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Direxion strengthens buy-and-hold product offerings with three volatility response ETFs

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Direxion has launched three exchange-traded funds that seek to better control risk in equity investments. The Funds track indices in the newly launched S&P Dynamic Rebalancing Risk Control Index Series.

The Direxion S&P 500 RC Volatility Response Shares (ticker:VSPY), Direxion S&P 1500 RC Volatility Response Shares (ticker:VSPR) and Direxion S&P Latin America 40 RC Volatility Response Shares (ticker:VLAT) follow the S&P 500 Dynamic Rebalancing Risk Control Index, S&P Composite 1500 Dynamic Rebalancing Risk Control Index and S&P Latin America 40 Dynamic Rebalancing Risk Control Index, respectively.

The Funds embody 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 (lower volatility) market environment. Each Fund has a target volatility level for its corresponding index. When volatility moves above those levels, the Funds will increase their exposure to U.S. Treasuries and decrease their exposure to equities. The Funds will proportionately increase exposure to equities during periods of low market volatility.

The Funds are structured so that adjustments can be made quickly and frequently, even on a daily basis, as the methodology dictates. The volatility levels of the corresponding indices are monitored daily, and equity/U.S. Treasury Bills exposure allocations are rebalanced on a monthly basis, at minimum.

"These new Funds are an intelligent way for equity investors to mitigate risk," says Ed Egilinsky, Managing Director, Alternative Investments at Direxion. "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 favourable 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."

 

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