Direxion Launches Leveraged Real Estate ETFs

by on July 20, 2009 | ETFs Mentioned:

Direxion, the ETF issuer known for pioneering and popularizing 3x leveraged ETFs, has added two new funds: Daily Real Estate Bull 3x Shares (DRN) and Daily Real Estate Bear 3x Shares (DRV). Both new ETFs, which began trading last week, track the MSCI U.S. REIT Index, a broad-based benchmark that represents approximately 85% of the U.S. REIT Index. DRN and DRV are Direxion’s first real estate ETF offerings. The firm has about 20 ETFs offering multi-directional exposure to various equity markets, as well as four funds tracking Treasury indexes. Both new Direxion funds will have expense ratios of 0.95%.  

Vanguard‘s REIT ETF (VNQ), which tracks the MSCI U.S. REIT Index, is down approximately 16% this year, and nearly 50% over the last twelve months. ProShares, Direxion’s main competitor in the leveraged ETF business, currently offers the UltraShort Real Estate (SRS) and Ultra Real Estate (URE), which are based on the Dow Jones U.S. Real Estate Index. SRS and URE, which offer 200% leveraged exposure, have posted returns of -61.7% and -46.1%, respectively, so far in 2009 (the complexities of leveraged ETFs can result negative returns for “opposite” funds over long time periods, especially in oscillating markets).

Direxion’s new fund offering comes less than a month after MacroShares launched a pair of funds (DMM and UMM) that will track three times the cumulative percentage change in U.S. single-family home prices, as measured by the S&P/Case-Shiller Composite-10 Home Price Index. Since DRN and DRV are comprised primarily of holdings in industrial and commercial real estate, they likely won’t compete directly with the MacroShares funds, but do offer investors an option for leveraged exposure to real estate (the MacroShares funds also have some nuances that make them unique from nearly all other ETFs on the market).

Direxion now has a line of 22 exchange-traded products tracking a variety of indexes, ranging from energy and financial sub-indexes to emerging markets benchmarks. Many of Direxion’s ETFs are among the most-heavily traded products on the market. “As we continue to expand our ETF line up, we are excited to provide innovative new products for investors seeking increased exposure to the real estate investment trust market,” stated Dan O’Neill, Direxion Shares’ President. “These two new ETFs further enhance our unique offering of solutions for the tactically minded investor.”

Read Direxion’s press release here.

Disclosure: No positions at time of writing.