Direxion ETF Takes On Digital Consumption

Direxion added another ETF to its lineup that capitalizes on the societal changes caused—or even just accelerated—by the coronavirus pandemic. The Direxion Connected Consumer ETF (CCON) covers four areas of the digital economy: home entertainment, online education, remote health and wellbeing and virtual/digital social interaction.

CCON comes with an expense ratio of 0.45% and lists on the NYSE Arca.

“The fund is really intended to capture the increasingly virtual nature and digitization of how invdividuals consume in a comprehensive way,” said David Mazza, Direxion’s head of product. “Similar to the greater adoption of remote work, the COVID-19 pandemic has really only accelerated these trends.”

“This is just intended to be comprehensive exposure to the changing consumer at large,” he added.

Methodology

The fund’s underlying index relies on artificial intelligence in the form of natural language processing to target U.S.-listed companies that meet minimum size and liquidity requirements. The fund selects 10 companies for each of the four categories based on their key word search scores and equal weights them during semi-annual reconstitutions and rebalances, the prospectus says.

The companies included in the index range from giants like Apple and Amazon to smaller companies like Strategic Education and 8x8, Inc. According to Mazza, about 65% of the portfolio is large cap, 14% midcap and 20% small cap. And it may be the smaller companies that hold the most appeal for investors.

Mazza says the market sell-off in March raised the question of the possible micro-level themes and opportunities that might emerge from it.

“What I think is really exciting and interesting about the opportunity for investors is to learn more about really unique and innovative companies that may be smaller in market cap size but are growing rapidly and solving problems either for other companies or consumers,” he added, noting that the fund is “most definitely a growth play.”

At the start of the summer, Direxion rolled out the Direxion Work From Home ETF (WFH). Like CCON, the ETF looks to capture the performance of companies that are likely to benefit from pandemic-related changes. The fund already has $91 million in assets under management. CCON simply seeks to capture those accelerated trends from the perspective of the consumer.

 Contact Heather Bell at [email protected]