A firm better known for its leveraged index mutual funds has filed for 36 exchange traded funds (ETFs) with the Securities and Exchange Commission (SEC) that raise the stakes.
The ETFs from Direxion Funds would deliver three times the performance (or three times the inverse) of their underlying indexes. This is a new twist, since no ETF currently offers anything more than double the exposure, leveraged or short.
The funds will cover a variety of asset classes that include sectors, international regions, real estate and even commodities, reports Heather Bell for Index Universe. The prospectus says the management fees for the funds will be 0.75%.
ProShares and Rydex have no doubt proved that some investors want leveraged and short ETFs, but is this going too far with the concept? For financial advisors and retail investors, double exposure might be plenty. We’re concerned that this might be a case of too much octane.
Are ETFs going to be like those razors that hit the market with one more blade every time a new one comes out? Investors should be careful – too many blades, and you’re likely to get cut.
Read the disclosure, as Tom Lydon is a board member of Rydex Funds.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.