Today Direxion launched a trio of ETFs that offer index-based strategies designed to provide buy-and-hold investors with diversification for their portfolios. The three ETFs and their expense ratios are as follows:
- Direxion High Growth ETF (HIPR), 0.40%
- Direxion Fallen Knives ETF (NIFE), 0.50%
- Direxion Dynamic Hedge ETF (DYHG), 0.57%
All of the funds list on the NYSE Arca.
David Mazza, managing director and head of product at Direxion, said that the funds are part of Direxion’s goal to diversify its product range and aim to offer “targeted outcomes for investors with different goals, whether that’s for alpha generation or risk mitigation.”
High Growth ETF
HIPR tracks the Russell 1000 Hyper Growth Index, which scores companies based on quality, momentum, value and volatility, according to the prospectus. The quality angle may seem unconnected to growth, but the idea is to ensure that a company’s growth is sustainable.
“If there’s nothing backing [the growth] up, it’s probably not going to materialize. So [quality paired with traditional growth characteristics] is a very powerful combination,” said Mazza.
As a result, the fund methodology seeks to identify “hyper” growth companies with strong cash flows and strong balance sheets. The underlying index had 151 components as of mid-May.
Fallen Knives ETF
NIFE’s underlying index comprises companies that have seen significant share price declines but have solid financials, indicating the price could see a turnaround. Companies are scored on current ratio, cash flow coverage and debt-to-equity ratio, with the top 50 securities selected for inclusion in the index, the prospectus says.
Mazza says that in the current market environment, a lot of investors have been “bottom fishing” but that the strategy aims to “combine underperformance with financial health.”
He adds that the fund focuses on “short-term controversies to hopefully identify mean reversion as the strategy systematically identifies those that have fallen but have strong financial health.”
Dynamic Hedge ETF
DYHG is different from the other two funds as it is focused more on protection. Direxion teamed with Salt Financial, which uses its proprietary truVol metric to measure volatility. The truVol metric relies on intraday data, with the intention of creating a more accurate volatility gauge.
The Salt truVol US Large Cap Dynamic Hedge Index shifts its exposure between the S&P 500 Index and a portfolio of short positions in S&P 500 Index futures contracts, with the potential for the portfolio to go from unhedged to completely hedged depending on the degree of volatility indicated by the truVol metric.
Mazza describes the fund as “a robust offering for an investor looking for long-term exposure to the stock market with built-in risk mitigation,” with the idea of giving the investor a smoother ride over the long run.
Contact Heather Bell at [email protected]