decrease) from capital share transactions | (1,310,517 | ) | 515,703 | |||||
Net increase (decrease) in net assets | (1,466,951 | ) | 1,302,661 | |||||
Net assets: | ||||||||
Beginning of year | 3,989,818 | 2,687,157 | ||||||
End of year | $ | 2,522,867 | $ | 3,989,818 | ||||
Capital share activity: | ||||||||
Shares sold | 55,745 | 269,303 | ||||||
Shares issued from reinvestment of distributions | 361 | 734 | ||||||
Shares redeemed | (69,429 | ) | (264,674 | ) | ||||
Net increase (decrease) in shares | (13,323 | ) | 5,363 |
60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EUROPE 1.25x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 107.35 | $ | 84.49 | $ | 104.66 | $ | 82.06 | $ | 88.28 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.63 | ) | .76 | 1.66 | .25 | .25 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .73 | f | 23.18 | (21.46 | ) | 23.17 | (6.25 | ) | ||||||||||||
Total from investment operations | .10 | 23.94 | (19.80 | ) | 23.42 | (6.00 | ) | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.65 | ) | (1.08 | ) | (.37 | ) | (.82 | ) | (.22 | ) | ||||||||||
Total distributions | (1.65 | ) | (1.08 | ) | (.37 | ) | (.82 | ) | (.22 | ) | ||||||||||
Net asset value, end of period | $ | 105.80 | $ | 107.35 | $ | 84.49 | $ | 104.66 | $ | 82.06 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 0.24 | % | 28.43 | % | (18.97 | %) | 28.60 | % | (5.58 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,523 | $ | 3,990 | $ | 2,687 | $ | 5,725 | $ | 2,553 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.67 | %) | 0.77 | % | 1.67 | % | 0.26 | % | 1.70 | % | ||||||||||
Total expensesc | 1.91 | % | 1.88 | % | 1.78 | % | 1.80 | % | 1.73 | % | ||||||||||
Net expensesd | 1.86 | % | 1.80 | % | 1.77 | % | 1.80 | % | 1.73 | % | ||||||||||
Portfolio turnover rate | 212 | % | 391 | % | 187 | % | 121 | % | 441 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:6 reverse share split effective December 1, 2016. |
f | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the year because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
JAPAN 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark. The Fund’s current benchmark is 200% of the fair value of the Nikkei-225 Stock Average Index (the “underlying index”).
For the one-year period ended December 31, 2020, Japan 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the fair value of the underlying index. Japan 2x Strategy Fund returned 40.46%, while the underlying index returned 22.35% over the same time period.
The sectors contributing the most to the return of the underlying index for the period were Consumer Discretionary, Health Care, and Information Technology. The Financials, Real Estate, and Energy sectors detracted the most from the performance of the underlying index for the period.
Stocks contributing most to return of the underlying index were Fast Retailing Co., Softbank Group Corp., and Tokyo Electron Ltd. Those detracting most from performance of the underlying index were Mitsubishi UFJ Financial Group, Inc., Sumitomo Mitsui Financial Group, Inc., and Hitachi Ltd.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s positive performance.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
62 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: October 1, 2001 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 19.8% |
Guggenheim Strategy Fund II | 16.6% |
Total | 36.4% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Japan 2x Strategy Fund | 40.46% | 19.74% | 12.00% |
Nikkei-225 Stock Average Index | 22.35% | 10.99% | 7.82% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Nikkei-225 Stock Average Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 63 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
JAPAN 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 36.4% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 59,367 | $ | 592,484 | |||||
Guggenheim Strategy Fund II1 | 19,906 | 496,862 | ||||||
Total Mutual Funds | ||||||||
(Cost $1,079,456) | 1,089,346 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 11.5% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/212,3 | $ | 345,000 | 344,987 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $344,980) | 344,987 |
REPURCHASE AGREEMENTS††,4 - 49.4% | ||||||||
J.P. Morgan Securities LLC | 820,459 | 820,459 | ||||||
Barclays Capital, Inc. | 341,812 | 341,812 | ||||||
BofA Securities, Inc. | 316,492 | 316,492 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,478,763) | 1,478,763 | |||||||
Total Investments - 97.3% | ||||||||
(Cost $2,903,199) | $ | 2,913,096 | ||||||
Other Assets & Liabilities, net - 2.7% | 80,227 | |||||||
Total Net Assets - 100.0% | $ | 2,993,323 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Nikkei 225 (CME) Index Equity Futures Contracts | 44 | Mar 2021 | $ | 6,055,500 | $ | 198,000 | ||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
Japanese Yen Futures Contracts | 50 | Mar 2021 | 6,057,813 | 41,408 |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
CME — Chicago Mercantile Exchange | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 1,089,346 | $ | — | $ | — | $ | 1,089,346 | ||||||||
U.S. Treasury Bills | — | 344,987 | — | 344,987 | ||||||||||||
Repurchase Agreements | — | 1,478,763 | — | 1,478,763 | ||||||||||||
Equity Futures Contracts** | 198,000 | — | — | 198,000 | ||||||||||||
Currency Futures Contracts** | 41,408 | — | — | 41,408 | ||||||||||||
Total Assets | $ | 1,328,754 | $ | 1,823,750 | $ | — | $ | 3,152,504 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
JAPAN 2x STRATEGY FUND |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | �� | |||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 488,954 | $ | 726,126 | $ | (720,000 | ) | $ | (4,823 | ) | $ | 6,605 | $ | 496,862 | 19,906 | $ | 6,106 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 480,691 | 765,153 | (655,000 | ) | (1,370 | ) | 3,010 | 592,484 | 59,367 | 5,143 | ||||||||||||||||||||||
$ | 969,645 | $ | 1,491,279 | $ | (1,375,000 | ) | $ | (6,193 | ) | $ | 9,615 | $ | 1,089,346 | $ | 11,249 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
JAPAN 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $344,980) | $ | 344,987 | ||
Investments in affiliated issuers, at value (cost $1,079,456) | 1,089,346 | |||
Repurchase agreements, at value (cost $1,478,763) | 1,478,763 | |||
Segregated cash with broker | 2,342 | |||
Receivables: | ||||
Fund shares sold | 67,642 | |||
Variation margin on futures contracts | 18,928 | |||
Dividends | 692 | |||
Interest | 2 | |||
Total assets | 3,002,702 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 2,199 | |||
Management fees | 1,628 | |||
Printing fees | 932 | |||
Securities purchased | 772 | |||
Transfer agent and administrative fees | 615 | |||
Investor service fees | 571 | |||
Portfolio accounting fees | 228 | |||
Trustees’ fees* | 40 | |||
Fund shares redeemed | 33 | |||
Miscellaneous | 2,361 | |||
Total liabilities | 9,379 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 2,993,323 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,999,783 | ||
Total distributable earnings (loss) | (1,006,460 | ) | ||
Net assets | $ | 2,993,323 | ||
Capital shares outstanding | 25,242 | |||
Net asset value per share | $ | 118.59 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 11,249 | ||
Interest from securities of unaffiliated issuers | 3,032 | |||
Total investment income | 14,281 | |||
Expenses: | ||||
Management fees | 12,658 | |||
Investor service fees | 4,219 | |||
Transfer agent and administrative fees | 5,519 | |||
Professional fees | 3,128 | |||
Portfolio accounting fees | 1,688 | |||
Trustees’ fees* | 387 | |||
Custodian fees | 253 | |||
Miscellaneous | 1,151 | |||
Total expenses | 29,003 | |||
Less: | ||||
Expenses waived by Adviser | (843 | ) | ||
Net expenses | 28,160 | |||
Net investment loss | (13,879 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 774 | |||
Investments in affiliated issuers | (6,193 | ) | ||
Futures contracts | 351,081 | |||
Net realized gain | 345,662 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 10 | |||
Investments in affiliated issuers | 9,615 | |||
Futures contracts | 231,519 | |||
Net change in unrealized appreciation (depreciation) | 241,144 | |||
Net realized and unrealized gain | 586,806 | |||
Net increase in net assets resulting from operations | $ | 572,927 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
JAPAN 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (13,879 | ) | $ | 16,959 | |||
Net realized gain on investments | 345,662 | 482,682 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 241,144 | 76,423 | ||||||
Net increase in net assets resulting from operations | 572,927 | 576,064 | ||||||
Distributions to shareholders | (16,959 | ) | (25,936 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 4,641,138 | 10,910,626 | ||||||
Distributions reinvested | 16,959 | 25,936 | ||||||
Cost of shares redeemed | (4,257,909 | ) | (11,462,568 | ) | ||||
Net increase (decrease) from capital share transactions | 400,188 | (526,006 | ) | |||||
Net increase in net assets | 956,156 | 24,122 | ||||||
Net assets: | ||||||||
Beginning of year | 2,037,167 | 2,013,045 | ||||||
End of year | $ | 2,993,323 | $ | 2,037,167 | ||||
Capital share activity: | ||||||||
Shares sold | 60,712 | 151,194 | ||||||
Shares issued from reinvestment of distributions | 223 | 348 | ||||||
Shares redeemed | (59,560 | ) | (159,986 | ) | ||||
Net increase (decrease) in shares | 1,375 | (8,444 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 67 |
JAPAN 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 85.35 | $ | 62.30 | $ | 100.82 | $ | 67.08 | $ | 61.65 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.65 | ) | .66 | .70 | (.13 | ) | (.06 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 34.73 | 23.49 | (19.56 | ) | 33.87 | 5.49 | ||||||||||||||
Total from investment operations | 34.08 | 24.15 | (18.86 | ) | 33.74 | 5.43 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.84 | ) | (1.10 | ) | — | — | — | |||||||||||||
Net realized gains | — | — | (19.66 | ) | — | — | ||||||||||||||
Total distributions | (.84 | ) | (1.10 | ) | (19.66 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 118.59 | $ | 85.35 | $ | 62.30 | $ | 100.82 | $ | 67.08 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 40.46 | % | 39.03 | % | (22.95 | %) | 50.30 | % | 8.86 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,993 | $ | 2,037 | $ | 2,013 | $ | 5,614 | $ | 2,499 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.82 | %) | 0.89 | % | 0.76 | % | (0.15 | %) | (0.50 | %) | ||||||||||
Total expensesc | 1.72 | % | 1.72 | % | 1.58 | % | 1.83 | % | 1.56 | % | ||||||||||
Net expensesd | 1.67 | % | 1.64 | % | 1.58 | % | 1.83 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 199 | % | 153 | % | 180 | % | 73 | % | 183 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:6 reverse share split effective December 1, 2016. |
68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
STRENGTHENING DOLLAR 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the U.S. Dollar Index® (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Strengthening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the underlying index. Strengthening Dollar 2x Strategy Fund returned -14.03%, compared with a return of -6.69% for its benchmark, the underlying index.
