Direxion Launches 3x Leveraged REIT ETFs

July 16, 2009

Direxion launches new leveraged and inverse REIT ETFs tracking U.S. markets.

 

Investors interested in playing the U.S. real estate market now have two new ways to leverage their bets.

On Thursday, Direxion launched a pair of exchange-traded funds targeting domestic real estate investment trusts. Those are the:

  • Direxion Daily Real Estate Bull 3x Shares (NYSEArca: DRN)
  • Direxion Daily Real Estate Bear 3x Shares (NYSEArca: DRV)

The new ETFs will do exactly what their names imply. DRN will seek to provide 300% exposure to the daily returns of an index. DRV will provide 3x inverse exposure to the same index, the MSCI U.S. REIT Index. Each comes with an expense ratio of 0.95%, according to Direxion.

ProShares has a pair that does much the same—only with a Dow Jones domestic REITs benchmark. Both try to provide 200% leveraged and inverse coverage rather than the more juiced 3x exposure of the new Direxion funds. Those funds (NYSEArca: SRS and NYSEArca: URE) currently charge expense ratios of 0.95%.

Heading into Thursday, the 2x leveraged ProShares (URE) had returned -57.03% so far this year. Meanwhile, the UltraShort Real Estate ProShares (SRS) was down nearly 71%, according to Morningstar data.

The new Direxion 3x ETFs also figure to have another indirect competitor in the field. MacroMarkets recently launched its latest so-called teeter-totter funds. Those are the MacroShares Major Metro Up (UMM) and the MacroShares Major Metro Down (DMM).

The exchange-traded products also aim at providing 300% exposure, this time to the S&P/Case Shiller Home Price 10 Index. (See related story here.) That's a benchmark directly tied to residential markets, unlike Direxion's new entries, which focus on commercial real estate investment trusts.

No information had appeared by Thursday morning on Direxion's Web site to accompany its 20 other leveraged and inverse ETF offerings. But you can read the registration statement for both new ETFs here.

"These two new ETFs further enhance our unique offering of solutions for the tactically minded investor," said Dan O'Neill, Direxion Shares' president, in a statement on Thursday.

The MSCI U.S. REIT Index represents approximately 85% of the U.S. REIT universe. "The flexibility that our ETFs provide, on both the long and short side, can be especially valuable for sophisticated investors who use tactical strategies in order to navigate today's volatile market," added O'Neill.

 

 

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