Given that a decrease in trading has hit Schwab below the belt, how have firms based on the business of active traders fared?

Between the end of March of 2000 and the end of January of 2001, Rydex went from over $7 billion in assets under management to just under $5 billion, a drop of over $2 billion and nearly 30 percent. In the same period, ProFunds went from $2.2 billion to less than a billion, a drop of over $1 billion and more than 55 percent.

Ouch! Bearing in mind that other firms during the bear market have fared as badly or worse, it's still no coincidence that both firms were among the hardest hit. Timers, accustomed to stowing cash in money market funds and investing as they see fit, tend to keep money tucked away during volatile markets.

"We continue to have investors that are active with our funds, but we have had a good amount of money in money markets over the last six months," said Michael Sapir, chairman and ceo at ProFunds. "There are a lot of people on the sidelines."

While Rydex has a money market fund, advisors who use Schwab's platform to trade generally put their money in Schwab's money market. However, the firm has not been unsettled by the drop in assets.

"The clients that are in money markets and so forth, when they invest, they'll put their money back with Rydex," said Dan Hornbaker, vice president and regional sales manager for Rydex. "They're going to go back to doing business the way they were before."

The advice business is booming as many self-directed investors stopped trading in their tracks and are now looking for professional help. Is this bear market also the death knell of active trading?

"I think some market timers are just blowing up and their business is in jeopardy, but there are some that are doing well," said Hornbaker. He asserts that the sun hasn't yet set on market timers, who are often viewed through a distorted lens. "I think the huge misconception about market timers is that they're trying to shoot out the lights. They're just trying to get 10 to 15 percent."

When it comes to his Hornbaker's own firm, he reflects on the dip in assets with some perspective. "Let's keep our wits about us," he said. "And realize that, when you build a product for timers, you're going to have swings."

Related stories:
Schwab's Own Fund Assets Climb, Apr. 17, 2001 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE