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Direxion is racing to catch up with a new leveraged and inverse exchange-traded fund product innovation: single-stock funds.
The manager filed an application with the U.S. Securities and Exchange Commission last week to launch 21 funds, each offering exposure to the daily or leveraged inverse returns of a leading tech stock.
Alternative asset manager AXS Investments filed 18 similar ETFs earlier this month, each designed to replicate twice the daily performance or daily inverse performance of nine well-known, but not all tech-focused, stocks.
Both companies’ rollouts include chipmaker Nvidia among their target stocks. Direxion’s other target stocks include Meta Platforms, Netflix, Apple, Microsoft, Amazon and Google. AXS funds also invest in Tesla, ConocoPhillips, Boeing, PayPal, Wells Fargo, Pfizer, Salesforce and Nike.
This article was previously published by Ignites, a title owned by the FT Group.
Neither document disclosed expense ratios.
Another application for the Innovator Hedged Tesla ETF would provide hedged exposure to a single stock, that of Tesla. Innovator Capital Management requested its deployment on January 31.
The products represent a new twist on leveraged and inverse ETFs and were not approved for launch. Their approval is by no means assured as the SEC is developing new rules for these products.
SEC Chairman Gary Gensler announced in October that he had instructed committee staff to develop recommendations for developing rules addressing the risks of investing in “complex financial products,” including leveraged and inverse ETFs.
Funds “can pose risk even to sophisticated investors and can potentially create system-wide risk by operating in unexpected ways when markets experience volatility or stressed conditions,” Gensler said at the time.
Soon after, the SEC rejected plans for a leveraged Bitcoin futures fund, dashing the hopes of applicants including AXS and Direxion.
*Ignites is an information service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at enflamme.com.
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