Morgan, Lewis & Bockius LLP
1111 Pennsylvania Ave., NW
Washington, DC 20004
LAURA E. FLORES
202.739.5684
lflores@morganlewis.com
August 1, 2007
VIA EDGAR CORRESPONDENCE
Mr. Christian T. Sandoe
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: RYDEX SERIES FUNDS (THE "TRUST") - POST-EFFECTIVE AMENDMENT ("PEA") NO. 70
(FILE NOS. 33-59692 AND 811-07584)
Dear Mr. Sandoe:
This letter responds to your comments to the Trust's Post-Effective Amendment
No. 70, filed on May 25, 2007 for the purpose of reflecting (i) the
discontinuation of the master-feeder arrangement previously in place for the
Trust's Dynamic S&P 500, Inverse Dynamic S&P 500, Dynamic OTC, Inverse Dynamic
OTC, Dynamic Dow and Inverse Dynamic Dow Funds effective April 1, 2007; (ii) the
removal of the non-fundamental investment policy to invest at least 80% of a
Fund's net assets in a particular investment pursuant to Rule 35d-1 subject to
providing 60 days' notice to shareholders for certain series of the Trust; (iii)
a revised investment strategy for the Absolute Return Strategies Fund; and (iv)
the reorganization of the prospectuses. The following summarizes your comments,
and our response to those comments. Unless otherwise noted, capitalized terms
have the same meaning as contained in the Fund's Prospectuses and/or Statement
of Additional Information ("SAI").
1. COMMENT. Please confirm that the Sector Rotation Fund's investments
will not be concentrated in any particular industry consistent with the
Fund's fundamental policy concerning concentration as disclosed in the
SAI.
RESPONSE. Consistent with the Sector Fund's fundamental policy
regarding concentration, the Fund will not invest 25% or more of the
value of the Fund's total assets in the securities of one or more
issuers conducting their principal business activities in the same
industry.
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Mr. Christian T. Sandoe
August 1, 2007
Page 2
2. COMMENT. Because Small and Mid-Capitalization Securities Risk is listed
as a principal risk of the Sector Rotation Fund, consider disclosing
that the Fund invests in small and mid-capitalization securities in the
Fund's investment strategy.
RESPONSE. Per your suggestion, we have revised the second to last
sentence of the Sector Rotation Fund's investment strategy as follows
(new language appears in bold for the purposes of this correspondence
only):
"The Fund invests in equity securities, INCLUDING SMALL AND MID-CAP
SECURITIES, such as U.S. traded common stocks and American Depository
Receipts ("ADRs"), but may also invest in equity derivatives such as
futures contracts, options and swap agreements."
3. COMMENT. Please confirm whether the Hedged Equity Fund's investments in
equity securities are hedged. If they are not, please explain why the
Fund's 80% non-fundamental investment policy adopted pursuant to Rule
35d-1 is consistent with Rule 35d-1.
RESPONSE. We believe that the Hedged Equity Fund's non-fundamental
investment policy to invest at least 80% of its net assets, plus any
borrowings for investment purposes, in long and short positions in U.S.
and foreign equity securities of any capitalization range, or
derivatives thereof, including futures, options and swap agreements is
consistent with Section 35(d) and Rule 35d-1 thereunder. Foremost, the
Fund's name is not materially deceptive or misleading. It is unlikely
that the Fund's name would lead a reasonable investor to conclude that
the Fund invests in something other than long and short equity
positions or that the risks of those investments are inconsistent with
the risks typically associated with a hedging strategy involving equity
securities. In addition, the Fund's non-fundamental investment policy
to invest at least 80% of its assets in equity securities is consistent
with Rule 35d-1. Rule 35d-1 requires that a non-fundamental 80%
investment policy reference the type of investment suggested by a
fund's name, not terms included in the fund's name that connote types
of investment strategies, such as "growth" and "value."(1) Similar to
"growth" and "value," the term "hedged" is descriptive and connotes a
type of investment strategy, not a type of investment. Because the
Fund's name is not materially deceptive or misleading, and the Fund's
non-fundamental investment policy appropriately references the type of
investment suggested by the Fund's name, both the Fund's name and its
non-fundamental investment policy are consistent with Section 35(d) and
Rule 35d-1 thereunder.
4. COMMENT. Please disclose whether the Real Estate Companies that the
Real Estate Fund invests in are primarily engaged in real
estate-related activities.
- ----------
(1) Final Rule: Investment Company Names, Rel. No. IC-24828 (Mar. 31, 2001).
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Mr. Christian T. Sandoe
August 1, 2007
Page 3
RESPONSE. We have revised the fourth sentence of the Real Estate Fund's
investment strategy as follows (new language appears in bold for the
purposes of this correspondence only):
"Real Estate Companies, which also include master limited partnerships,
are PRIMARILY engaged in the ownership, construction, management,
financing or sale of residential, commercial or industrial real
estate."
5. COMMENT. Please consider making all references to a Fund plural in each
risk discussion under "Description of Principal Risks."
RESPONSE. Because the singular use of "Fund" works well in conjunction
with the risk matrix included under "Principal Risks of Investing in
the Funds," our client has decided not to make the suggested change at
this time, but will take it into consideration for future Prospectuses.
6. COMMENT. Please confirm that all Funds that invest in investment
companies, including ETFs, include the required "Acquired Fund Fees and
Expenses" line item in their respective fee tables.
