Daily ETF Watch: New 1.25X Geared Funds

June 03, 2014

Just why do you leverage a fund 1.25 times?

Direxion, the ETF issuer known for its lineup of inverse and leveraged funds, has put into registration 11 proposed levered equity and fixed-income ETFs—each with a 1.25X leverage factor—that are likely to launch at a time when the S&P 500 Index is reaching new highs, and yields on 10-year Treasurys are falling.

Direxion’s proposed ETFs include the:

  • Direxion Daily Russell 1000 Growth Index Bull 1.25X Shares
  • Direxion Daily Russell 1000 Value Index Bull 1.25X Shares
  • Direxion Daily S&P 500 Bull 1.25X Shares
  • Direxion Daily Mid Cap Bull 1.25X Shares
  • Direxion Daily Small Cap Bull 1.25X Shares
  • Direxion Daily Total Stock Market Bull 1.25X Shares
  • Direxion Daily FTSE Developed Markets Bull 1.25X Shares
  • Direxion Daily FTSE Emerging Markets Bull 1.25X Shares
  • Direxion Daily 7-10 Year Treasury Bond Bull 1.25X Shares
  • Direxion Daily 20+ Year Treasury Bond Bull 1.25X Shares
  • Direxion Daily Total Bond Market Bull 1.25X Shares

The funds, like most of Direxion’s levered products, are rebalanced daily, which means their returns are likely to deviate from those of their underlying indexes, especially in choppy markets. As such, they are designed for sophisticated investors who watch them closely and often use them for tactical purposes.

Associated fees and tickers are not made available in the filing.

Filing

The db X-trackers Harvest MSCI All China Equity Fund (CN), which currently gains exposure to mainland China securities via the db X-trackers Harvest CSI 300 China A-shares ETF (ASHR | D-50), has a new avenue to the holy grail of emerging market investing.

That’s because effective immediately, CN can also obtain exposure to the A-shares by investing in the newly launched db X-trackers Harvest CSI 500 China A-Shares Small Cap Fund (ASHS), according to a regulatory filing.

Both funds target physical shares of mainland Chinese securities, giving investors access to China’s next wave of growth—local consumer economies, a departure from China’s export-oriented economic growth program in past years.

Last November, db X-trackers made headlines with the launch of its “groundbreaking” ASHR because it was the first U.S.-listed RQFII ETF, which are funds physically backed by China A-shares, as opposed to using derivatives.

ASHR is able to directly hold A-shares through its subadvisor, Hong-Kong based Harvest Global Investments, which has an RQFII license. The fund launched with a massive $108 million in seed capital.

In a nutshell, CN indirectly gets A-share exposure through ASHR, which directly holds A-shares. Yes, it’s a bit of a mind-bender.

 

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