By Murray Coleman
On the heels of introducing a popular series of exchange-traded funds that provided traders with the first portfolios that took 300% short positions in stocks and 300% leveraged exposure, Direxion launched Thursday a pair of mid-cap funds doing much the same.
The Direxion Mid Cap Bear 3x Shares (NYSE: MWN) and the Direxion Mid Cap Bull 3x Shares (NYSE: MWJ) follow eight broad-based inverse and leveraged ETFs in early November. (See related story here.)
The latest super-juiced portfolios also follow last month's debut of 3X inverse and leveraged ETFs tracking international markets and selected U.S. sectors. (See story here.)
Direxion still has aims to come out with a host of others. In its initial filing with the Securities and Exchange Commission in May, the company filed to launch 36 new ETFs. Those include foreign leveraged offerings focusing on China, India, Japan and Latin America. Domestically, homebuilders and real estate were also listed as being in the works.
They've been a hit with traders. Since opening this fall, they've been among the biggest attractions based on net inflows in the industry in the past two months. (See latest data here.)
But they've courted controversy as well, pitting supporters of long-term investing versus short-term traders over whether the market really needs ETFs that provide 300% exposure on the downside as well as up. Previously, ProShares and Rydex, the two inverse and leveraged leaders, had only gone with 2x (shorthand for 200%) coverage.
Andy O'Rourke, a Direxion manager, responded to those charges and addressed the potential of the leveraged market during a lengthy interview last month with IndexUniverse.com. (See story here.)
The new Mid Cap Bull 3x aims to provide 300% exposure to the Russell MidCap Index. That's the same benchmark used for the Mid Cap Bear 3x fund. Both are expected to come with expense ratios of 0.95%.
A few notes in Direxion's filings should be considered. For one, the expected expense ratio is capped only through March 1. Fee waivers aren't an unusual practice in the fund world, but something investors might want to keep a close watch on to see if it's extended or lifted.
Also, a stipulation included in the descriptions of the Mid Cap Bull and Bear ETFs includes mention that the funds have adopted a Rule 12b-1 plan. That means, according to the filing, both could charge up to 0.25% in additional fees.
For details on Direxion's complete list of ETFs, with explanations of each, filed with the SEC, see the documents here.