The Euro, Japanese Yen, and Swedish Krona were the components which contributed the most to the DXY during 2020. The Canadian Dollar, Swiss Franc, and British Pound were the components which detracted the most from the DXY during 2020.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s positive performance.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
THE RYDEX FUNDS ANNUAL REPORT | 69 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: September 30, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 27.9% |
Guggenheim Strategy Fund II | 20.6% |
Total | 48.5% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Strengthening Dollar 2x Strategy Fund | (14.03%) | (2.39%) | 0.73% |
U.S. Dollar Index | (6.69%) | (1.83%) | 1.30% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
70 | THE RYDEX FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 48.5% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 43,502 | $ | 434,153 | |||||
Guggenheim Strategy Fund II1 | 12,805 | 319,625 | ||||||
Total Mutual Funds | ||||||||
(Cost $749,045) | 753,778 | |||||||
Face | ||||||||
FEDERAL AGENCY DISCOUNT NOTES†† - 5.1% | ||||||||
Federal Farm Credit Bank | ||||||||
0.06% due 01/04/212 | $ | 80,000 | 80,000 | |||||
Total Federal Agency Discount Notes | ||||||||
(Cost $80,000) | 80,000 | |||||||
U.S. TREASURY BILLS†† - 3.7% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/212,3 | 58,000 | 57,998 | ||||||
Total U.S. Treasury Bills | ||||||||
(Cost $57,997) | 57,998 |
REPURCHASE AGREEMENTS††,4 - 44.0% | ||||||||
J.P. Morgan Securities LLC | 380,014 | 380,014 | ||||||
Barclays Capital, Inc. | 158,318 | 158,318 | ||||||
BofA Securities, Inc. | 146,590 | 146,590 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $684,922) | 684,922 | |||||||
Total Investments - 101.3% | ||||||||
(Cost $1,571,964) | $ | 1,576,698 | ||||||
Other Assets & Liabilities, net - (1.3)% | (20,732 | ) | ||||||
Total Net Assets - 100.0% | $ | 1,555,966 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Currency Futures Contracts Purchased† | ||||||||||||||||
U.S. Dollar Index Futures Contracts | 30 | Mar 2021 | $ | 2,696,850 | $ | (32,562 | ) |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Currency Index Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | U.S. Dollar Index | N/A | At Maturity | 03/17/21 | 4,755 | $ | 427,547 | $ | (4,389 | ) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the effective yield at the time of purchase. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
4 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as currency index swap collateral at December 31, 2020. |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 753,778 | $ | — | $ | — | $ | 753,778 | ||||||||
Federal Agency Discount Notes | — | 80,000 | — | 80,000 | ||||||||||||
U.S. Treasury Bills | — | 57,998 | — | 57,998 | ||||||||||||
Repurchase Agreements | — | 684,922 | — | 684,922 | ||||||||||||
Total Assets | $ | 753,778 | $ | 822,920 | $ | — | $ | 1,576,698 |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Currency Futures Contracts** | $ | 32,562 | $ | — | $ | — | $ | 32,562 | ||||||||
Currency Index Swap Agreements** | — | 4,389 | — | 4,389 | ||||||||||||
Total Liabilities | $ | 32,562 | $ | 4,389 | $ | — | $ | 36,951 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles�� annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 323,643 | $ | 287,361 | $ | (290,000 | ) | $ | (4,210 | ) | $ | 2,831 | $ | 319,625 | 12,805 | $ | 7,348 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 322,019 | 643,793 | (530,000 | ) | (2,761 | ) | 1,102 | 434,153 | 43,502 | 6,786 | ||||||||||||||||||||||
$ | 645,662 | $ | 931,154 | $ | (820,000 | ) | $ | (6,971 | ) | $ | 3,933 | $ | 753,778 | $ | 14,134 |
72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $137,997) | $ | 137,998 | ||
Investments in affiliated issuers, at value (cost $749,045) | 753,778 | |||
Repurchase agreements, at value (cost $684,922) | 684,922 | |||
Receivables: | ||||
Variation margin on futures contracts | 7,380 | |||
Dividends | 726 | |||
Interest | 1 | |||
Total assets | 1,584,805 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 4,389 | |||
Payable for: | ||||
Fund shares redeemed | 12,453 | |||
Licensing fees | 4,757 | |||
Management fees | 1,171 | |||
Securities purchased | 780 | |||
Swap settlement | 761 | |||
Transfer agent and administrative fees | 377 | |||
Investor service fees | 351 | |||
Portfolio accounting fees | 140 | |||
Trustees’ fees* | 26 | |||
Miscellaneous | 3,634 | |||
Total liabilities | 28,839 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 1,555,966 | ||
Net assets consist of: | ||||
Paid in capital | $ | 2,875,885 | ||
Total distributable earnings (loss) | (1,319,919 | ) | ||
Net assets | $ | 1,555,966 | ||
Capital shares outstanding | 44,266 | |||
Net asset value per share | $ | 35.15 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 14,134 | ||
Interest | 3,960 | |||
Total investment income | 18,094 | |||
Expenses: | ||||
Management fees | 17,918 | |||
Investor service fees | 4,977 | |||
Transfer agent and administrative fees | 6,772 | |||
Professional fees | 3,645 | |||
Licensing fees | 2,773 | |||
Portfolio accounting fees | 1,991 | |||
Trustees’ fees* | 550 | |||
Custodian fees | 311 | |||
Miscellaneous | 1,198 | |||
Total expenses | 40,135 | |||
Less: | ||||
Expenses waived by Adviser | (1,130 | ) | ||
Net expenses | 39,005 | |||
Net investment loss | (20,911 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (6,971 | ) | ||
Swap agreements | (40,647 | ) | ||
Futures contracts | (295,007 | ) | ||
Net realized loss | (342,625 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 2 | |||
Investments in affiliated issuers | 3,933 | |||
Swap agreements | (546 | ) | ||
Futures contracts | (22,242 | ) | ||
Net change in unrealized appreciation (depreciation) | (18,853 | ) | ||
Net realized and unrealized loss | (361,478 | ) | ||
Net decrease in net assets resulting from operations | $ | (382,389 | ) |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (20,911 | ) | $ | 13,811 | |||
Net realized gain (loss) on investments | (342,625 | ) | 26,475 | |||||
Net change in unrealized appreciation (depreciation) on investments | (18,853 | ) | 40,613 | |||||
Net increase (decrease) in net assets resulting from operations | (382,389 | ) | 80,899 | |||||
Distributions to shareholders | (13,811 | ) | (21,820 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 23,485,177 | 43,014,728 | ||||||
Distributions reinvested | 13,811 | 21,820 | ||||||
Cost of shares redeemed | (22,958,927 | ) | (45,103,803 | ) | ||||
Net increase (decrease) from capital share transactions | 540,061 | (2,067,255 | ) | |||||
Net increase (decrease) in net assets | 143,861 | (2,008,176 | ) | |||||
Net assets: | ||||||||
Beginning of year | 1,412,105 | 3,420,281 | ||||||
End of year | $ | 1,555,966 | $ | 1,412,105 | ||||
Capital share activity: | ||||||||
Shares sold | 583,065 | 1,024,231 | ||||||
Shares issued from reinvestment of distributions | 351 | 523 | ||||||
Shares redeemed | (573,413 | ) | (1,076,580 | ) | ||||
Net increase (decrease) in shares | 10,003 | (51,826 | ) |
74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
STRENGTHENING DOLLAR 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 41.21 | $ | 39.73 | $ | 35.53 | $ | 43.90 | $ | 43.45 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.43 | ) | .21 | .27 | (.04 | ) | (.23 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | (5.32 | ) | 1.63 | 3.93 | (7.67 | ) | 2.96 | |||||||||||||
Total from investment operations | (5.75 | ) | 1.84 | 4.20 | (7.71 | ) | 2.73 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.31 | ) | (.36 | ) | — | — | — | |||||||||||||
Net realized gains | — | — | — | (.66 | ) | (2.28 | ) | |||||||||||||
Total distributions | (.31 | ) | (.36 | ) | — | (.66 | ) | (2.28 | ) | |||||||||||
Net asset value, end of period | $ | 35.15 | $ | 41.21 | $ | 39.73 | $ | 35.53 | $ | 43.90 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (14.03 | %) | 4.61 | % | 11.82 | % | (17.65 | %) | 7.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,556 | $ | 1,412 | $ | 3,420 | $ | 1,737 | $ | 5,644 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.05 | %) | 0.50 | % | 0.73 | % | (0.10 | %) | (0.57 | %) | ||||||||||
Total expensesc | 2.02 | % | 2.09 | % | 1.83 | % | 1.80 | % | 1.76 | % | ||||||||||
Net expensesd | 1.96 | % | 2.02 | % | 1.82 | % | 1.80 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 103 | % | 102 | % | 241 | % | 88 | % | 190 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2020 |
WEAKENING DOLLAR 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the inverse (opposite) of the performance of the U.S. Dollar Index (the “underlying index”).
