Direxion announced on Wednesday the launch of three new ETFs for 2020 meant to appeal to long-term investors.
These new ETFs are the Direxion MSCI USA ESG - Leaders vs. Laggards ETF (NYSE: ESNG) Direxion Flight to Safety Strategy ETF (NYSE: FLYT) and Direxion S&P 500 High Minus Low Quality ETF (NYSE: QMJ), and are the first three of several planned launches this year.
The three new ETFs are part of Direxion’s goal of offering more strategies for long-term investors. Direxion is currently the largest provider of 3X leveraged ETFs, which are primarily used by active short-term traders.
“These funds are long term buy and hold options,” Direxion Managing Director of Capital Markets Sylvia Jablonski told Benzinga. “Most investors would hold these ETFs for long time horizons, even years. They are not the same as the tactical leveraged product or client.”
Leaders vs. Laggards
The Direxion MSCI USA ESG - Leaders vs. Laggards ETF allows investors to get increased long exposure to companies with strong environmental, social, and corporate governance ratings, while simultaneously going short companies with weak ratings.
The fund utilizes a 150/50 structure in which it gains 150% exposure to the 100 highest-rated ESG companies and short 50% exposure to the 100 lowest-rated companies. ESG ratings are taken from MSCI ESG indexes.
According to the release, it’s the first ETF that allows investors to simultaneously go long and short companies based on their ESG rating.
“The core idea of ESG is very topical and relevant to many of today’s issues whether around the upcoming election, or the general shift that we are seeing from companies and individuals towards awareness of environmental, social and governance factors,” said Jablonski. “Investors have expressed interest in alignment with socially responsible investing, positive environmental impacts and issues that matter beyond the bottom line.”
Flight To Safety
The Direxion Flight to Safety Strategy ETF is designed to protect investors during times of economic uncertainty.
The ETF combines long-term U.S. Treasurys, utility stocks, and physical gold into a single portfolio. It seeks to outperform the Solactive Flight to Safety Index.
“Our Flight to safety is an all in one package of defensive exposures,” said Jablonski. “It takes bonds, utilities, and gold and meshes them in an ETF which allows for the benefits of beta across fixed income, equities, and precious metals. It’s a way to introduce protection that does not require precision in timing.”
High Minus Low Quality
The Direxion S&P 500 High Minus Low Quality ETF provides exposure to “quality” firms that are profitable, operationally efficient, stable and have a tendency to outperform the broader market.
“Investors have expressed interest in seeking quality exposure given our place in the long-dated bull market,” said Jablonski. “These factors (profitable, operationally efficient, stable and have a tendency to outperform the broader market) brought in $7 billion of assets under management in 2019 alone, and there aren’t a massive amount of options well-positioned.”
This ETF utilizes a similar capital-efficient 150/50 structure to ESNG. It provides 150% exposure to the highest quality stocks in the S&P 500 and a simultaneous short 50% exposure to the lowest quality names.