New Alternative Strategy Funds from Direxion

Direxion is best known for providing tools that help investors and traders implement their strategies.  Their line of 3x ETFs, providing +300% and -300% exposure to many popular indexes, have been quite successful for the company.  Recently, Direxion took another big step with their new alternative strategy mutual fund series.

The Direxion/Wilshire Dynamic Fund (DXDWX) was introduced on March 3, 2009.  The DXDWX Fact Sheet says the fund combines a strategic asset allocation with a “tactical overlay” to position the fund defensively or aggressively, depending upon the outlook of the Subadviser (Wilshire Associates).  Under normal circumstances, the Dynamic Fund follows a traditional asset allocation model which allocates approximately 60% to equity securities and 40% to fixed income securities.  A tactical overlay is then used to increase or decrease risk exposure based on Wilshire’s outlook for the market.  There is a brochure with additional information on the strategy.  DXDWX has an expense ratio of 1.95%, and there is a 1% redemption fee for shares sold within 90 days of purchase.

The Direxion Financial Trends Strategy Fund (DXFTX) was introduced on March 3, 2009.  The  DXFTX Fact Sheet says the fund seeks daily investment results, before fees and expenses, of the performance of the Standard and Poor’s Financial Trends Indicator (”S&P FTI®”).  The S&P FTI is an index that reflects price changes in eight market segments: six currency and two fixed income. Unlike traditional indexes, which only reflect long positions in the relevant components, each part of the S&P FTI may reflect either a long or a short position. The long/short decision involves monitoring the price of the sectors in relation to their respective seven-month moving average price.  There is a brochure with additional information on the strategy.  DXFTX has an expense ratio of 1.95%, and there is a 1% redemption fee for shares sold within 90 days of purchase.

The third member of this group has been around a little longer.  The Direxion Commodity Trends Strategy Fund (DXCTX) has been available since June of last year and has already been added to our weekly rankings in the “Tradable Long Mutual Funds” (note: link requires paid access) category at AllStarInvestor.com.  The DXCTX Fact Sheet says the fund seeks daily investment results, before fees and expenses, of the performance of the Standard and Poor’s Commodity Trends Indicator (”S&P CTI”).  The S&P CTI is an investable long/short strategy that offers exposure to 16 commodity markets and holds each of them long or short, based on a price momentum formula. The long/short decision involves monitoring the price of the sectors in relation to their respective seven-month moving average price. The exception within the model is the Energy sector which, due to geopolitical issues, economic changes and other factors uniquely related to the sector, is positioned either long or neutral (flat).  There is a brochure with additional information on the strategy.   DXTCX has an expense ratio of 1.84%, and there are no short-term redemption penalties.

Direxion closed and liquidated a number of funds in late 2008 including Direxion China Bear 2x (DXHSX), Direxion India Bull 2x (DXILX), Direxion Japan Bull 2x (DXJLX), Direxion MidCap Bull 2.5x (DXMLX), Direxion Latin America Bear 2x (DXZSX), Direxion Dow 30 Bull 1.25x (PDOWX), and Direxion Nasdaq 100 Bull 1.25x (POTCX).

This article is the second in a series about mutual funds.  Yesterday, we covered Rydex Funds and tomorrow we will cover Fidelity.