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Leveraged Homebuilding ETFs Planned By Direxion

Direxion is a renowned player in the leveraged and inverse leveraged ETF world, alone possessing a major share of this segment of the investing corner. The issuer is in no mood to let go off its strong status as it recently filed up for two leveraged homebuilding ETFs – one regular, another inverse. Let’s take a look at the newly filed products. The Proposed ETFs in Focus Direxion Daily Homebuilders Bull 2X Shares ETF has been designed to replicate double the daily performance of the S&P Homebuilders Select Industry Index while Direxion Daily Homebuilders Bear 2X Shares ETF does exactly the opposite. This leveraged bear ETF gives the double inverse daily performance of the same index. The bull and bear ETFs charge 1.04% and 0.95% in expense ratio, respectively. The index follows the performance of a basket of 35 homebuilding companies. The index is not heavily concentrated on the top 10 holdings as it puts just 34% of assets in the portfolio. No stock accounts for more than 3.8% of the total. How Do These Fit in a Portfolio? These ETFs could be intriguing choices for those looking for a targeted exposure to the U.S. homebuilding sector. The homebuilding space has been performing well in recent times on sustained economic recovery despite a soft start to the year, a healing job market, moderating home prices and, certainly, low interest rates long prevailing in the country. As long as these economic attributes remain in place, homebuilding stocks should see a smooth journey. However, investors should not forget that the Fed is on the verge of policy tightening this year. Since homebuilding is an interest rate sensitive sector, it might be in disarray post Fed rate hike. Investors can play the pullback via the bear ETF then. Competition As of now, only five ETFs have true focus on the homebuilding sector. Among these, four are regular ETFs. Only one ETF, the ETRACS Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (NYSEARCA: HOML ) might pose as a threat to Direxion’s proposed leveraged bull ETF, if the latter gets an approval. Moreover, the expense ratio of the proposed ETF is higher than HOML which charges 85 bps in fees. The difference between daily (in the case of the proposed ETF) and monthly resetting technique (for HOML) might have caused this disparity in expense ratio. However, the coast is clear for the leveraged bear ETF as no such fund has hit the space as yet. Link to the original post on Zacks.com

Highland Capital Launches 3 Hedge Fund Style ETFs

Dallas-based Highland Capital Management is expanding its presence in the ETF world with a focus on alternative investing. Early this year, the issuer filed for 17 alternatives ETFs all targeting four broad hedge funds styles – equity hedge, event driven, macro and relative value. The successful debut of these funds will make Highland one of the largest managers of alternative ETFs in the market. Out of these, Highland Capital recently rolled out a trio of products that aim at giving investors new options in the hedge fund space. The three funds – the Highland HFR Global ETF (NYSEARCA: HHFR ) , the Highland HFR Event-Driven Activist ETF (NYSEARCA: DRVN ) and the Highland HFR Equity Hedge ETF (NYSEARCA: HHDG ) – are designed in collaboration with HFR and are the first of their kind to replicate hedge fund positions in an ETF. The trio provides global hedge fund exposure by investing in equity and debt securities of the U.S. and international companies, charging investors 85 bps in annual fees. The introduction of these ETFs quadrupled the size of Highland Capital’s ETF lineup. HHFR in Focus This ETF seeks to tracks the HFRL Global Index, which uses all the four hedge fund strategies to select the stocks. These strategies may include event-driven, long/short equity, macro, relative-value and other strategies commonly used by hedge fund managers. DRVN in Focus This fund looks to target the stocks of event-driven strategies, which take advantage of transaction announcements and other specific one-time events. The strategy then utilizes an investment process that identifies equity opportunities in companies which are currently engaged in a corporate transaction, such as mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments. The ETF seeks to track the HFRL Event-Driven Index. HHDG in Focus This fund follows the HFRL Equity Hedge Index, which measures the performance of stocks based only on equity hedge strategies that combine long holdings of equity securities with short sales of stock, stock indices or derivatives related to equity markets. How Do They Fit in a Portfolio? The new products appear interesting choices for investors seeking some smart stock-selection techniques to avoid risks in the market. Hedge-fund replication ETFs have been gaining immense popularity in recent years as these seek to outperform the market over the long term. The funds try to either replicate the investing styles of renowned investors or mimic an index that aims to provide specific hedge fund strategies. This results in a solid and well-diversified portfolio having superior adjusted risk returns. After all, the hedge funds have proven their supremacy by making huge money in any market environment. Competition While there are a number of hedge-fund replication ETFs on the market that use a fund-of-fund approach, there are only a few that use a stock-selection methodology. The ultra-popular the Global X Guru Index ETF (NYSEARCA: GURU ) uses a proprietary methodology to compile the best ideas from a select pool of hedge funds by looking at the 13F document on a quarterly basis. The ETF has AUM of $266 million and expense ratio of 0.75%. The other popular name in this regard is the AlphaClone Alternative Alpha ETF (NYSEARCA: ALFA ) , which has garnered $161.6 million in its asset base while charging 95 bps in fees per year. It uses a proprietary ranking system, ‘Clone Score’, which ranks hedge funds and institutional investors based on the efficacy of replicating their publicity disclosed positions. The IQ ARB Merger Arbitrage ETF (NYSEARCA: MNA ) is an event-driven hedge fund that might give stiff competition to DRVN. This fund offers capital appreciation by investing in global companies for which there has been a public announcement of a takeover by an acquirer yet provides short exposure to global equities as a partial equity market hedge. The product has amassed $130 million in its asset base and charges 75 bps in annual fees. Given that all these products have been able to build up decent assets, it might not be difficult for the Highland products to see solid inflows and garner investor interest given that the interest rate hike might lead to uncertainty and bouts of volatility. Link to the original post on Zacks.com