Direxion Launches Leveraged Real Estate ETFs
July 17, 2009

SAN DIEGO (ETFguide.com) – Two new Direxion ETFs focused on real estate stocks have just been introduced.

The Direxion Daily Real Estate Bull 3x Shares (NYSEArca: DRN) and the Direxion Daily Real Estate Bear 3x Shares (NYSEArca: DRV) are leveraged real estate ETFs that attempt to deliver 300% the daily long and inverse performance of the MSCI U.S. REIT Index.

“The flexibility that our ETFs provide, on both the long and short side, can be especially valuable for sophisticated investors who use tactical strategies in order to navigate today's volatile market," stated Dan O’Neill, Direxion Shares' President. "These two new ETFs further enhance our unique offering of solutions for the tactically minded investor."

Under current law, REITs are required to distribute 90% of their income to shareholders via a dividend.

The MSCI U.S. REIT Index represents approximately 85% of the U.S. REIT universe. Through mid-July, the Vanguard REIT ETF (NYSEArca: VNQ) which follows this same benchmark has declined by 11.58%.

According to the prospectus, both Direxion REIT ETFs will charge annual expenses of 0.95%.

The Direxion Shares ETF lineup covers U.S. and international stocks along with bonds. The funds are designed to achieve long and short exposure with daily magnified returns of 300%.

The Boston, MA-based company also offers mutual funds with a similar leveraged and short strategy.

At the end of June, Direxion had $5.1 billion in ETF assets.

Hedge Fund Strategies
In related news, ProShares introduced the ProShares Credit Suisse 130/30 (NYSE Arca: CSM). The fund is linked to the Credit Suisse 130/30 Large-Cap Index developed by MIT finance professor Andrew Lo and Credit Suisse director of quantitative research Pankaj Patel.

The 130/30 concept employs a hedge fund like strategy of marrying long holdings with short.

A 130/30 fund will typically invest 130% of its assets in long positions, which increase in value if stocks rise, while 30% of the fund is invested in short positions, which benefit if stock prices fall. The strategy is often sold under the premise it can provide protection in down markets and add broader diversification.

The 130/30 strategy is still new and an unproven strategy in the world of real life performance. 

Since its inception during the spring of last year, the First Trust Enhanced 130/30 ETN (NYSEArca: JFT) has lost around half its value.

For investors that don’t like the taxation and credit risk associated with ETNs, Fidelity Investments offers a 130/30 large cap mutual fund (Nasdaq: FOTTX).