The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended December 31, 2020, Weakening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the underlying index. Weakening Dollar 2x Strategy Fund returned 9.69%, compared with a return of -6.69% for its benchmark, the underlying index.
The Euro, Japanese Yen, and Swedish Krona were the components which contributed the most to the DXY during 2020. The Canadian Dollar, Swiss Franc, and British Pound were the components which detracted the most from the DXY during 2020.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and were a factor in the Fund’s negative performance.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the Fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
The Fund may invest in certain of the underlying series of Guggenheim Funds Trust and Guggenheim Strategy Funds Trust, including Guggenheim Ultra Short Duration, Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short-Term Investment Vehicles”), each of which are open-end management investment companies managed by Guggenheim Investments. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by Guggenheim Investments and/or its affiliates, and are not available to the public, with the exception of Guggenheim Ultra Short Duration Fund, which is available to the public. Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III do not charge an investment management fee. Guggenheim Ultra Short Duration Fund charges an investment management fee, but the Fund’s adviser has agreed to waive fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment in such affiliated fund. For the one-year period ended December 31, 2020, investment in the Short-Term Investment Vehicles benefited Fund performance.
Performance displayed represents past performance, which is no guarantee of future results.
76 | THE RYDEX FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2020 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund. Investments in those Funds do not provide “market exposure” to meet the Fund’s investment objective, but will significantly increase the portfolio’s exposure to certain other asset categories (and their associated risks), which may cause the Fund to deviate from its principal investment strategy, including: (i) high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization (also known as “junk bonds”); (ii) securities issued by the U.S. government or its agencies and instrumentalities; (iii) CLOs and similar investments; and (iv) other short-term fixed income securities.
Inception Date: September 30, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
Largest Holdings (% of Total Net Assets) | |
Guggenheim Ultra Short Duration Fund — Institutional Class | 22.9% |
Guggenheim Strategy Fund II | 15.7% |
Total | 38.6% |
“Largest Holdings” excludes any temporary cash or derivative investments. |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2020
| 1 Year | 5 Year | 10 Year |
Weakening Dollar 2x Strategy Fund | 9.69% | 0.09% | (4.74%) |
U.S. Dollar Index | (6.69%) | (1.83%) | 1.30% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
THE RYDEX FUNDS ANNUAL REPORT | 77 |
SCHEDULE OF INVESTMENTS | December 31, 2020 |
WEAKENING DOLLAR 2x STRATEGY FUND |
| Shares | Value | ||||||
MUTUAL FUNDS† - 38.6% | ||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 53,626 | $ | 535,187 | |||||
Guggenheim Strategy Fund II1 | 14,648 | 365,606 | ||||||
Total Mutual Funds | ||||||||
(Cost $897,650) | 900,793 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 4.0% | ||||||||
U.S. Treasury Bills | ||||||||
0.08% due 01/28/212,3 | $ | 92,000 | 91,997 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $91,995) | 91,997 |
REPURCHASE AGREEMENTS††,4 - 58.5% | ||||||||
J.P. Morgan Securities LLC | 757,422 | 757,422 | ||||||
Barclays Capital, Inc. | 315,550 | 315,550 | ||||||
BofA Securities, Inc. | 292,176 | 292,176 | ||||||
Total Repurchase Agreements | ||||||||
(Cost $1,365,148) | 1,365,148 | |||||||
Total Investments - 101.1% | ||||||||
(Cost $2,354,793) | $ | 2,357,938 | ||||||
Other Assets & Liabilities, net - (1.1)% | (26,314 | ) | ||||||
Total Net Assets - 100.0% | $ | 2,331,624 |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Currency Futures Contracts Sold Short† | ||||||||||||||||
U.S. Dollar Index Futures Contracts | 45 | Mar 2021 | $ | 4,045,275 | $ | 49,113 |
Total Return Swap Agreements | |||||||||||||||||||
Counterparty | Index | Financing | Payment | Maturity | Units | Notional | Value and | ||||||||||||
OTC Currency Index Swap Agreements Sold Short†† | |||||||||||||||||||
Goldman Sachs International | U.S. Dollar Index | N/A | At Maturity | 03/17/21 | 6,672 | $ | 599,888 | $ | 3,859 |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | All or a portion of this security is pledged as futures collateral at December 31, 2020. |
3 | Rate indicated is the effective yield at the time of purchase. |
4 | Repurchase Agreements — See Note 6. |
5 | All or a portion of this security is pledged as currency index swap collateral at December 31, 2020. |
See Sector Classification in Other Information section. |
78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2020 |
WEAKENING DOLLAR 2x STRATEGY FUND |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2020 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mutual Funds | $ | 900,793 | $ | — | $ | — | $ | 900,793 | ||||||||
U.S. Treasury Bills | — | 91,997 | — | 91,997 | ||||||||||||
Repurchase Agreements | — | 1,365,148 | — | 1,365,148 | ||||||||||||
Currency Futures Contracts** | 49,113 | — | — | 49,113 | ||||||||||||
Currency Index Swap Agreements** | — | 3,859 | — | 3,859 | ||||||||||||
Total Assets | $ | 949,906 | $ | 1,461,004 | $ | — | $ | 2,410,910 |
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2020, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126820000133/gug81042-ncsr.htm.
