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Inside Direxion's New Lightweight Leveraged ETFs - ETF News And Commentary

Zacks Equity Research

Direxion is a sought-after name in the leveraged ETF world. The company has about 60 products in its lineup, and around $8.7 billion in total assets under management. Some of its most popular funds are FAS tracking daily 3x bullish performance of the financial segment, TNA tracking daily 3x bullish performance of the U.S. small-cap space and NUGT delivering the daily 3x bullish performance of the gold mining stocks.


However, in comparison to another leveraged product king ProShares, Direxion’s portfolio still looks feeble as it rival boasts around 135 ETFs with about $24.4 billion in assets at the time of writing. Possibly in hopes of diversifying the product mix and gaining more market share, Direxion launched four ETFs with 1.25x leverage quotient in January.


Per the issuer, these ETFs mark the entry of 1.25x leverage in the ETF industry. The funds charge 50 bps in fees for this novel exposure. We have highlighted some of the key points regarding these potential ETFs below (see all Leveraged Equity ETFs here):


Newly Launched ETFs in Focus


Direxion Daily S&P 500 Bull 1.25x Shares ETF (LLSP): The fund looks to offer 1.25x exposure to the performance of the S&P 500 Index and has exposure to domestic large-cap stocks. The fund has amassed about $4 million in assets so far.  


It goes without saying, that as per the issuer’s comment, with 1.25x magnification, none of newly launched ETFs face competition, as the concept is entirely new. Still, as far as leveraged S&P 500 funds are concerned, the popular Ultra S&P500 (SSO) with its 2x exposure can act as a peer to LLSP.  As far as regular funds are concerned, the fund will face competition from the likes of  SPDR S&P 500 ETF (SPY), Vanguard S&P 500 ETF (VOO) and

iShares Core S&P 500 ETF (IVV).


Direxion Daily Small Cap Bull 1.25x Shares (LLSC): This fund takes a 1.25x leveraged exposure to the Russell 2000 Index giving exposure to the small-cap segment of the U.S. equities. The fund has amassed about $4 million in assets.


UltraPro Russell2000 ETF (URTY) comes as a distant peer with 3x leverage on the Russell 2000 index while iShares Russell 2000 Index Fund (IWM) serves up as the regular fund in the space (read: Can Small Cap Low Volatility ETFs Continue Their Hot Streak?).


Daily FTSE Developed Markets Bull 1.25x Shares (LLDM): This fund offers 1.25 times exposure to the FTSE Developed ex-North America Index which gives investors a glimpse of developed market investing with a light leverage. The fund has piled up about $3 million in assets.


Direxion Daily FTSE Emerging Markets Bull 1.25x Shares (LLEM): This product is targeted at emerging markets obviously with the same level of exposure and has garnered round $2.7 million in assets so far (read: 3 Emerging Market ETFs That Soared in 2014).


Leveraged ETF Direxion Daily Emerging Markets Bull 3x Shares ETF (EDC) targets this space with 300% focus, so the fund probably gets tougher competition from the regular emerging market ETF iShares MSCI Emerging Markets ETF (EEM).


Bottom Line


In a nutshell, we expect the newly launched funds to give investors opportunities to cash in on short-term positive news on the afore-said spaces. These funds adopt a truly middle-of-the-road approach between regular and leveraged funds and open up fresh opportunities for short-term traders.


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DIR-FIN BULL 3X (FAS): ETF Research Reports
 
DIRX-SC BULL 3X (TNA): ETF Research Reports
 
DIR-D GM BL 3X (NUGT): ETF Research Reports
 
DIRX-D SP5 B125 (LLSP): ETF Research Reports
 
PRO-ULTR S&P500 (SSO): ETF Research Reports
 
DIRX-D SCB125 (LLSC): ETF Research Reports
 
PRO-ULT R2000 (URTY): ETF Research Reports
 
ISHARS-R 2000 (IWM): ETF Research Reports
 
DIRX-D F DMB125 (LLDM): ETF Research Reports
 
DIRX-D F EMB125 (LLEM): ETF Research Reports
 
DIR-EM BULL3X (EDC): ETF Research Reports
 
ISHARS-EMG MKT (EEM): ETF Research Reports
 
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