Direxion, best known as the leading provider of 3x leveraged and inverse leveraged ETFs, is planning to diversify its product line a bit. The Newton, Massachusetts-based ETF provider has filed with the SEC in order to obtain regulatory approval for 11 new ETFs. The funds look to help open up Direxion’s main product line which currently focuses on leveraged equity ETFs and leveraged Treasury funds into the leveraged commodity and currency segments. This new push could be another success for the company as investor interest in the commodity and currency markets have grown immensely over the past few years as literally dozens of ETFs have been introduced to target these once hard-to-reach asset classes. Below, we profile the 11 new funds which Direxion hopes to release once it receives SEC approval:
Leveraged Commodity ETFs
Direxion plans to launch four ETFs in the commodity space with two seeking to return triple the daily performance of COMEX gold futures with one fund tracking the long side and the other tracking the short side of the commodity. The remaining two new funds will seek to return triple the daily performance of COMEX silver futures, again with one fund tracking 300% of the index’s daily return and the other following the -300% daily return. The proposed funds are as follows:
- Direxion Daily Gold Bull 3x Shares
- Direxion Daily Gold Bear 3x Shares
- Direxion Daily Silver Bull 3x Shares
- Direxion Daily Silver Bear 3x Shares
Leveraged Currency ETFs
In the leveraged currency ETF segment, Direxion is planning to launch six funds in total. All of the funds will seek to provide investors with triple the daily return of their respective currencies. The yen and euro bull funds will offer three times the daily return of their respective currencies against the dollar. There will also be two funds that offer exposure to the inverse of three times the daily return of the yen against the dollar and the euro against the dollar for investors bearish on the currencies. The dollar bear and bull funds will offer similar exposure but will respectively track triple the daily return and triple the inverse return of the ICE U.S. Dollar Index which measures the greenback’s value against a basket of six developed market foreign currencies: euro, yen, British pounds, Canadian dollars, Swedish krona and Swiss francs. The proposed currency funds are:
- Direxion Daily Japanese Yen Bull 3x Shares
- Direxion Daily Japanese Yen Bear 3x Shares
- Direxion Daily Dollar Bull 3x Shares
- Direxion Daily Dollar Bear 3x Shares
- Direxion Daily Euro Bear 3x Shares
- Direxion Daily Euro Bull 3x Shares
In addition to the currency and commodity ETFs, Direxion is planning on launching a fund known as the Direxion S&P 500 Dynamic VEQTOR Fund which will follow the VEQTOR index which consists of daily allocations among three components; the S&P 500, its equity component; the S&P 500 Short-Term VIX Futures Index, its volatility component; and the overnight LIBOR rate, its cash component. The index allocates between the two main components, the equity and the volatility, based on the combination of realized and implied volatility trend decision variables, and these allocations are evaluated on a daily basis. According to the filling with the SEC, the weighting system depends on the volatility of the overall fund as there is “stop-loss provision in the index’s methodology (which) moves the index’s entire allocation to cash should the index drop more than 2 percent during the previous five business days. Unless the stop-loss is in place, S&P 500 Dynamic VEQTOR Index is entirely invested in either the S&P 500 or VIX futures. Under normal circumstances, the VIX allocation is between 2.5% and 40%, with the S&P 500 making up the rest. The allocation to VIX futures increases with increases in both implied and realized volatility.”
Direxion has not disclosed ticker symbols or expense ratios for the new funds, however, all of Direxion’s current 38 funds have an expense ratio of either 0.94% or 0.95% so it seems likely that these new funds will fall somewhere close to that in terms of expenses [see a full list of Direxion's ETFs here].
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Disclosure: No positions at time of writing.