Transactions during the year ended December 31, 2020, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 127,529 | $ | 458,354 | $ | (220,000 | ) | $ | (1,740 | ) | $ | 1,463 | $ | 365,606 | 14,648 | $ | 3,325 | |||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 152,315 | 642,621 | (260,000 | ) | (683 | ) | 934 | 535,187 | 53,626 | 2,600 | ||||||||||||||||||||||
$ | 279,844 | $ | 1,100,975 | $ | (480,000 | ) | $ | (2,423 | ) | $ | 2,397 | $ | 900,793 | $ | 5,925 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
WEAKENING DOLLAR 2x STRATEGY FUND |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2020 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $91,995) | $ | 91,997 | ||
Investments in affiliated issuers, at value (cost $897,650) | 900,793 | |||
Repurchase agreements, at value (cost $1,365,148) | 1,365,148 | |||
Unrealized appreciation on OTC swap agreements | 3,859 | |||
Receivables: | ||||
Dividends | 658 | |||
Swap settlement | 143 | |||
Interest | 2 | |||
Total assets | 2,362,600 | |||
Liabilities: | ||||
Payable for: | ||||
Variation margin on futures contracts | 11,318 | |||
Fund shares redeemed | 10,457 | |||
Licensing fees | 1,885 | |||
Management fees | 1,515 | |||
Securities purchased | 722 | |||
Transfer agent and administrative fees | 477 | |||
Investor service fees | 443 | |||
Portfolio accounting fees | 177 | |||
Trustees’ fees* | 29 | |||
Miscellaneous | 3,953 | |||
Total liabilities | 30,976 | |||
Commitments and contingent liabilities (Note 11) | — | |||
Net assets | $ | 2,331,624 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,574,526 | ||
Total distributable earnings (loss) | (1,242,902 | ) | ||
Net assets | $ | 2,331,624 | ||
Capital shares outstanding | 37,998 | |||
Net asset value per share | $ | 61.36 |
STATEMENT OF OPERATIONS |
Year Ended December 31, 2020 |
Investment Income: | ||||
Dividends from securities of affiliated issuers | $ | 5,925 | ||
Interest | 1,175 | |||
Total investment income | 7,100 | |||
Expenses: | ||||
Management fees | 10,466 | |||
Investor service fees | 2,907 | |||
Transfer agent and administrative fees | 3,525 | |||
Professional fees | 1,984 | |||
Licensing fees | 1,534 | |||
Portfolio accounting fees | 1,163 | |||
Custodian fees | 162 | |||
Trustees’ fees* | 160 | |||
Miscellaneous | 1,337 | |||
Total expenses | 23,238 | |||
Less: | ||||
Expenses waived by Adviser | (476 | ) | ||
Net expenses | 22,762 | |||
Net investment loss | (15,662 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in affiliated issuers | (2,423 | ) | ||
Swap agreements | (20,470 | ) | ||
Futures contracts | 147,335 | |||
Net realized gain | 124,442 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 2 | |||
Investments in affiliated issuers | 2,397 | |||
Swap agreements | 1,425 | |||
Futures contracts | 41,688 | |||
Net change in unrealized appreciation (depreciation) | 45,512 | |||
Net realized and unrealized gain | 169,954 | |||
Net increase in net assets resulting from operations | $ | 154,292 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
WEAKENING DOLLAR 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (15,662 | ) | $ | 3,015 | |||
Net realized gain (loss) on investments | 124,442 | (5,196 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 45,512 | (532 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 154,292 | (2,713 | ) | |||||
Distributions to shareholders | (3,015 | ) | (4,772 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 38,842,654 | 15,676,550 | ||||||
Distributions reinvested | 3,015 | 4,772 | ||||||
Cost of shares redeemed | (37,252,358 | ) | (15,668,672 | ) | ||||
Net increase from capital share transactions | 1,593,311 | 12,650 | ||||||
Net increase in net assets | 1,744,588 | 5,165 | ||||||
Net assets: | ||||||||
Beginning of year | 587,036 | 581,871 | ||||||
End of year | $ | 2,331,624 | $ | 587,036 | ||||
Capital share activity: | ||||||||
Shares sold | 675,499 | 284,024 | ||||||
Shares issued from reinvestment of distributions | 54 | 86 | ||||||
Shares redeemed | (648,006 | ) | (283,428 | ) | ||||
Net increase in shares | 27,547 | 682 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
WEAKENING DOLLAR 2x STRATEGY FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 56.17 | $ | 59.56 | $ | 67.40 | $ | 56.49 | $ | 61.90 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.76 | ) | .28 | .40 | (.14 | ) | (.11 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.19 | (3.17 | ) | (8.24 | ) | 11.05 | (5.30 | ) | ||||||||||||
Total from investment operations | 5.43 | (2.89 | ) | (7.84 | ) | 10.91 | (5.41 | ) | ||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.24 | ) | (.50 | ) | — | — | — | |||||||||||||
Total distributions | (.24 | ) | (.50 | ) | — | — | — | |||||||||||||
Net asset value, end of period | $ | 61.36 | $ | 56.17 | $ | 59.56 | $ | 67.40 | $ | 56.49 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 9.69 | % | (4.85 | %) | (11.63 | %) | 19.31 | % | (8.71 | %) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,332 | $ | 587 | $ | 582 | $ | 779 | $ | 687 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.35 | %) | 0.50 | % | 0.61 | % | (0.22 | %) | (0.63 | %) | ||||||||||
Total expensesc | 2.00 | % | 2.08 | % | 1.82 | % | 1.80 | % | 1.76 | % | ||||||||||
Net expensesd | 1.96 | % | 2.00 | % | 1.81 | % | 1.80 | % | 1.76 | % | ||||||||||
Portfolio turnover rate | 129 | % | 187 | % | 213 | % | 367 | % | 250 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Rydex Variable Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Reverse share split — Per share amounts for the year ended December 31, 2016 have been restated to reflect a 1:4 reverse share split effective December 1, 2016. |
82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
The Rydex Variable Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust may issue an unlimited number of authorized shares. The Trust accounts for the assets of each Fund separately. At December 31, 2020, the Trust consisted of forty-nine funds. The Trust offers shares of the funds to insurance companies for their variable annuity and variable life insurance contracts.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment | |||
S&P 500® Pure Growth Fund | Non-diversified | |||
S&P 500® Pure Value Fund | Non-diversified | |||
S&P MidCap 400® Pure Growth Fund | Non-diversified | |||
S&P MidCap 400® Pure Value Fund | Non-diversified | |||
S&P SmallCap 600® Pure Growth Fund | Non-diversified | |||
S&P SmallCap 600® Pure Value Fund | Non-diversified | |||
Europe 1.25x Strategy Fund | Non-diversified | |||
Japan 2x Strategy Fund | Non-diversified | |||
Strengthening Dollar 2x Strategy Fund | Non-diversified | |||
Weakening Dollar 2x Strategy Fund | Non-diversified |
The Funds are designed and operated to accommodate frequent trading by shareholders and, unlike most mutual funds, offer unlimited exchange privileges with no minimum holding periods or transactions fees, which may cause the Funds to experience high portfolio turnover.
Security Investors, LLC, which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The net asset value per share (“NAV”) of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that fund.
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds and closed-end investment companies are valued at the last quoted sale price.
THE RYDEX FUNDS ANNUAL REPORT | 83 |
NOTES TO FINANCIAL STATEMENTS (continued) |
U.S. Government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition are valued at amortized cost, provided such amount approximates market value.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The value of currency index swap agreements entered into by a Fund is accounted for using the unrealized appreciation or depreciation on the agreements that is determined by marking the agreements to the broker quote.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis. In connection with futures contracts and other derivative investments, such factors may include obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Futures Contracts
Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(d) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
(e) Currency Translations
The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation, or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain or loss and unrealized appreciation or depreciation on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment
84 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
transactions. Net unrealized appreciation and depreciation arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(f) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2020, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(g) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(h) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(i) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.09% at December 31, 2020.
(j) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Derivatives
As part of their investment strategy, the Funds utilize a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized on the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.
The Funds may utilize derivatives for the following purposes:
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
THE RYDEX FUNDS ANNUAL REPORT | 85 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Liquidity: the ability to buy or sell exposure with little price/market impact.
For any Fund whose investment strategy consistently involves applying leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if they had not been leveraged.
Futures Contracts
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to a Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Europe 1.25x Strategy Fund | Index exposure, Leverage, Liquidity | $ | 4,453,590 | $ | — | ||||
Japan 2x Strategy Fund | Index exposure, Leverage, Liquidity | 6,963,453 | — | ||||||
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | 3,330,620 | — | ||||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 1,949,209 |
Swap Agreements
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing over-the-counter (“OTC”) swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally-cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. There is no guarantee that a fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
Currency swaps enable the Funds to gain exposure to currencies in a market without actually possessing a given currency, or to hedge a position. Currency swaps involve the exchange of the principal and interest in one currency for the principal and interest in another currency. As in other types of OTC swaps, the Funds may be at risk due to the counterparty’s inability to perform.
