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Mounting Momentum for MOON

Spotlight NewsletterAugust 30, 2022

Companies associated with innovative technology, and those in the technology sector more broadly, have been out of favor for investors during the recent market downturn. However, with the selloff, valuation multiples have come down, improving the potential trajectory of the space. It is important to remember that, by nature, innovative technology companies have different qualities than companies that are more well-established. They are often younger, are not profitable yet, and are in constant trial and error when experimenting with new projects and technologies. These characteristics can lead to a more volatile stock price, with arguably greater opportunity for high reward.

What makes MOON special?

Although there is no shortage of technology companies and funds claiming to be focused on innovation, We believe the Direxion Moonshot Innovators ETF (MOON) is truly unique. MOON seeks to track the S&P Kensho Moonshots Index, which measures the performance of 50 early-stage companies with the highest “early-stage composite innovation scores”. This score is based on a company’s R&D expense allocation to innovation and use of innovative language in regulatory filings over the past year. Investing in MOON presents a distinct opportunity to gain exposure to a group of these companies within a basket. Thanks to its special construction, MOON has outperformed the actively-managed ARKK Innovation Fund (ARKK) since its inception. The ARKK Innovation Fund was the first commercially successful innovative technology fund and has often been considered the industry standard, although it is important to note that it is actively managed. MOON and ARKK have very similar investment theses and move similarly, as seen below. 

All funds are managed differently and do not react the same to economic or market events. The investment objectives, strategies, policies or restrictions of other funds may differ and more information can be found in their respective prospectuses. Therefore, we generally do not believe it is possible to make direct fund to fund comparisons in an effort to highlight the benefits of a fund versus another similarly managed fund.

Source: Bloomberg Finance, L.P., as of July 29, 2022.

Performance is historical and does not guarantee future results. Current performance may be lower or higher than quoted. Investment returns and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance data for the most recent month-end is available at https://www.direxion.com/product/moonshot-innovators-etf  and https://ark-funds.com/funds/arkk/

Due to the ever-changing nature of the sector, the S&P Kensho Moonshots Index rebalances do not shy away from relatively high turnover and weight changes in order include companies that are on the bleeding edge of innovative technology. In fact, during the most recent July 2022 rebalance, more than half of the index constituents (33 to be exact) were replaced with new names. Accordingly, the sectors and industries weightings shifted significantly. The Autonomous Vehicles sub-sector experienced the greatest gain while the Distributed Ledger sub-sector saw the greatest reduction.

Source: S&P Kensho, as of July 29, 2022.

Notable New Names

As a result of the rebalance, some exciting new names have been added to the fund:

  • Intellia Therapeutics Inc (NTLA): Intellia is a biotechnology company that focuses on genome-editing technologies for human therapeutics. The stock price has rallied in the past three months and their pipeline includes Crispr-based therapy for liver disease, lung disease, sickle cell disease, and acute myeloid leukemia, just to name a few.
  • Roblox Corp (RBLX): Roblox is likely one of the most well-known names in the S&P Kensho Moonshots Index. It is a gaming platform and one of the first movers in the metaverse. Despite some negative headwinds in the tech and gaming space, daily active users on Roblox rose 9% in the first quarter of 2022.
  • Innoviz Technologies (INVZ): Innoviz is a LiDAR technology (laser-based radio) company working on autonomous vehicles. Volkswagen recently selected Innoviz to supply LiDAR technology for its development of self-driving cars as a tier 1 supplier, meaning there is no middle man and they sell directly to VW.
  • Curevac (CVAC): Curevac is a biotech company that went public in 2020 in the midst of the race to release the first Covid vaccination. Ultimately, Moderna and Pfizer beat them to it, but nonetheless shares traded extremely well out of the gate. Curevac is still a very important company in the biotech space, with the third largest market capitalization of leading mRNA companies in 2021 following only Moderna and BioNTech.*

The chart below illustrates how these names have rallied over the course of the year, exemplifying that performance can change quickly.

2022 Returns

1 Month2 MonthsYear-To-Date
Intellia Therapeutics Inc25.12%32.08%-45.23%
Roblox Corporation30.65%40.07%-58.39%
Innoviz Technologies2.55%-0.50%-36.59%
Curevac-4.48%-23.93%-62.11
Source: Bloomberg Finance, L.P., as of July 29, 2022.

