Daily ETF Watch: Two 3X Gold Funds Live

Direxion is launching two futures-based leveraged and inverse gold funds today.

Direxion today is launching a bull-and-bear pair of triple-exposure futures-based gold ETFs, though the funds’ daily rebalance feature means they’ll probably resonate more with day traders than long-term investors.

The funds, Direxion Daily Gold Bull 3X Shares (GLDL) and the Direxion Daily Gold Bear 3X Shares (GLDS) will launch at a time when gold is rallying as investors seek safe haven from geopolitical risks from tensions between Russia and Ukraine.

The futures-based exposure of the funds is relatively simple, targeting only front-month contracts, according to the prospectus.

“Gold is seeing a bit of fresh safe-haven demand due to the increase in Russia-Ukraine tensions,” Jim Wyckoff, a senior analyst at Kitco Metals, reported at Hard Asset Investor. “It's not likely this matter will fade away, and it’s more likely that it will escalate in the coming weeks,” he said, which would be bullish for the gold market.

The daily rebalance feature of the funds almost guarantees that the funds’ actual returns won’t track their underlying benchmarks. As a consequence, firms like Direxion and ProShares that sponsor leveraged and inverse products such as GLDL and GLDS pepper regulatory paperwork detailing the products with warnings about this so-called path-dependency characteristic.

Because the funds are registered under the Securities Exchange Act of 1933, Direxion estimated the fund’s annual cost to investors at 1.56 percent, or $156 for each $10,000 invested. That estimate is based on total underlying assets in the fund of $50 million, and could change over time because of changes to assets as well as fee waivers set by the funds’ managers.

The two new funds bring the total number of ETF launches to 55 new offerings year-to-date, according to data compiled by ETF.com Analytics. There are currently some 1,570 U.S.-listed ETFs managing more than $1.740 trillion in assets.

Filing

TrimTabs Asset Management, purveyor of the AdvisorShares TrimTabs Float Shrink (TTFS | B-77), is looking to strike out on its own. The firm has filed regulatory paperwork seeking permission to market self-indexed funds as well as funds of funds.

Self-indexing continues to be a popular trend among issuers who want to cut out third-party indexers in order to get their wares to market quicker and more cost efficiently. The trend was pioneered by WisdomTree.

TTFS was launched in October 2011 and is an actively managed, equal-weighted fund that selects stocks based on trends in outstanding shares, firm leverage and free cash flow. It currently manages $120 million.