Direxion Delivers Thought Leadership on Relative Value Investment Strategies in Portfolio Construction

Research on Capital-Efficient Execution of Cyclical Views Backs Thesis of New Relative Weight ETFs

NEW YORK—April 2, 2019—Direxion has released compelling new research that contrasts long-only constrained investment execution with strategies that deploy controlled short positions, which builds the case for the more robust implementation of a market view through the use of Relative Weight ETFs.

The technical research paper, Relative Weight Investing: Stronger Implementation of Your Market Views, demonstrates that because capital is finite, investors’ asset allocation decisions are ultimately a reflection of their views on one market segment or asset class relative to another. But, since the majority of investors have been constrained from implementing true expressions of relative value asset allocation decisions, they are likely leaving returns on the table.

The paper, authored by Dave Mazza, Head of Product at Direxion, explores the merits of the value proposition that when an investor’s market view is correct, relative value investing, using strategies that employ a controlled short position with net long exposure, delivers a more robust implementation of that view.

Access to the research paper is limited to investment professionals and available at Read the Research Paper, or by contacting Direxion’s Product Research Department at 866-476-7523.

“For decades, investors have expressed their market views by, for example, overweighting value if they believe it’s going to outperform for the next year. But, for most investors, that only captures half of their view. If value beats the market, then it obviously beats growth by even more,” said Mr. Mazza. “Accessing the spread between the favored and the unfavored securities delivers more bang for the investor’s buck.”

Investors, portfolio managers, and the financial media have been intrigued by Direxion’s new Relative Weight ETFs since they were launched in January, with the paired theme of Value vs. Growth garnering the most attention.

“We’re pleased with the initial reception of these new ETF strategies by advisors and home offices,” said Ben Woloshin, Head of National Accounts for Direxion. “This research helps validate that they can aid portfolio construction by taking further advantage of market cyclicality. It’s also a validation of our decision to broaden our focus beyond highly tactical trading, towards buy-and-hold investors, while building on our core strengths.”

Each Direxion Relative Weight ETF allows investors to 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.

Direxion’s 10 ETFs cover five well-known investment pairs, and are built using familiar passive building blocks:

Fund Name Index Ticker
Direxion Russell 1000® Value Over Growth ETF Russell 1000® Value/Growth 150/50 Net Spread Index RWVG
Direxion Russell 1000® Growth Over Value ETF Russell 1000® Growth/Value 150/50 Net Spread Index RWGV
Direxion Russell Large Over Small Cap ETF Russell 1000®/Russell 2000® 150/50 Net Spread Index RWLS
Direxion Russell Small Over Large Cap ETF Russell 2000®/Russell 1000® 150/50 Net Spread Index RWSL
Direxion MSCI Cyclicals Over Defensives ETF MSCI USA Cyclical Sectors – USA Defensive Sectors 150/50 Return Spread Index RWCD
Direxion MSCI Defensives Over Cyclicals ETF MSCI USA Defensive Sectors – USA Cyclical Sectors 150/50 Return Spread Index RWDC
Direxion MSCI Developed Over Emerging Markets ETF MSCI EAFE IMI – Emerging Markets IMI 150/50 Return Spread Index RWDE
Direxion MSCI Emerging Over Developed Markets ETF MSCI Emerging Markets IMI – EAFE IMI 150/50 Return Spread Index RWED
Direxion FTSE Russell International Over US ETF FTSE All-World ex US/Russell 1000 150/50 Net Spread Index RWIU
Direxion FTSE Russell US Over International ETF Russell 1000/FTSE All-World ex US 150/50 Net Spread Index RWUI

The index 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.

While most known for tactical trading funds, Direxion has in recent years expanded offerings to more thematic investors and strategic allocators.

Direxion’s mission is to democratize institutional strategies for their clients, including tactical traders, thematic investors and strategic asset allocators.

Press Release (pdf)

 

About Direxion:

Direxion equips investors who are driven by conviction with ETF solutions built for purpose and fine-tuned for precision. These solutions are available for a broad spectrum of investors, whether executing short-term tactical trades, investing in macro themes, or building long-term asset allocation strategies. Direxion’s reputation is founded on developing products that precisely express market perspectives and allow investors to manage their risk exposure. Founded in 1997, the company has approximately $13.5 billion in assets under management as of March 29, 2019. For more information, please visit www.direxion.com.

 

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There is no guarantee that the Funds will achieve their investment objectives.

For more information on all Direxion Shares daily leveraged ETFs, go to direxioninvestments.com, or call us at 866.476.7523.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 646-798-9337 or visit our website at direxioninvestments.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Direxion Relative Weight ETFs Risks – Investing involves risk including possible loss of principal. The ETFs’ investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in or shorting securities or other investments. There is no guarantee that the returns on an ETF’s long or short positions will produce high, or even positive returns and the ETF could lose money if either or both of the ETF’s long and short positions produce negative returns. Please see the summary and full prospectuses for a more complete description of these and other risks of the ETFs. 

Distributor: Foreside Fund Services, LLC.