Direxion's three new ETFs seek control of risk in equity investments

By Tali David

Minneapolis, Jan. 11 - Direxion launched three new exchange-traded funds that each seek to better control risk in equity investments, according to a press release.

The funds track corresponding indexes in the newly launched S&P Dynamic Rebalancing Risk Control Index Series.

The Direxion S&P 500 RC Volatility Response Shares, Direxion S&P 1500 RC Volatility Response Shares and Direxion S&P Latin America 40 RC Volatility Response Shares follow the S&P 500 Dynamic Rebalancing Risk Control Index, the S&P Composite 1500 Dynamic Rebalancing Risk Control Index and the S&P Latin America 40 Dynamic Rebalancing Risk Control Index, respectively.

The funds use a rules-based investment approach that uses volatility as a gauge to determine equity exposure. They operate according to the principle that exposure to equities should be reduced during periods of higher overall market volatility and increased during periods of a more stable market environment.

Each fund has a target volatility level for its corresponding index. When volatility moves above those levels, the funds increase their exposure to U.S. Treasuries and decrease their exposure to equities. During periods of low market volatility, the funds will proportionately increase their exposure to equities.

Adjustments in investments can be made quickly, even on a daily basis. Volatility levels are monitored daily. Equity/U.S. Treasuries exposure allocations are rebalanced on a monthly basis or sooner.

"These new funds are an intelligent way for equity investors to mitigate risk," Ed Egilinsky, managing director of Alternative Investments at Direxion, said in the release.

"Periods of higher than average market volatility tend to coincide, with potentially adverse equity markets, while periods of below average market volatility tend to represent a more stable environment and a greater likelihood of favorable equity market conditions. By tracking indices that use volatility to dictate overall equity exposure, these funds serve as a means for investors to gain exposure to equities while seeking to help protect their portfolios."

Direxion is a Milwaukee-based provider of liquid alternative investment solutions.

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