Direxion to increase leverage on PortfolioPlus ETFs

Jan 5th, 2019 | By | Category: ETF and Index News

US-based inverse and leveraged ETF specialist Direxion has announced it will raise the daily leverage factor on its suite of ‘PortfolioPlus’ ETFs.

Direxion to elevate leverage on PortfolioPlus ETFs

Effective 1 March 2019, the funds will provide 135% of the daily return on their underlying indices.

Introduced in February 2018, PortfolioPlus ETFs are designed to provide lightly leveraged exposure (initially 125%) to the daily return on their underlying indices.

The suite was unveiled consisting of six funds, although the single fixed income ETF, the PortfolioPlus Total Bond Market ETF (PPTB US), has since been closed down. The remaining funds provide exposure to the US large, mid, and small-cap markets, as well as international developed and emerging market stocks.

Effective 1 March 2019, the funds will provide 135% of the daily return on their underlying indices.

The PortfolioPlus S&P 500 ETF (PPLC US) will provide 135% of the daily return on the bellwether S&P 500 Index. It charges an expense ratio of 0.34%

The PortfolioPlus S&P Mid Cap ETF (PPMC US) will provide 135% of the daily return on the S&P Mid Cap 400 Index, a reference of 400 equities designed to serve as a proxy for the US mid-cap market. Its expense ratio is 0.40%.

The PortfolioPlus S&P Small Cap ETF (PPSC US) will provide 135% of the daily return on the S&P SmallCap 600 Index, a reference for the US small-cap market that consists of 600 securities. Its expense ratio is 0.46%.

The PortfolioPlus Developed Markets ETF (PPDM US) will provide 135% of the daily return on the FTSE Developed All Cap ex US Index, a broad reference for the entire developed equities market outside the US. Its expense ratio is 0.47%.

The PortfolioPlus Emerging Markets ETF (PPEM US) will provide 135% of the daily return on the FTSE Emerging Index, a reference for the emerging markets equities universe. Its expense ratio is 0.40%.

Inverse & leveraged funds may provide an efficient means for sophisticated traders to obtain tactical exposures; however, they are generally considered unsuitable for retail investors who may not fully understand the risks involved.

The funds tend to decay in value if held for an extended period of time, potentially leading to significant losses especially in volatile but range-bound markets. This characteristic generally increases with the degree of leverage involved.

Increasing the leverage factor of these funds to 135% will consequently heighten the impact of this unfavourable characteristic; however, the decay of value will still not be as pronounced as the 200% or 300% leveraged funds commonly associated with Direxion.

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