US-based leveraged and inverse ETF specialist Direxion has debuted a new range of ETFs, under a new brand called “Portfolio+ ETFs”. The ETFs provide lightly leveraged exposure to their underlying indices.
The Portfolio+ ETFs provide 125% of the daily return of their underlying indices.
The Portfolio+ suite currently consists of six ETFs, including four new launches and two rebranded ETFs, and target both equities and fixed income exposures.
Each ETF offers 1.25x the daily return on its underlying index.
The funds do not carry the traditional Direxion branding and have been launched with their own website.
Commenting on the launch, Andy O’Rourke, Managing Director at Direxion, said, “Over time, a small amount of added exposure can make a significant difference. At the right price point, just a 25% boost allows advisors who already manage a diversified strategy to seek out additional risk-adjusted returns in a manageable way. “
“Over the past decade or so, increased correlation, the inability to outperform passive indexing, and fee compression all put pressure on advisors to prove their worth,” added Sylvia Jablonski, Managing Director at Direxion. “Traditional diversified asset allocation has worked well for decades. These new ETFs are a way to get just a little more out of those allocations, and maybe set yourself apart from your competitors.”
The new funds, all of which have been listed on NYSE Arca, are outlined below:
The Portfolio+ S&P Mid Cap ETF (PPMC US) provides 1.25x the daily return on the S&P Mid Cap 400 Index, a reference of 400 equities designed to serve as a proxy for the US mid-cap market. Its expense ratio is 0.40%.
The Portfolio+ Developed Markets ETF (PPDM US) provides 1.25x the daily return on the FTSE Developed All Cap ex US Index, a broad reference for the entire developed equities market outside the US. Its expense ratio is 0.47%.
The Portfolio+ Emerging Markets ETF (PPEM US) provides 1.25x the daily return on the FTSE Emerging Index, a reference for the emerging markets equities universe. Its expense ratio is also 0.40%.
The Portfolio+ Total Bond Market ETF (PPTB US) provides 1.25x the return on the Bloomberg Barclays US Aggregate Bond Index, a reference for US investment grade bonds from multiple segments including Treasuries, corporate bonds, mortgage-backed securities, and agency bonds. Its expense ratio is 0.34%.
The other two funds in the range are the Portfolio+ S&P 500 ETF (PPLC US), which has been rebranded from the Direxion Daily S&P 500 Bull 1.25x Shares (LLSP US); and the Portfolio+ S&P Small Cap ETF (PPSC US), which has been rebranded from the Direxion Daily Small cap Bull 1.25x Shares (LLSC US).
PPLC provides 1.25x the daily return on the S&P 500 Index and charges an expense ratio of 0.34%, while PPSC provides 1.25x the daily return on the S&P Small Cap 600 Index and charges 0.46%.
Inverse & leveraged funds may provide an efficient means for sophisticated traders to obtain tactical exposures; however, they are generally considered unsuitable for retail investors who may not fully understand the risks involved.
The funds tend to decay in value if held for an extended period of time, potentially leading to significant losses especially in volatile but range bound markets. This characteristic generally increases with the degree of leverage involved.
The 25% leverage of these funds means that the decay of value would not be as pronounced as the 2x or 3x leveraged funds commonly associated with Direxion but the funds are still not suitable as buy-and-hold investments.