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Relative Strength ETFs to Help Build More Efficient Portfolios

Max Chen

This article was originally published on ETFTrends.com.

As financial advisors and investors look to rising market themes, one may look to targeted exchange traded fund strategies that provide relative insights into growing trends ahead.

"Is growth going to outperform value? Is large going to beat small? That actually wasn't as important in the last ten years. We think it is going to be important going forward. So, as we think about it, we sort of think about building portfolios that more efficiently allow investors to execute on those views," Rob Nestor, President, Direxion, said at the Inside ETFs conference.

To help investors better access the markets, Direxion has come out with a suite of ETFs to cover well-known investment pairs, and they are built using familiar passive building blocks, including:

The underlying indices for each Relative Weight ETF are built with a 150% long component and 50% short component, resulting in a net exposure of 100% of assets. Each ETF and its benchmark index has an oppositely-weighted counterpart. The ETFs provide relative outperformance if the long component outperforms the short component. The strategy implements the long side of the trade, and then also rewards an investor when a macro view is correct.

Each ETF helps investors capture both sides of their expressed view, with a risk profile similar to the broad underlying asset class. The products are built on Direxion's core expertise of delivering sophisticated and precise exposure, whether views are short, intermediate, or long term.

With these ETFs, Direxion is the first to offer this long-short relative value strategy in an index-based fund. Whether they believe, for example, value will outperform growth, emerging will outperform developed markets or vice versa–all are captured within the convenience of one ETF as opposed to holding two separate positions.

Watch Rob Nestor Discuss Building Portfolios:

https://youtu.be/5CAkVkJWotI

For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.

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