“When someone hears ‘three beta,’ the assumption might be that someone would put 100% of their assets in that fund. They’re meant to be complementary or supplements. They can be used wisely.”
O’Neill says that most of the criticism has come from those who see ETFs as something where every fund needs to be suitable for every investor, but that simply isn’t the case.
“There are lots of investment tools used at the margins or only used by certain players. This is a suite of products that can be used very wisely by certain investors,” says O’Neill.
The early appearance is that professional investors will find these funds of particular interest, including hedge funds, registered investment advisors and proprietary trading desks on Wall Street, says Bill Franca, Direxion’s head of sales.
“I don’t think they’re going to be used by passive investors who are checking their portfolio once every six months. That’s not what these products are for,” Franca points out.
“They’re meant to be used by people who are managing their portfolios very actively, by professional, sophisticated investors,” O’Neill adds.
Overall, these funds are just another tool in the shed for investors who want more leverage. Franca says, “”We believe that leveraged ETFs have already proven their versatility in the marketplace. We feel that there’s definitely a place for leverage because of the ability of different firms to achieve leverage because of what’s going on in the market today.”
The new funds are:
- Direxion Large Cap Bull 3X Shares (BGU)
- Direxion Small Cap Bull 3x Shares (TNA)
- Direxion Energy Bull 3x Shares (ERX)
- Direxion Financial Bull 3x Shares (FAS)
- Direxion Large Cap Bear 3x Shares (BGZ)
- Direxion Small Cap Bear 3x Shares (TZA)
- Direxion Energy Bear 3x Shares (ERY)
- Direxion Financial Bear 3x Shares (FAZ)