Direxion Launches Bear Brazil, Korea ETFs

May 01, 2013

The bear versions of two 3X Direxion Brazil and South Korea funds go live today.

 

Direxion, the Newton, Mass.-based firm known for its geared ETFs, is launching a bear pair of triple-leveraged single-country ETFs today—one focused on Brazil, the other on South Korea—that are apart of a big lineup the firm first put in registration in 2010.

The two are the short versions of two triple-leverage long funds Direxion launched about three weeks ago that were also focused on Brazil and South Korea. Both new funds will have net annual expense ratios of 1 percent—or $100 for each $10,000 invested—the same as the bull versions that are already live, according to the funds’ latest prospectus.

The Direxion Daily Brazil Bear 3X Shares (NYSEArca: BRZS) will serve up three times the inverse daily performance of the MSCI Brazil Index, a free-float-adjusted market-capitalization-weighted index comprising primarily Brazil’s large- and midcap names—the same index anchoring the $7.2 billion iShares MSCI Brazil Index Fund (NYSEArca: EWZ).

Similarly, the Direxion Daily South Korea Bear 3X Shares (NYSEArca: KORZ) will serve up triple exposure to the inverse of the daily performance of the MSCI Korea Index, the same benchmark that the $3.26 billion iShares MSCI South Korea Index Fund (NYSEArca: EWY) tracks.

At the time of Direxion’s massive 2010 filing that detailed plans for some 36 funds—including 17 bull-and-bear triple-exposure pairs that rebalance daily and are focused largely on Asian and emerging market countries— the company said it would be rolling out the strategies when they thought the time was right for the funds.

Interestingly, Brazil ETFs have struggled in recent months as the country’s GDP growth has failed to live up to the promise of outsized emerging market performance relative to developed-world markets.

The big iShares fund, EWZ, has lost more than 3 percent of its value year-to-date as investors yanked more than $1.85 billion from the fund. The ETF’s losses come in at more than 10 percent in the past year.

Classification Differences

South Korea, meanwhile, has been in the center of a debate regarding whether the country belongs in the emerging markets basket or among developed economies. Last June, MSCI decided to keep South Korea labeled as emerging, but FTSE has long held the country among its developed markets.

Either way, since the beginning of the year, EWY has slipped almost 10 percent despite net asset inflows of $214.6 million, trading at its lowest level in about 18 months.

The new ETFs will join similarly designed Direxion products, such as the $75 million Direxion Daily China Bull 3X Shares (NYSEArca: YINN), which first came to market in December 2009, and the $18 million Direxion Daily Russia Bull 3X Shares (NYSEArca: RUSL), launched in May 2011.

All of these leveraged ETFs have matching bear funds, and now BRZS and KORZ fit that bill as well. The new funds join the Direxion Daily Brazil Bear 3X Shares (NYSEArca: BRZU) and Direxion Daily South Korea Bear 3X Shares (NYSEArca: KORU).

 

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