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Direxion Introduces Equal Weight Nasdaq ETF


As stocks like Apple (AAPL - News) dominate the performance of market indexes, more investors are looking for alternatives that reduce the risk of over-concentrated exposure to just a few big stocks.

In response, the Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE - News) debuted today. The fund provides broader exposure to stocks within the NASDAQ-100 index by assigning each holding an equal 1% position.

'This fund is designed to provide investors with balanced exposure and reduce concentration risk without overweighting potentially overvalued companies and underweighting undervalued companies,' said Daniel D. O'Neill, President and Chief Investment Officer of Direxion. 'Investors are increasingly embracing an equal weighting approach to complement other U.S. large cap equity strategies that tend to be more highly concentrated in a select number of industries.'

The traditional cap-weighted NASDAQ-100 index currently has a significant overweighting to a select number of companies, and a heavy bias toward the technology sector, based on the market capitalization of these few companies. Larger companies in the index receive a higher weight than small companies, which can lead to a portfolio with an over concentration in a limited number of companies and industries.

Unlike the PowerShares QQQ (QQQ - News), which allows stocks with the largest market capitalization or size to dominate its performance, QQQE  strictly assigns each stock within the NASDAQ-100 a 1% weighting and rebalances quarterly in March, June, September and December. 

The stratospheric run of Apple, which last week crossed $600 per share, means it now represents over 18% of the QQQ's market exposure. While higher concentrated positions in an ETF or fund boost performance when a stock is surging, it can have an opposite or negative impact when that same large holding begins to falter. Inside QQQE, Apple represents just 1% of the fund's exposure while the other 99 stocks receive the same 1% representation.  

QQQE currently has 49% exposure to technology stocks, 23% to consumer discretionary, and 16% to healthcare companies.

The NASDAQ 100 Index includes 100 of the largest non-financial securities listed on NASDAQ.

QQQE's net annual expense ratio is 0.35%.

Other ETF Launches

Market Vectors ETF Trust today announced the launch of Market Vectors Indonesia Small-Cap ETF (IDXJ - News), which focuses on publicly traded companies with a $1 billion or smaller market size within Indonesia's stock market.

'Indonesia has grown rapidly over the past several years and we believe that it is well positioned to continue to prosper, with an economy supported by rising domestic consumption and higher levels of disposable income,' said Ed Lopez, Marketing Director at Market Vectors ETFs. 'In our view, smaller cap companies that generate the majority of their revenues in the local market provide the best way for investors to gain exposure to the domestic growth story. In that regard, IDXJ provides a complement to our broader-based Indonesian ETF, IDX.'

IDXJ contains exposure to 25 stocks. And as of late February, the leading sectors within IDXJ were Financials (39 percent), Industrials (18 percent), Energy (17 percent), and Consumer Staples (15 percent).

Indonesia, home to roughly 240 million people, has Southeast Asia's largest economy.

IDXJ carries a net expense ratio of 0.61%, which is capped until at least May 1, 2013.

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