The following table represents the Funds’ use and volume of currency swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Strengthening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | $ | 627,500 | $ | — | ||||
Weakening Dollar 2x Strategy Fund | Index exposure, Leverage, Liquidity | — | 309,994 |
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2020:
86 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/Currency contracts | Variation margin on futures contracts | Variation margin on futures contracts |
Currency contracts | Unrealized appreciation on OTC swap agreements | Unrealized depreciation on OTC swap agreements |
The following tables set forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2020:
Asset Derivative Investments Value | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total Value at | ||||||||||||
Europe 1.25x Strategy Fund | $ | 12,531 | $ | 7,865 | $ | — | $ | 20,396 | ||||||||
Japan 2x Strategy Fund | 198,000 | 41,408 | — | 239,408 | ||||||||||||
Weakening Dollar 2x Strategy Fund | — | 49,113 | 3,859 | 52,972 |
Liability Derivative Investments Value | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total Value at | ||||||||||||
Strengthening Dollar 2x Strategy Fund | $ | — | $ | 32,562 | $ | 4,389 | $ | 36,951 |
* | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. For exchange-traded and centrally-cleared derivatives, variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2020:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Equity/Currency contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
Currency contracts | Net realized gain (loss) on swap agreements |
| Net change in unrealized appreciation (depreciation) on swap agreements |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended December 31, 2020:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | (193,742 | ) | $ | 179,854 | $ | — | $ | (13,888 | ) | ||||||
Japan 2x Strategy Fund | 158,916 | 192,165 | — | 351,081 | ||||||||||||
Strengthening Dollar 2x Strategy Fund | — | (295,007 | ) | (40,647 | ) | (335,654 | ) | |||||||||
Weakening Dollar 2x Strategy Fund | — | 147,335 | (20,470 | ) | 126,865 |
THE RYDEX FUNDS ANNUAL REPORT | 87 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||
Fund | Futures | Futures | Swaps | Total | ||||||||||||
Europe 1.25x Strategy Fund | $ | (2,989 | ) | $ | (32,159 | ) | $ | — | $ | (35,148 | ) | |||||
Japan 2x Strategy Fund | 178,893 | 52,626 | — | 231,519 | ||||||||||||
Strengthening Dollar 2x Strategy Fund | — | (22,242 | ) | (546 | ) | (22,788 | ) | |||||||||
Weakening Dollar 2x Strategy Fund | — | 41,688 | 1,425 | 43,113 |
In conjunction with the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
Note 3 – Offsetting
In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
88 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net Amount | ||||||||||||||||||
Weakening Dollar 2x Strategy Fund | Swap currency contracts | $ | 3,859 | $ | — | $ | 3,859 | $ | — | $ | — | $ | 3,859 |
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net Amount | ||||||||||||||||||
Strengthening Dollar 2x Strategy Fund | Swap currency contracts | $ | 4,389 | $ | — | $ | 4,389 | $ | (4,389 | ) | $ | — | $ | — |
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2020.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Europe 1.25x Strategy Fund | Goldman Sachs International | Futures contracts | $ | 110,562 | $ | — | ||||
Japan 2x Strategy Fund | Goldman Sachs International | Futures contracts | 2,342 | — |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
THE RYDEX FUNDS ANNUAL REPORT | 89 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees | |||
S&P 500® Pure Growth Fund | 0.75 | % | ||
S&P 500® Pure Value Fund | 0.75 | % | ||
S&P MidCap 400® Pure Growth Fund | 0.75 | % | ||
S&P MidCap 400® Pure Value Fund | 0.75 | % | ||
S&P SmallCap 600® Pure Growth Fund | 0.75 | % | ||
S&P SmallCap 600® Pure Value Fund | 0.75 | % | ||
Europe 1.25x Strategy Fund | 0.90 | % | ||
Japan 2x Strategy Fund | 0.75 | % | ||
Strengthening Dollar 2x Strategy Fund | 0.90 | % | ||
Weakening Dollar 2x Strategy Fund | 0.90 | % |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted an Investor Services Plan for which GFD and other firms that provide investor services (“Service Providers”) may receive compensation. The Funds will pay investor service fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for investor services it performs.
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. Fee waivers will be calculated at the investing Fund level without regard to any expense cap in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI. For the year ended December 31, 2020, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Europe 1.25x Strategy Fund | $ | 1,067 | ||
Japan 2x Strategy Fund | 843 | |||
Strengthening Dollar 2x Strategy Fund | 1,130 | |||
Weakening Dollar 2x Strategy Fund | 476 |
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. U.S. Bank, N.A. (“U.S. Bank”) acts as the Funds’ custodian. As custodian, U.S. Bank is responsible for the custody of the Funds’ assets. For providing the aforementioned services, MUIS and U.S. Bank are entitled to receive a monthly fee equal to an annual percentage of each Fund’s average daily net assets and out of pocket expenses.
90 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 6 – Repurchase Agreements
The Funds transfer uninvested cash balances into a single joint account, the daily aggregate balance of which is invested in one or more repurchase agreements collateralized by obligations of the U.S. Treasury and U.S. government agencies. The joint account includes other Funds in the Guggenheim complex not covered in this report. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements. Each Fund holds a pro rata share of the collateral based on the dollar amount of the repurchase agreement entered into by each Fund.
At December 31, 2020, the repurchase agreements in the joint account were as follows:
Counterparty and | Face Value | Repurchase Price |
| Collateral | Par Value | Fair Value | ||||||||||||
J.P. Morgan Securities LLC | U.S. Treasury Note | |||||||||||||||||
0.06% | 2.13% | |||||||||||||||||
Due 01/04/21 | $ | 52,863,147 | $ | 52,863,499 | 02/29/24 | $ | 50,484,000 | $ | 53,920,527 | |||||||||
Barclays Capital, Inc. | U.S. Treasury Note | |||||||||||||||||
0.06% | 1.63% | |||||||||||||||||
Due 01/04/21 | 22,023,354 | 22,023,501 | 11/15/22 | 21,811,900 | 22,463,921 | |||||||||||||
BofA Securities, Inc. | U.S. Treasury Bond | |||||||||||||||||
0.06% | 5.25% | |||||||||||||||||
Due 01/04/21 | 20,391,995 | 20,392,131 | 11/15/28 | 15,370,000 | 20,799,887 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
Note 7 – Portfolio Securities Loaned
The Funds may lend their securities to approved brokers to earn additional income. Security lending income shown on the Statements of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Funds act as the lender, U.S. Bank acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with U.S. Bank, cash collateral and proceeds are invested in the First American Government Obligations Fund — Class Z. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering their securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand. Securities lending transactions are accounted for as secured borrowings. The remaining contractual maturity of the securities lending agreement is overnight and continuous.
THE RYDEX FUNDS ANNUAL REPORT | 91 |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2020, the Funds participated in securities lending transactions, which are subject to enforceable netting arrangements, as follows:
Gross Amounts Not Offset in the | Securities Lending Collateral | ||||||||||||||||||||||||
Fund | Value of | Collateral | Net | Cash | Cash | Total | |||||||||||||||||||
S&P 500® Pure Value Fund | $ | 40,622 | $ | (40,622 | ) | $ | — | $ | 41,349 | $ | — | $ | 41,349 | ||||||||||||
S&P MidCap 400® Pure Value Fund | 91,261 | (91,261 | ) | — | 94,481 | — | 94,481 | ||||||||||||||||||
S&P SmallCap 600® Pure Growth Fund | 555,893 | (555,893 | ) | — | 577,649 | — | 577,649 | ||||||||||||||||||
S&P SmallCap 600® Pure Value Fund | 101,964 | (101,964 | ) | — | 107,897 | — | 107,897 | ||||||||||||||||||
Europe 1.25x Strategy Fund | 12,607 | (12,607 | ) | — | 12,966 | — | 12,966 |
(a) | Actual collateral received by the Fund is generally greater than the amount shown due to overcollateralization. |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. GI, acting under the supervision of the Board, reviews the value of the collateral and the creditworthiness of those banks and dealers to evaluate potential risks.
