Guide To ETF Providers: Direxion

Direxion offers 44 U.S. listed ETFs distributed by Rafferty Capital Markets, LLC. Direxion specializes in leveraged ETFs - funds that use financial derivatives and debt to amplify the returns of an underlying index. Founded in 1997, Direxion in 2008 became the first ETF provider to offer three times leveraged ("triple-leveraged") ETF products that seek returns that are 300% (or -300% for Bear Funds) of the return of their benchmark index for a single day. Triple-leveraged funds are identified with a "3X" in the fund name, such as "Direxion Financial Bull 3X Shares." Today, Direxion's quivers of leveraged ETFs offer exposure to a variety of markets, from emerging markets to specific sectors indexes and Treasuries. Leveraged ETFs are typically used by active traders seeking a short-term trading strategy.

Direxion also specializes in inverse ETFs - funds that are constructed by using a variety of derivatives with the intention of profiting from a decline in the value of the underlying benchmark. Because this is similar to holding various short positions, inverse ETFs are also called "short ETFs" and "Bear ETFs." Direxion's funds that seek to profit from declines are identified with "Bear" in the fund name; for example, "Direxion Small Cap Bear 3X Shares 2013 Russell 2000" (a fund which happens to be triple-leveraged as well as inverse).

Headquartered in Boston, Massachusetts, Direxion ETFs have expense ratios ranging from 0.35 to 0.95%, with an average of 0.89%.

Figure 1: Direxion\'s top five largest funds by AUM. Information current as of Feb. 8, 2013.