RESPONSE. We have confirmed with our client that all Funds that invest
in investment companies and that incur related expenses greater than
0.01% include the "Acquired Fund Fees and Expenses" line item in their
respective fee tables.
7. COMMENT. Please note that the Staff does not believe that inclusion of
the term "strategy" in a Fund's name, other than a fund that invests in
commodities, is sufficient to remove the Fund from the scope of Rule
35d-1 and the Rule's requirement to have a non-fundamental investment
policy that provides that the Fund will invest 80% of its net assets in
the type of investment suggested by the Fund's name.
RESPONSE. While we disagree with the Staff's decision to treat funds
that invest in derivatives and similar instruments to gain exposure to
commodities differently from funds that invest in derivatives and
similar instruments to gain exposure to other types of investments, we
have reincorporated the Funds' non-fundamental investment policies as
previously adopted pursuant to Rule 35d-1.
8. COMMENT. Please consider consolidating the discussions of the Funds'
frequent trading and redemption fee policies.
RESPONSE. As suggested, we have deleted the section formerly entitled
"Frequent Trading and Redemption Fee Policy," and consolidated the
information under "Frequent Purchases and Redemptions of Fund Shares."
9. COMMENT. Please consider clarifying how the responsibilities differ
between the three portfolio managers listed under "Portfolio
Management."
RESPONSE. We have revised the second to last paragraph under "Portfolio
Management" as follows (new language appears in bold for the purposes
of this correspondence only):
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Mr. Christian T. Sandoe
August 1, 2007
Page 4
"Mr. Dellapa oversees the RESEARCH AND creation of the processes used
to select investments. Mr. King oversees the day-to-day DETAILS OF THE
PORTFOLIO MANAGEMENT of all of the Rydex Funds. Mr. Byrum generally
oversees ALL ASPECTS OF THE MANAGEMENT OF ALL THE RYDEX FUNDS and
reviews the activities of Messrs. King and Dellapa, AS WELL AS OTHER
ASPECTS OF THE INVESTMENT MANAGEMENT PORTFOLIO DEPARTMENT."
10. COMMENT. If the Funds provide Fund information and documentation on
their web site, please disclose this information under "Additional
Information."
RESPONSE. The following disclosure is included in the "Additional
Information" section:
"You may obtain a copy of the SAI or the Annual or Semi-Annual Reports,
without charge by calling 800.820.0888 or 301.296.5100, visiting the
Rydex web site at www.rydexinvestments.com, or writing to Rydex Series
Funds, at 9601 Blackwell Road, Suite 500, Rockville, Maryland 20850."
11. COMMENT. If the Nova Fund invests in equity securities to a significant
extent, please revise the investment strategy to so state.
RESPONSE. We believe that the existing disclosure adequately discloses
the fact that the Nova Fund will invest in equity securities to a
significant extent. Therefore, we have not revised the investment
strategy as suggested.
12. COMMENT. Please delete the word "may" in section (ii) of the seventh
fundamental policy included in the SAI, and revise section (ii) to
state that "a Sector Fund or the Real Estate Fund will be concentrated
in an industry or group of industries within a sector."
RESPONSE. We have revised section (ii) of the seventh fundamental
policy accordingly.
13. COMMENT. Please clarify the third exception in the Funds' seventh
fundamental policy concerning the concentration of Fund investments.
RESPONSE. We have confirmed with our client that the High Yield
Strategy Fund and Inverse High Yield Strategy Fund will not invest 25%
or more of the value of each Fund's total assets in the securities of
one or more issuers conducting their principal business activities in
the same industry. Therefore, we have deleted section (iii) of the
seventh fundamental policy.
14. COMMENT. Please confirm that the Money Market Fund's fundamental
policies are consistent with the requirements set forth in Section 13.
RESPONSE. The Money Market Fund's fundamental policies are consistent
with the requirements set forth in Section 13 as fundamental policy
numbers 9 through 17 are also applicable to the Money Market Fund.
However, to clarify the applicability of fundamental policy numbers 9
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Mr. Christian T. Sandoe
August 1, 2007
Page 5
through 17 to the Money Market Fund, we have revised the heading that
precedes fundamental policy number 9 to reference the Money Market Fund
as follows:
"FUNDAMENTAL POLICIES OF THE INVERSE OTC STRATEGY FUND, INVERSE S&P 500
STRATEGY FUND, NOVA FUND, OTC FUND, PRECIOUS METALS FUND, GOVERNMENT
LONG BOND 1.2X STRATEGY FUND, INVERSE GOVERNMENT LONG BOND STRATEGY
FUND AND MONEY MARKET FUND"
***
I hereby acknowledge on behalf of Rydex Series Funds (the "Trust") that: (i) the
Trust is responsible for the adequacy and accuracy of the disclosure in its
registration statement; (ii) SEC staff comments or changes to disclosure in
response to staff comments in the registration statement reviewed by the staff
do not foreclose the SEC from taking any action with respect to the registration
statement; and (iii) the Trust may not assert SEC staff comments as a defense in
any proceeding initiated by the SEC or any person under the federal securities
laws of the United States.
***
If you have any additional questions or comments, please do not hesitate to
contact either John McGuire at 202.739.5654 or me at 202.739.5684.
Sincerely,
/s/Laura E. Flores
Laura E. Flores
cc: Joanna M. Haigney
W. John McGuire, Esq.