Direxion Shares introduced three volatility based ETFs.
The funds are the Direxion S&P 500 RC Volatility Response Shares (NYSEArca: VSPY - News), Direxion S&P 1500 RC Volatility Response Shares (NYSEArca: VSPR - News) and Direxion S&P Latin America 40 RC Volatility Response Shares (NYSEArca: VLAT - News).
The latest Direxion ETFs are benchmarked to the newly launched S&P Dynamic Rebalancing Risk Control Index Series.
The Funds use stock market volatility as a gauge to determine what percentage of exposure to stocks the portfolio should have. For example, during periods of low market volatility, the funds will generally increase their market exposure to stocks. On the other hand, exposure to stocks is cut during periods of rising volatility and exposure to U.S. Treasuries is conversely increased. Each fund has a target volatility level for its corresponding index.
The underlying indexes are rebalanced monthly, but can be rebalanced daily if volatility targets are met.
To obtain their market exposure, the ETFs typically invest 80% of their net assets in the underlying securities that make up the index while 20% can be invested in other financial instruments like futures contracts or swaps.
The funds carry annual net expenses of 0.45% that include fee waivers through April 1, 2013.
'These new Funds are an intelligent way for equity investors to mitigate risk,' said Ed Egilinsky, Managing Director, Alternative Investments at Direxion. He adds, 'Periods of higher than average market volatility tend to coincide, with potentially adverse equity markets, while periods of below average market volatility tend to represent a more stable environment and a greater likelihood of favorable equity market conditions. By tracking indices that use volatility to dictate overall equity exposure, these Funds serve as a means for investors to gain exposure to equities, while seeking to help protect their portfolios.'
Last month, the Boston, MA-based company also introduced the Direxion All Cap Insider Sentiment Shares ETF (NYSEArca: KNOW - News) and the Direxion Large Cap Insider Sentiment Shares ETF (NYSEArca: INSD - News).
KNOW is linked to the Sabrient Multi-Cap Insider/Analyst Quant-Weighted Index, while INSD tracks the Sabrient Large-Cap Insider/Analyst Quant-Weighted Index.
Both KNOW and INSD offer a way to access stocks that corporate insiders are accumulating or analyst ratings based on public company filings to determine weightings within the indices they track.
As of December 2011, Direxion managed $6.69 billion in ETF assets.
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