Latest news from Direxion, winner of Best US Equity ETF Issuer ($1bn-$10bn) in this year’s ETF Express US ETF awards, is that it has launched two new pairs of 2X leveraged bull and -1x bear ETFs, offering exposure to Berkshire Hathaway Inc., or Palantir Technologies Inc.
The firm has also recently become the new home of Douglas Yones, formerly head of Exchange Traded Product at the ‘home of ETFs’ NYSE, who joined the firm in November as its new CEO.
Ed Egilinsky, Direxion’s Managing Director and Head of Sales, Distribution and Alternatives, explains that the firm has been going since 1997 and started offering leveraged and inverse ETFs in 2008. It now has some 85+ ETFs, predominantly in the leveraged and inverse space.
Egilinsky has been with the firm for 13 years and has seen the leveraged and inverse universe grow enormously. The firm has assets of USD50 billion, which can fluctuate partly based on the movement of the markets. Periods of increased volatility can lead to a higher degree of turnover with Direxion’s Leveraged and Inverse ETF lineup.
“We are primarily known for short term trading vehicles with different leverage points. We have trading tools for active traders that are looking to express short term views whether bullish or bearish. These products are not appropriate for everyone,” Egilinsky says.
Education is first and foremost for the firm, with a dedicated section on the website explaining exactly how these products work.
Egilinsky says that appetite for leveraged and inverse products is growing, especially during and after the pandemic.
“It’s not just with our products, but we are seeing an overall increased appetite for risk,” he says, noting that ETFs using options or cryptos intended for active trading have seen growth in both the retail and professional buyers’ groups. “The evolution of the active trader to accept greater risk has picked up momentum both in the US and globally,” he says.
The firm is strong in APAC, with a dedicated office in Hong Kong and is enjoying significant flows through that region and in Japan and South Korea, with hedge funds, high velocity traders and family offices utilising their products.
Single stock leveraged and inverse ETPs have been more of a recent evolution driven by demand for the Magnificent Seven stocks. These latest launches are a broadening out of that offering.
The four new funds allow active traders to obtain magnified, or inverse, exposure to the daily performance of the common stock of Berkshire Hathaway Inc., or Palantir Technologies Inc., through either the Direxion Daily BRKB Bull 2X Shares (Ticker: BRKU) and Direxion Daily BRKB Bear 1X Shares (Ticker: BRKD), or the Direxion Daily PLTR Bull 2X Shares (Ticker: PLTU) and Direxion Daily PLTR Bear 1X Shares (Ticker: PLTD).
“Berkshire Hathaway is one of the more widely held and actively traded stocks, with a market capitalisation in the top 10,” Egilinsky says. “There are always headlines around the stock meaning that some individuals want to trade that type of news. There will be those who believe, on the short-term basis, that Berkshire Hathaway will move higher and those who are worried about the succession plan at the firm, who might be bearish.”
He also notes that those who don’t want to use margin on their accounts might be attracted to the ETFs or investors with significant profits might want to hedge their gains.
“These ETFs provide a solution to express a short-term view to hedge or take an outright short on Berkshire Hathaway,” he says.
Yones adds that 2024 has seen no shortage of large swings in the market because of war, geo-political risk and company news. “Volatility around certain sectors has been going up year on year and that will hold true through 2025.”
“For our type of traders and institutions that take short term views, we will provide them with packaged solutions which allow them to take short term bets on where the market will be going. You might want a daily hedge and it makes sense – it’s a natural addition to our line up.”
Yones describes his new role as ‘a privilege.’ “I hope to be able to continue to grow here. I helped some 200 asset managers come into the business who had never had an ETF before, so my experience taps the global markets,” he says. “The market is moving towards structured products with an ETF wrapper so I hope I can bring my experience and leverage it, no pun intended, worldwide.”
The ETFs offering exposure to Palantir Technologies are there to enable traders to participate actively in the AI arena, with leveraged and inverse exposure on a stock that is up 300+ percent this year. Egilinsky says, “Based on those outsized gains this year, contrarians might consider taking the other side of that trade. There are individuals on the bull and bear side so we are providing trading tools for both.”
