Direxion Unveils Tidal Wave Of ETF Proposals

by on December 14, 2010 | ETFs Mentioned:

The month of November was incredibly active inside the ETF space. In particular, the last week of the month and the beginning of December saw the introduction of over two dozen new funds. Among these were a number of VIX based ETFs that have been surging in popularity with investors. Along with funds that have hit the market, there has been a wave of filings for new funds to expand upon the current crop of over 1,100+ ETFs that are available to investors [see also Recapping A Wild Week In The ETF World].

One of the lengthier recent filings the industry has seen in this time period came from Direxion. Founded in 1997, Direxion specializes in leveraged funds and was the first firm to bring 3X products to market back in 2008. In fact, the company started off with only leveraged products, but has moved into ‘plain-vanilla’ 1x bull products in recent weeks, including a proposal for a first-of-its-kind auto ETF and a  recently launched Airline ETF (FLYX). Expanding upon both the traditional and leveraged offerings, Direxion recently filed for 24 new funds to take advantage of both domestic and international markets, with both 1x and 3x funds. Yet, perhaps the biggest surprise is not the overwhelming size of the filing, but the wide diversity of products that the company will be coming out with. Direxion will offer a batch of non-leveraged products that will focus on the Nasdaq slice of the market, an index that has been more or less been overlooked by ETF issuers in recent years [see Direxion Launches Three New ETFs]. Below, we highlight a few details from this massive filing:

ETF Leverage Proposed Expense Ratio
Direxion NASDAQ-100 Equal Weighted Index Shares None 0.55%
Direxion NASDAQ Volatility Index Shares None 0.95%
Direxion Wireless Communications Shares None 0.55%
Direxion Daily Dow 30 Bear 1X Shares -1x 0.65%
Direxion Daily Large Cap Bear 1X Shares -1x 0.65%
Direxion Daily Small Cap Bear 1X Shares -1x 0.65%
Direxion Daily Total Market Bear 1X Shares -1x 0.65%
Direxion Daily Corporate Bond Bear 1X Shares -1x 0.65%
Direxion Daily Developed Markets Bear 1X Shares -1x 0.65%
Direxion Daily Emerging Market Bear 1X Shares -1x 0.65%
Direxion Daily Large Cap Growth Bull 3X Shares 3x 0.95%
Direxion Daily Large Cap Growth Bear 3X Shares -3x 0.95%
Direxion Daily Large Cap Value Bull 3X Shares 3x 0.95%
Direxion Daily Large Cap Value Bear 3X Shares -3x 0.95%
Direxion Daily Corporate Bond Bull 3X Shares 3x 0.95%
Direxion Daily Corporate Bond Bear 3X Shares -3x 0.95%
Direxion Daily High Yield Bull 3X Shares 3x 0.95%
Direxion Daily High Yield Bear 3X Shares -3x 0.95%
Direxion Daily Municipal Bond Bull 3X Shares 3x 0.95%
Direxion Daily Municipal Bond Bear 3X Shares -3x 0.95%
Direxion Daily TIPs Bull 3X Shares 3x 0.95%
Direxion Daily TIPs Bear 3X Shares -3x 0.95%
Direxion Daily Total Bond Market Bull 3X Shares 3x 0.95%
Direxion Daily Total Bond Market Bear 3X Shares -3x 0.95%

Direxion’s push into non-leveraged funds has allowed the company to branch out into different corners of the market. First, a NASDAQ volatility fund that is found nowhere else on the market looks to be a huge hit with traders that have clamored for more funds targeting volatility indexes in recent months. This fund will be designed to respond to volatility in the NASDAQ index which will include 100 of the largest domestic and international non-financial securities listed on the important index. Additionally, the wireless communications ETF will measure the performance of the mobile communications subsector of the global market and will focus on large capitalization companies. This fund looks to tap into investor demand for smart phone related investments and surging foreign demand for mobile services, a combination that could make this proposed fund an interesting pick someday[see also Rydex Launches Five Equal-Weight ETFs].

The filings will also greatly expand upon the many bull and bear pairs that the company currently offers, reaching further into the domestic equity and fixed income spaces. Of particular interest to investors is likely to be the five bull and bear pairs of 3x bond ETFs. In recent weeks, Treasury markets have been extremely volatile and products targeting this slice of the market could potentially garner significant assets. In fact, there are currentlpy no leveraged bond products that offer any exposure to high yield, munis, or the TIPS market in either the 2x or 3x form. This suggests that Direxion may be able to attract a sizable following and corner the non-Treasury leveraged bond market with these first-of-their-kind funds [see all the Leveraged Bond ETFs].

While it is unclear what the final fees for all of the funds will be, the filing has stated that the expenses on all funds that do not have a 3X leverage will not exceed 65 basis points (with the exception of the volatility fund). It is important to note that currently Direxion only offers one fund that is cheaper than 95 basis points suggesting that a series of 1x products may help to push the average expense ratio of the company’s lineup down and help the issuer expand beyond its traditional role as a provider of leveraged ETFs.

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Disclosure: No positions at time of writing.