Note 8 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2020 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
S&P 500® Pure Growth Fund | $ | 4,645,829 | $ | 2,219,457 | $ | 6,865,286 | ||||||
S&P 500® Pure Value Fund | 1,768,964 | — | 1,768,964 | |||||||||
S&P MidCap 400® Pure Growth Fund | — | 549,822 | 549,822 | |||||||||
S&P MidCap 400® Pure Value Fund | 307,126 | — | 307,126 | |||||||||
S&P SmallCap 600® Pure Growth Fund | — | 448,156 | 448,156 | |||||||||
Europe 1.25x Strategy Fund | 34,978 | — | 34,978 | |||||||||
Japan 2x Strategy Fund | 16,959 | — | 16,959 | |||||||||
Strengthening Dollar 2x Strategy Fund | 13,811 | — | 13,811 | |||||||||
Weakening Dollar 2x Strategy Fund | 3,015 | — | 3,015 |
92 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2019 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
S&P 500® Pure Growth Fund | $ | — | $ | 893,743 | $ | 893,743 | ||||||
S&P 500® Pure Value Fund | 269,858 | 404,516 | 674,374 | |||||||||
S&P SmallCap 600® Pure Value Fund | 22,849 | — | 22,849 | |||||||||
Europe 1.25x Strategy Fund | 73,007 | — | 73,007 | |||||||||
Japan 2x Strategy Fund | 25,936 | — | 25,936 | |||||||||
Strengthening Dollar 2x Strategy Fund | 21,820 | — | 21,820 | |||||||||
Weakening Dollar 2x Strategy Fund | 4,772 | — | 4,772 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2020 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
S&P 500® Pure Growth Fund | $ | 180,112 | $ | — | $ | 8,757,421 | $ | — | $ | 8,937,533 | ||||||||||
S&P 500® Pure Value Fund | 221,197 | 91,396 | 1,565,227 | — | 1,877,820 | |||||||||||||||
S&P MidCap 400® Pure Growth Fund | 1,308,111 | 198,668 | 3,757,677 | — | 5,264,456 | |||||||||||||||
S&P MidCap 400® Pure Value Fund | 658,992 | — | 933,289 | — | 1,592,281 | |||||||||||||||
S&P SmallCap 600® Pure Growth Fund | 64,639 | — | 2,177,473 | — | 2,242,112 | |||||||||||||||
S&P SmallCap 600® Pure Value Fund | — | — | (220,889 | ) | (2,674,043 | ) | (2,894,932 | ) | ||||||||||||
Europe 1.25x Strategy Fund | 7,486 | — | 37,843 | (976,169 | ) | (930,840 | ) | |||||||||||||
Japan 2x Strategy Fund | — | — | 4,655 | (1,011,115 | ) | (1,006,460 | ) | |||||||||||||
Strengthening Dollar 2x Strategy Fund | — | — | 4,008 | (1,323,927 | ) | (1,319,919 | ) | |||||||||||||
Weakening Dollar 2x Strategy Fund | — | — | 3,135 | (1,246,037 | ) | (1,242,902 | ) |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. The Funds are permitted to carry forward capital losses for an unlimited period and such capital loss carryforwards retain their character as either short-term or long-term capital losses. As of December 31, 2020, capital loss carryforwards for the Funds were as follows:
Unlimited | Total | |||||||||||
Fund | Short-Term | Long-Term | Carryforward | |||||||||
S&P SmallCap 600® Pure Value Fund | $ | (1,525,199 | ) | $ | (1,148,844 | ) | $ | (2,674,043 | ) | |||
Europe 1.25x Strategy Fund | (750,688 | ) | (225,481 | ) | (976,169 | ) | ||||||
Japan 2x Strategy Fund | (402,795 | ) | (608,320 | ) | (1,011,115 | ) | ||||||
Strengthening Dollar 2x Strategy Fund | (535,708 | ) | (788,219 | ) | (1,323,927 | ) | ||||||
Weakening Dollar 2x Strategy Fund | (515,738 | ) | (730,299 | ) | (1,246,037 | ) |
For the year ended December 31, 2020, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
Japan 2x Strategy Fund | $ | 581,491 | ||
Weakening Dollar 2x Strategy Fund | 167,374 |
THE RYDEX FUNDS ANNUAL REPORT | 93 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, foreign currency gains and losses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, and the “mark-to-market” of certain derivatives. Additional differences may result from the tax treatment of net operating losses. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2020 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
S&P 500® Pure Growth Fund | $ | 4,780,394 | $ | (4,780,394 | ) | |||
S&P 500® Pure Value Fund | 3,122 | (3,122 | ) | |||||
S&P MidCap 400® Pure Growth Fund | 423,361 | (423,361 | ) | |||||
S&P MidCap 400® Pure Value Fund | 271,042 | (271,042 | ) | |||||
S&P SmallCap 600® Pure Growth Fund | 290,688 | (290,688 | ) | |||||
S&P SmallCap 600® Pure Value Fund | (20,280 | ) | 20,280 | |||||
Japan 2x Strategy Fund | (13,879 | ) | 13,879 | |||||
Strengthening Dollar 2x Strategy Fund | (20,911 | ) | 20,911 | |||||
Weakening Dollar 2x Strategy Fund | (15,662 | ) | 15,662 |
At December 31, 2020, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net Tax | ||||||||||||
S&P 500® Pure Growth Fund | $ | 26,808,036 | $ | 8,910,535 | $ | (153,114 | ) | $ | 8,757,421 | |||||||
S&P 500® Pure Value Fund | 24,562,825 | 1,668,350 | (103,123 | ) | 1,565,227 | |||||||||||
S&P MidCap 400® Pure Growth Fund | 17,174,852 | 3,971,253 | (213,576 | ) | 3,757,677 | |||||||||||
S&P MidCap 400® Pure Value Fund | 15,557,174 | 984,567 | (51,278 | ) | 933,289 | |||||||||||
S&P SmallCap 600® Pure Growth Fund | 14,425,458 | 2,411,464 | (233,991 | ) | 2,177,473 | |||||||||||
S&P SmallCap 600® Pure Value Fund | 8,468,504 | — | (220,889 | ) | (220,889 | ) | ||||||||||
Europe 1.25x Strategy Fund | 2,403,264 | 38,227 | (92 | ) | 38,135 | |||||||||||
Japan 2x Strategy Fund | 2,908,441 | 4,655 | — | 4,655 | ||||||||||||
Strengthening Dollar 2x Strategy Fund | 1,572,690 | 4,008 | — | 4,008 | ||||||||||||
Weakening Dollar 2x Strategy Fund | 2,354,803 | 3,135 | — | 3,135 |
Note 9 – Securities Transactions
For the year ended December 31, 2020, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
S&P 500® Pure Growth Fund | $ | 53,505,598 | $ | 68,720,453 | ||||
S&P 500® Pure Value Fund | 31,980,671 | 37,704,212 | ||||||
S&P MidCap 400® Pure Growth Fund | 32,817,974 | 29,597,287 | ||||||
S&P MidCap 400® Pure Value Fund | 32,490,947 | 26,700,250 | ||||||
S&P SmallCap 600® Pure Growth Fund | 27,086,377 | 25,257,641 | ||||||
S&P SmallCap 600® Pure Value Fund | 15,664,526 | 15,778,219 | ||||||
Europe 1.25x Strategy Fund | 2,353,045 | 3,746,984 | ||||||
Japan 2x Strategy Fund | 1,491,278 | 1,375,000 | ||||||
Strengthening Dollar 2x Strategy Fund | 931,154 | 820,000 | ||||||
Weakening Dollar 2x Strategy Fund | 1,100,975 | 480,000 |
94 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2020, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized | |||||||||
S&P 500® Pure Growth Fund | $ | 13,786,965 | $ | 16,097,339 | $ | 510,780 | ||||||
S&P 500® Pure Value Fund | 6,748,703 | 8,252,703 | (251,933 | ) | ||||||||
S&P MidCap 400® Pure Growth Fund | 2,277,368 | 2,207,268 | 152,062 | |||||||||
S&P MidCap 400® Pure Value Fund | 2,807,628 | 1,500,029 | 59,312 | |||||||||
S&P SmallCap 600® Pure Growth Fund | 1,637,208 | 1,020,332 | (53,679 | ) | ||||||||
S&P SmallCap 600® Pure Value Fund | 1,329,230 | 1,959,884 | 184,069 | |||||||||
Europe 1.25x Strategy Fund | 385,840 | 686,263 | (19,983 | ) |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured an uncommitted $75,000,000 line of credit from U.S. Bank, N.A., which expired June 8, 2020. On March 30, 2020, the Board approved increasing the line of credit from $75,000,000 to $150,000,000. On June 8, 2020, the line of credit agreement was renewed at the increased $150,000,000 amount and expires on June 7, 2021. This line of credit is reserved for emergency or temporary purposes. Borrowings, if any, under this arrangement bear interest equal to the Prime Rate, minus 2%, which shall be paid monthly, averaging 1.54% for the year ended December 31, 2020. The Funds did not have any borrowings outstanding under this agreement at December 31, 2020.
The average daily balances borrowed for the year ended December 31, 2020, were as follows:
Fund | Average Daily Balance | |||
S&P 500® Pure Growth Fund | $ | 4,467 | ||
S&P 500® Pure Value Fund | 675 | |||
S&P MidCap 400® Pure Growth Fund | 1,505 | |||
S&P MidCap 400® Pure Value Fund | 251 | |||
S&P SmallCap 600® Pure Growth Fund | 5,833 | |||
S&P SmallCap 600® Pure Value Fund | 1,128 | |||
Europe 1.25x Strategy Fund | 213 |
Note 11 – Legal Proceedings
Tribune Company
Rydex Variable Trust has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the Rydex Variable Trust of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the Rydex Variable Trust, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). Rydex Variable Trust has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
THE RYDEX FUNDS ANNUAL REPORT | 95 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, Plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed an opposition to Plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020. On July 6, 2020, plaintiffs filed a new petition for a writ of certiorari in the U.S. Supreme Court. In that petition, plaintiffs stated that “[t]o make it more likely that there will be a quorum for this petition,” they have “abandon[ed] the case and let the judgment below stand” with respect to certain defendants. That list did not include Rydex Variable Trust. Defendants filed an opposition to the petition for certiorari on August 26, 2020, and plaintiffs filed a reply in support of the petition for certiorari on September 8, 2020.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
96 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (concluded) |
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020. Plaintiff filed a reply brief on May 18, 2020. The Court held oral argument on August 24, 2020.