Outlook

Despite recent performance, we believe MOON’s opportunity for strong future returns are vast. As many of these companies embark upon new projects and cultivate existing ones – from gene therapy, to the metaverse, to automated vehicles – balance sheets may improve as these unique products are brought to market. Many of these companies have premium valuation multiples as a result of their proprietary technology and robust pipelines. The technologies being created today only scratch the surface of what is possible. MOON is a buy-and-hold strategy, with the “hold” element being key to reap the rewards given the inherent forward-looking nature of the theme. Overall, MOON is on the up and up!

Fund Name/TickerARK Innovation ETF (ARKK)Direxion Moonshots Innovators ETF (MOON)
Inception Date10/31/201411/12/2020
ObjectiveARKK is an actively managed ETF that seeks long-term growth of capital by investing under normal circumstances primarily (at least 65% of its assets) in domestic and foreign equity securities of companies that are relevant to the Fund’s investment theme of disruptive innovation.MOON, under normal circumstances, invests at least 80% of its net assets in the securities that compromise the S&P Kensho Moonshots Index or investments with economic characteristics similar to the securities included in the index.
Expense Ratio.75%.65%
IndexActively ManagedS&P Kensho Moonshots Index
Principal RisksThe principal risks of investing in the ARKK include: Authorized Participants Concentration Risk, Communications Sector Risk, Consumer Discretionary Risk, Cryptocurrency Risk, Cryptocurrency Tax Risk, Currency Risk, Cyber Security Risk, Depositary Receipts Risk, Disruptive Innovation Risk, Emerging Market Securities Risk, Equity Securities Risk, Financial Technology Risk, Foreign Securities Risk, Future Expected Genomic Business Risk, Health Care Sector Risk, Information Technology Sector Risk, International Closed-Market Trading Risk, Issuer Risk, Large-Capitalization Companies Risk, Management Risk, Market Risk, Market Trading Risk, Micro-Capitalization Companies Risk, Next Generation Internet Companies Risk, Non-Diversified Risk, and Small and Medium Capitalization Companies RiskThe principal risks of investing in MOON include: Index Correlation Risk, Index Strategy Risk, Consumer Discretionary Sector Risk, Information Technology Sector Risk, Passive Investment Risk, Market Risk, Large-Capitalization Company Risk, Depositary Receipt Risk, Foreign Securities Risk, Liquidity Risk, Early Close/Trading Half Risk, Equity Securities Risk, Non-Diversification Risk, and Securities Lending Risk. Detailed information regarding the specific risks of MOON can be found in the ETF’s prospectus.
AUM*$8,130M$46.18M

*as of August 23, 2022

MOON Standard performance as of 6/30/22:

Quarterly1M %3M %YTD %1Y %3Y %5Y %10Y %Since InceptionInception DateExpense Ratio*
(Gross / Net %)
NAV-9.52-30.65-48.52-61.63-29.6511/12/20200.65 / 0.65*
Market Close-9.58-30.67-48.54-61.55-29.62
KMOON-9.57-30.75-48.62-62.01-30.10-
As of June 30, 2022

ARKK Standard performance as of 6/30/22:

Quarterly1M %3M %YTD %1Y %3Y %5Y %10Y %Since InceptionInception DateExpense Ratio
NAV-9.35-39.69.57.74-69.18-5.028.2910.82%10/31/20140.75%
Market Close-9.55-39.84-57.84-69.25-5.098.18 — 10.80%

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 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

The indices shown are for informational purposes only and are not reflective of any investment. As it is not possible to invest in the indices, the data shown does not reflect or compare features of an actual investment, such as its objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, or tax features. Past performance is no guarantee of future results.

Direxion Shares MOON ETF Risks – Investing involves risk including possible loss of principal. There is no guarantee the investment strategy will be successful. The value of stocks of information technology companies and companies that rely heavily on innovation and technology are particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation and competition, both domestically and internationally, including competition from competitors with lower production costs. Innovative technology companies may struggle to capitalize on new technology or may face competition and obsolescence. Additional risks of the Fund include, but are not limited to, Index Correlation/Tracking Risk, Index Strategy Risk, Market Disruption Risk, and risks associated with the market capitalizations of the securities in which the Fund may invest. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.

Distributor: Foreside Fund Services, LLC.

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