The markets, at times, exhibit uneven performances, and investors have been able to capitalize on the disparate returns in varying segments through ETFs that incorporate a relative weight strategy.
“It really builds upon common macro themes that investors utilize for a long time – I believe value is going to outperform growth, small-cap is going to outperform large-cap. What it does is improve upon the model that they typically utilize,” Rob Nestor, President, Direxion, said at the 2019 Schwab IMPACT conference.
To help investors better access the markets, Direxion has come out with a suite of ETFs to cover well-known investment pairs, and they are built using familiar passive building blocks, including:
- Direxion Russell 1000 Value Over Growth ETF (RWVG)
- Direxion Russell 1000 Growth Over Value ETF (RWGV)
- Direxion Russell Large Over Small Cap ETF (RWLS)
- Direxion Russell Small Over Large Cap ETF (RWSL)
- Direxion MSCI Cyclicals Over Defensives ETF (RWCD)
- Direxion MSCI Defensives Over Cyclicals ETF (RWDC)
- Direxion MSCI Emerging Over Developed Markets ETF (RWED)
- Direxion MSCI Developed Over Emerging Markets ETF (RWDE)
- Direxion FTSE Russell US Over International ETF (RWUI)
- Direxion FTSE Russell International Over US ETF (RWIU)
Building The Proper Index
The underlying indices for each Relative Weight ETF is built with a 150% long component and 50% short component, resulting in a net exposure of 100% of assets. Each ETF and its benchmark index has an oppositely-weighted counterpart. The ETFs provide relative outperformance if the long component outperforms the short component. The strategy implements the long side of the trade, and then also rewards an investor when a macro view is correct.
Each ETF helps investors capture both sides of their expressed view, with a risk profile similar to the broad underlying asset class. The products are built on Direxion’s core expertise of delivering sophisticated and precise exposure, whether views are short, intermediate, or long term.
With these ETFs, Direxion is the first to offer this long-short relative value strategy in an index-based fund. Whether they believe, for example, value will outperform growth, emerging will outperform developed markets or vice versa–all are captured within the convenience of one ETF as opposed to holding two separate positions.
Watch the interview between ETF Trends CEO Tom Lydon and Rob Nestor:
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