Direxion launches ‘Insider Sentiment’ ETFs

Dec 12th, 2011 | By | Category: Alternatives / Multi-Asset

Direxion, best known for its leveraged and inverse ETFs, has launched two new exchange-traded funds, the Direxion All Cap Insider Sentiment Shares and the Direxion Large Cap Insider Sentiment Shares.

Direxion launches 'Insider Sentiment' ETFs

Direxion has launched a pair of 'Insider Sentiment' ETFs which track stock purchases by company directors.

The funds utilise indicators of insider sentiment – namely stock purchases by corporate insiders – to allocate weightings to US equities.

Unlike Direxion’s existing line-up of funds, these ETFs are unleveraged and aimed at buy-and-hold investors, thus marking a break from Direxion’s industry niche, that of issuing leveraged ETFs popular with short-term traders.

The Direxion All Cap Insider Sentiment Shares ETF, which trades under the ticker KNOW, seeks to track the Sabrient Multi-Cap Insider/Analyst Quant-Weighted Index composed of 100 stocks from the S&P 1500 pool, a composite of the S&P 500, S&P 400 and S&P 600 indices.

The Direxion Large Cap Insider Sentiment Shares ETF, ticker INSD, seeks to track the Sabrient Large-Cap Insider/Analyst Quant-Weighted Index consisting of 100 stocks picked from the S&P 500.

The master index behind these sub-indices is the Sabrient Insider Sentiment Index. This index identifies stocks that reflect favourable corporate insider buying trends (determined via the public filings of such corporate insiders) and recent earnings estimate increases by Wall Street analysts that follow the stocks, giving them the potential to outperform on a risk-adjusted basis the S&P 500 Index and other broad market benchmark indices.

Corporate insiders – which include the employees and directors of the company, as well as 10% beneficial owners of the stock – are presumed to be well-apprised of the company’s business and future prospects. They know everything that reasonably can be known about their company’s business prospects, employees, customers, suppliers and competitors.

Therefore, when insiders go into the market to trade their own company’s shares, they have deeper insight into their company’s likely future prospects than can be captured in the more definitive information appropriately released to the public.

In essence, large purchases by corporate insiders can be interpreted as a bullish sign, whereas disposals by insiders can be interpreted as a bearish sign, indicating that prospects may be deteriorating.

Discussing the launch, Ed Egilinsky, Managing Director and Head of Alternatives at Direxion, said: “We are committed to providing advisors and investors with the opportunity to invest in buy and hold equity strategies that allow them to differentiate themselves within the marketplace.

“Investors are always looking for ways to try and generate excess returns within their equity portfolios. These equity indices are unique in that they are not constrained by either style box or sector allocation limitations, as are the majority of typical equity investments.”

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