None of these lawsuits alleges any wrongdoing on the part of Rydex Variable Trust. The following series of Rydex Variable Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500 2x Strategy Fund, Multi-Cap Core Equity Fund, S&P 500 Pure Value Fund, Hedged Equity Fund and Multi-Hedge Strategies Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $12,580, $2,380, $1,360, $148,376, $2,720, and $119,034, respectively. At this stage of the proceedings, Rydex Variable Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 12 – COVID-19 and Recent Developments
The global ongoing crisis caused by the outbreak of COVID-19 is causing materially reduced consumer demand and economic output, disrupting supply chains, resulting in market closures, travel restrictions and quarantines, and adversely impacting local and global economies. Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions all over the world, the Funds’ investments and a shareholder’s investment in a Fund are subject to sudden and substantial losses, increased volatility and other adverse events. Firms through which investors invest with the Funds, the Funds, their service providers, the markets in which they invest and market intermediaries are also impacted by quarantines and similar measures intended to contain the ongoing pandemic, which can obstruct their functioning and subject them to heightened operational risks.
Note 13 – Subsequent Events
On February 10, 2021, the Trust, along with other affiliated trusts, increased the line of credit agreement with U.S. Bank, N.A. from $150,000,000 to $200,000,000.
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events, other than disclosed above, that would require adjustment to or disclosure in the Funds’ financial statements.
THE RYDEX FUNDS ANNUAL REPORT | 97 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P Mid Cap 400® Pure Growth Fund, S&P Mid Cap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund and the Board of Trustees of Rydex Variable Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of S&P 500® Pure Growth Fund, S&P 500® Pure Value Fund, S&P Mid Cap 400® Pure Growth Fund, S&P Mid Cap 400® Pure Value Fund, S&P SmallCap 600® Pure Growth Fund, S&P SmallCap 600® Pure Value Fund, Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund (collectively referred to as the “Funds”), (ten of the funds constituting Rydex Variable Trust (the “Trust”)), including the schedules of investments, as of December 31, 2020, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (ten of the funds constituting Rydex Variable Trust) at December 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian, transfer agent, and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 26, 2021
98 | THE RYDEX FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2021, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2020.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2020, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
S&P 500® Pure Growth Fund | 9.21 | % | ||
S&P 500® Pure Value Fund | 46.92 | % | ||
S&P MidCap 400® Pure Value Fund | 36.04 | % | ||
Europe 1.25x Strategy Fund | 5.73 | % |
With respect to the taxable year ended December 31, 2020, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term | From long-term capital | ||||||
S&P 500® Pure Growth Fund | $ | 2,219,457 | $ | 3,800,974 | ||||
S&P MidCap 400® Pure Growth Fund | 549,822 | 423,361 | ||||||
S&P MidCap 400® Pure Value Fund | — | 194,880 | ||||||
S&P SmallCap 600® Pure Growth Fund | 448,156 | 236,803 |
Delivery of Shareholder Reports
Paper copies of the Funds’ annual and semi-annual shareholder reports are not sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract or from your financial intermediary. Instead, the reports are made available on a website, and you are notified by mail each time a report is posted and provided with a website address to access the report.
You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper may apply to all portfolio companies available under your contract.
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
THE RYDEX FUNDS ANNUAL REPORT | 99 |
OTHER INFORMATION (Unaudited)(concluded) |
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
100 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other Directorships |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee and Chair of the Valuation Oversight Committee | Since 2019 (Trustee)
Since 2020 | Current: Private Investor (2001-present).
Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990). | 157 | Current: Purpose Investments Funds (2013-present).
Former: Managed Duration Investment Grade Municipal Fund (2006-2016). |
Angela Brock-Kyle (1959) | Trustee | Since 2016 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present).
Former: Senior Leader, TIAA (1987-2012). | 156 | Current: Bowhead Insurance GP, LLC (2020-present); Hunt Companies, Inc. (2019-present).
Former: Infinity Property & Casualty Corp. (2014-2018). |
Donald A. Chubb, Jr. (1946)1 | Trustee | Since 2019 | Current: Retired.
Former: Business broker and manager of commercial real estate, Griffith & Blair, Inc. (1997-2017). | 156 | Former: Midland Care, Inc. (2011-2016). |
Jerry B. Farley (1946)1 | Trustee | Since 2019 | Current: President, Washburn University (1997-present). | 156 | Current: CoreFirst Bank & Trust (2000-present).
Former: Westar Energy, Inc. (2004-2018). |
Roman Friedrich III (1946)1 | Trustee | Since 2019 | Current: Founder and Managing Partner, Roman Friedrich & Company (1998-present). | 156 | Former: Zincore Metals, Inc. (2009-2019). |
Thomas F. Lydon, Jr. (1960) | Trustee and Chair of the Contracts Review Committee | Since 2005 (Trustee)
Since 2020 (Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 156 | Current: US Global Investors (GROW) (1995-present).
Former: Harvest Volatility Edge Trust (3) (2017-2019). |
THE RYDEX FUNDS ANNUAL REPORT | 101 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other Directorships |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2019 | Current: Of Counsel, Momkus LLP (2016-present).
Former: Partner, Nyberg & Cassioppi, LLC (2000-2016); Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999). | 157 | Current: PPM Funds (3) (2018-present); Edward-Elmhurst Healthcare System (2012-present).
Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2016 (Trustee)
Since 2019 | Current: Retired.
Former: Senior Vice President and Chief Financial Officer, M.A. Mortenson-Companies, Inc. (2007-2017). | 156 | Current: SPDR Series Trust (81) (2018-present); SPDR Index Shares Funds (30) (2018-present); SSGA Active Trust (14) (2018-present).
Former: SSGA Master Trust (1) (2018-2020). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2019 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present).
Former: Member, Executive Committee, Independent Directors Council (2016-2018); Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999); Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999). | 156 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) | Number of | Other Directorships |
INTERESTED TRUSTEE | |||||
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2019 | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present).
Former: President and Chief Executive Officer, certain other funds in the Fund Complex (2017-2019); Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012). | 156 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. |
*** | Each Trustee also serves on the Boards of Trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the Board of Trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
1 | Under the Funds’ Independent Trustees Retirement Policy, Messrs. Chubb, Farley and Friedrich are expected to retire in 2021. |
THE RYDEX FUNDS ANNUAL REPORT | 103 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2019 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
James M. Howley (1972) | Assistant Treasurer | Since 2016 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present).
Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004). |
Mark E. Mathiasen (1978) | Secretary | Since 2017 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2018 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present). Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim Distributors, LLC (2009-2014); Senior Manager, Security Investors, LLC (2004-2014); Senior Manager, Guggenheim Distributors, LLC (2004-2014). |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC and certain other funds in the Fund Complex (2017-present); Managing Director, Guggenheim Investments (2015-present).
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
104 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) Held | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
William Rehder (1967) | Assistant Vice President | Since 2018 | Current: Managing Director, Guggenheim Investments (2002-present). |
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2016 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009). |
Bryan Stone (1979) | Vice President | Since 2019 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2016 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and Chief Compliance Officer, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); Chief Financial Officer and Treasurer, Van Kampen Funds (1996-2004). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”), (2017); Senior Analyst of US Fund Administration, HGINA (2014–2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
THE RYDEX FUNDS ANNUAL REPORT | 105 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
THE RYDEX FUNDS ANNUAL REPORT | 107 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
108 | THE RYDEX FUNDS ANNUAL REPORT |
LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited) |
In compliance with SEC Rule 22e-4 under the U.S. Investment Company Act of 1940 (the “Liquidity Rule”), the Rydex Variable Trust (the “Trust”) has adopted and implemented a written liquidity risk management program (the “Program”) for each series of the Trust (each, a “Fund” and, collectively, the “Funds”). The Trust’s Board of Trustees (the “Board”) previously approved the designation of a Program administrator (the “Administrator”).
The Liquidity Rule requires that the Program be reasonably designed to assess and manage each Fund’s liquidity risk. A Fund’s “liquidity risk” is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of the remaining investors’ interests in the Fund. The Program includes a number of elements that support the assessment, management and review of liquidity risk. In accordance with the Program, each Fund’s liquidity risk is assessed no less frequently than annually taking into consideration a variety of factors, including, as applicable, the Fund’s investment strategy and liquidity of portfolio investments, cash flow projections, and holdings of cash and cash equivalents, as well as borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions. There is no guarantee that the Program will achieve its objective under all circumstances.
Under the Program, each Fund portfolio investment is classified into one of four liquidity categories based on a determination of the number of days it is reasonably expected to take to convert the investment to cash, or sell or dispose of the investment, in current market conditions without significantly changing the investment’s market value. The Program is reasonably designed to meet Liquidity Rule requirements relating to “highly liquid investment minimums” (i.e., the minimum amount of Fund net assets to be invested in highly liquid investments that are assets) and to monitor compliance with the Liquidity Rule’s limitations on a Fund’s investments in illiquid investments. Under the Liquidity Rule, a Fund is prohibited from acquiring any illiquid investment if, immediately after the acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments that are assets.
