Direxion Shares, the ETF provider best known for its triple-exposure leveraged and inverse fund offerings, filed paperwork with the U.S. Securities and Exchange Commission to bring to market four bull-and-bear pairs of triple-exposure equity ETFs focused on the industrial sectors, gold and silver miners and shares of Turkey-based companies.
The eight funds, which each have annual expense ratios of 0.95 percent, are:
- Direxion Daily Turkey Bull 3X Shares
- Direxion Daily Turkey Bear 3X Shares
- Direxion Daily Industrial Bull 3X Shares
- Direxion Daily Industrial Bear 3X Shares
- Direxion Daily Junior Gold Miners Index Bull 3X Shares
- Direxion Daily Junior Gold Miners Index Bear 3X Shares
- Direxion Daily Silver Miners Bull 3X Shares
- Direxion Daily Silver Miners Bear 3X Shares
In the filing, Direxion is plain about the risks of investing in leveraged funds that rebalance daily. Returns in such funds can deviate significantly from those of their underlying indexes. For example, at times of elevated volatility, investors could lose all their investment—even if the sum-total effect of multiple sharp changes in price leave a given index unchanged over time.
Indeed, Direxion states at the top of their prospectus that unlike most ETFs, these funds are intended to be used as short-term trading vehicles and that “they are not appropriate for investors who do not intend to actively monitor and manage their portfolios.”
However, for attentive investors with an appetite for risk, these leveraged ETFs offer the potential for large short-term payouts. The funds seek three times the daily return of a given index or its inverse.
The principal investment strategies of the eight funds involve investing at least 80 percent of a fund’s net assets in the securities that comprise its respective index.
The funds can use financial instruments such as futures contracts, options on securities, short positions and short-term debt instruments to achieve their investment strategies.