During the period covered by this shareholder report, the Board received a written report (the “Report”) prepared by the Administrator addressing the Program’s operation and assessing the adequacy and effectiveness of its implementation for the period from December 1, 2018, through March 31, 2020. The Report concluded that the Program operated effectively, the Program had been and continued to be reasonably designed to assess and manage each Fund’s liquidity risk and the Program has been adequately and effectively implemented to monitor and respond to the Funds’ liquidity developments, as applicable.
Please refer to your Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
THE RYDEX FUNDS ANNUAL REPORT | 109 |
Item 2. Code of Ethics.
The registrant’s Board of Trustees has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that it has at least one audit committee financial expert serving on its audit committee (the “Audit Committee”), Sandra G. Sponem. Ms. Sponem is “independent,” meaning that she is not an “interested person” of the Registrant (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) and she does not accept any consulting, advisory, or other compensatory fee from the Registrant (except in her capacity as a Board or committee member).
(Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the Audit Committee and Board of Trustees in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations or liability of any other member of the Audit Committee or Board of Trustees.)
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate Audit Fees billed by the registrant’s principal accountant for professional services rendered for the audit of the annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2020 and December 31, 2019 were $917,395, and $895,431, respectively.
(b) Audit Related Fees. The aggregate Audit-Related Fees billed by the registrant’s principal accountant for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item for the fiscal years ended December 31, 2020 and December 31, 2019 were $0 and $0, respectively.
The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor to the registrant’s investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant (“Service Affiliates”) which required pre-approval by the Audit Committee which related to the review of the transfer agent function for the fiscal years ended December 31, 2020 and December 31, 2019 were $0 and $0, respectively.
(c) Tax Fees. The aggregate Tax Fees billed by the registrant’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended December 31, 2020 and December 31, 2019 were $273,082 and $298,531, respectively.
(d) All Other Fees. The aggregate All Other Fees billed by the registrant’s principal accountant for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item, for the fiscal years ended December 31, 2020 and December 31, 2019 were $0 and $0, respectively.
(e) Audit Committee Pre-Approval Policies and Procedures.
(1) Audit Committee pre-approval policies and procedures:
To fulfill its responsibilities and duties the Audit Committee (the “Committee”) shall:
1. | Pre-Approval Policy (Trusts). Pre-approve any engagement of the independent auditors to provide any services, other than “prohibited non-audit services,” to the Trust, including the fees and other compensation to be paid to the independent auditors (unless an exception is available under Rule 2-01 of Regulation S-X). |
(a) | The categories of services to be reviewed and considered for pre-approval include those services set forth under Section II.A.1. of the Background and Definitions for Audit Committee Charter (collectively, “Identified Services”). |
(b) | The Committee has pre-approved Identified Services for which the estimated fees are less than $25,000. |
(c) | For Identified Services with estimated fees of $25,000 or more, but less than $50,000, the Chair or any member of the Committee designated by the Chair is hereby authorized to pre-approve such Identified Services on behalf of the Committee. |
(d) | For Identified Services with estimated fees of $50,000 or more, such Identified Services require pre-approval by the Committee. |
(e) | All requests for Identified Services to be provided by the independent auditor that were pre-approved by the Committee shall be submitted to the Principal/Chief Accounting Officer (“CAO”) of the Trust by the independent auditor using the pre-approval request form. The Trust’s CAO will determine whether such services are included within the list of services that have received the general pre-approval of the Committee. |
(f) | The independent auditors or the CAO of the Trust (or an officer of the Trust who reports to the CAO) shall report to the Committee at each of its regular scheduled meetings all audit, audit-related and permissible non-audit services initiated since the last such report (unless the services were contained in the initial audit plan, as previously presented to, and approved by, the Committee). The report shall include a general description of the services and projected fees, and the means by which such services were approved by the Committee (including the particular category of Identified Services under which pre-approval was obtained). |
2. | Pre-Approval Policy (Adviser or Any Control Affiliate). Pre-approve any engagement of the independent auditors, including the fees and other compensation to be paid to the independent auditors, to provide any non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust), if the engagement relates directly to the operations or financial reporting of the Trust (unless an exception is available under Rule 2-01 of Regulation S-X). |
(a) | The Chair or any member of the Committee designated by the Chair may grant the pre-approval for non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations or financial reporting of the Trust for which the estimated fees are less than $25,000. All such delegated pre-approvals shall be presented to the Committee no later than the next Committee meeting. |
(b) | For non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations or financial reporting of the Trust for which the estimated fees are $25,000 or more, such services require pre-approval by the Committee. |
a. | Pre-Approval Requirements |
i. | Categories of Services to be Reviewed and Considered for Pre-Approval |
1. | Audit Services |
a. | Annual financial statement audits |
b. | Seed audits (related to new product filings, as required) |
c. | SEC and regulatory filings and consents |
2. | Audit-Related Services |
a. | Accounting consultations |
b. | Fund merger/reorganization support services |
c. | Other accounting related matters |
d. | Agreed upon procedures reports |
e. | Attestation reports |
f. | Other internal control reports |
3. | Tax Services |
a. | Recurring tax services: |
i. | Preparation of Federal and state income tax returns, including extensions |
ii. | Preparation of calculations of taxable income, including fiscal year tax designations |
iii. | Preparation of annual Federal excise tax returns (if applicable) |
iv. | Preparation of calendar year excise distribution calculations |
v. | Calculation of tax equalization on an as-needed basis |
vi. | Preparation of monthly/quarterly estimates of tax undistributed position for closed-end funds |
vii. | Preparation of the estimated excise distribution calculations on an as-needed basis |
viii. | Preparation of calendar year shareholder reporting designations on Form 1099 |
ix. | Preparation of quarterly Federal, state and local and franchise tax estimated tax payments on an as-needed basis |
x. | Preparation of state apportionment calculations to properly allocate Fund taxable income among the states for state tax filing purposes |
xi. | Assistance with management’s identification of passive foreign investment companies (PFICs) for tax purposes |
b. | Permissible non-recurring tax services upon request: |
i. | Assistance with determining ownership changes which impact a Fund’s utilization of loss carryforwards |
ii. | Assistance with corporate actions and tax treatment of complex securities and structured products |
iii. | Assistance with IRS ruling requests and calculation of deficiency dividends |
iv. | Conduct training sessions for the Adviser’s internal tax resources |
v. | Assistance with Federal, state, local and international tax planning and advice regarding the tax consequences of proposed or actual transactions |
vi. | Tax services related to amendments to Federal, state and local returns and sales and use tax compliance |
vii. | RIC qualification reviews |
viii. | Tax distribution analysis and planning |
ix. | Tax authority examination services |
x. | Tax appeals support services |
xi. | Tax accounting methods studies |
xii. | Fund merger, reorganization and liquidation support services |
xiii. | Tax compliance, planning and advice services and related projects |
xiv. | Assistance with out of state residency status |
xv. | Provision of tax compliance services in India for Funds with direct investments in India |
(2) None of the services described in each of Items 4(b) through (d) were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Non-Audit Fees. The aggregate non-audit fees billed by the registrant’s accountant for the most recent fiscal year and the preceding fiscal year for services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant were $273,082, and $298,531, respectively. These aggregate fees were less than the aggregate fees billed for the same periods by the registrant’s principal accountant for audit services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant.
(h) Auditor Independence. The registrant’s Audit Committee was provided with information relating to the provision of non-audit services by Ernst & Young, LLP to the registrant’s investment adviser (not including any sub adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved by the Audit Committee so that a determination could be made whether the provision of such services is compatible with maintaining Ernst & Young, LLP’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s President (principal executive officer) and Treasurer (principal financial officer) have evaluated the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) as of a date within 90 days of this filing and have concluded that based on such evaluation as required by Rule 30a-3(b) under the Investment Company Act, that the registrant’s disclosure controls and procedures were effective as of that date in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed End Fund Management Investment Companies.
Not Applicable
Item 13. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Rydex Variable Trust | |
By (Signature and Title)* | /s/ Brian E. Binder | |
Brian E. Binder, President and Chief Executive Officer | ||
Date | March 5, 2021 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Brian E. Binder | |
Brian E. Binder, President and Chief Executive Officer | ||
Date | March 5, 2021 | |
By (Signature and Title)* | /s/ John L. Sullivan | |
John L. Sullivan, Chief Financial Officer, Chief Accounting Officer, and Treasurer | ||
Date | March 5, 2021 |
* | Print the name and title of each signing officer under his or her signature. |