Direxion Launches Leveraged Mid-Cap ETF

Direxion launched a new fund on Feb 15, 2018, focused on providing 1.25x exposure to the mid-cap space of the U.S. equity markets.

Portfolio+ S&P Mid Cap ETF PPMC tracks the S&P Mid Cap 400 Index (+125%) and provides leveraged access to the mid-cap space of the U.S. equity markets.

Fund Characteristics

The fund’s index seeks to provide investment results that closely track the performance of mid-cap companies in the U.S. markets. The S&P Mid Cap 400 Index measures the performance of 400 American mid-sized companies and is a float-adjusted market capitalization weighted index. It has amassed AUM of $25 million within a few days of trading and has a moderate expense ratio of 40 basis points a year.

From a sector look, Information Technology, Financials and Industrials are the top three allocations of the index, with 17.5%, 17.1% and 15.8% exposure, respectively. From a top holdings perspective, the index has 0.7% exposure each to Take Two Interactive Software Inc (NASDAQ:TTWO) , SVB Financial Group (NASDAQ:SIVB) and NVR Inc (NYSE:NVR) . However, investors should note that investing in mid-cap stocks requires a steady appetite for risk, as they are more volatile than their large-cap counterparts.

How Does it Fit in a Portfolio?

U.S. markets recently suffered a sell-off owing to fears of rising interest rates. The S&P 500 entered correction territory, as it declined more than 10% from the record high set in January.

However, mid-caps appeal to investors as they still have some growth potential and are relatively less risky than their small-cap counterparts. U.S. economic fundamentals seem to be strong with a slew of upbeat economic data, strong corporate fundamentals and President Donald Trump's tax-reform signed into law. Mid-caps have less international exposure compared to large-caps and are expected to benefit greatly from the tax reform and provide diversification benefits to investors.

Competition

The fund faces a lot of competition from other funds in the space. Below we discuss a few ETFs that seek to provide exposure to the mid-cap space of the U.S. equity markets (see all Leveraged Equity ETFs here).

Direxion Daily Mid Cap Bull 3X Shares (BO:MIDU)

This fund provides 3x leveraged exposure to mid-sized U.S. equities.

It has AUM of $63.7 million and charges a fee of 109 basis points a year. Information Technology, Financials and Industrials are the top three allocations of the index, with 17.5%, 17.1% and 15.8% exposure, respectively (as of Dec 31, 2017). From a top holdings perspective, the index has 0.7% exposure each to Take Two Interactive Software Inc, SVB Financial Group and NVR Inc. (as of Dec 31, 2017). The fund has returned 18.8% in a year. Zacks does not rank inverse and leveraged ETFs in view of their short-term performance objectives.

ProShares UltraPro MidCap400 UMDD

This fund provides 3x leveraged exposure to mid-sized U.S. equities.

It has AUM of $43.7 million and charges a fee of 95 basis points a year. Information Technology, Financials and Industrials are the top three allocations of the index, with 17.5%, 17.1% and 15.8% exposure, respectively (as of Dec 31, 2017). From a top holdings perspective, the index has 0.7% exposure each to Take Two Interactive Software Inc, SVB Financial Group and NVR Inc. (as of Dec 31, 2017). The fund has returned 19.4% in a year. Zacks does not rank inverse and leveraged ETFs in view of their short-term performance objectives.

ProShares Ultra Midcap 400 MVV

This fund provides 2x leveraged exposure to mid-sized U.S. equities.

It has AUM of $146.3 million and charges a fee of 95 basis points a year. Information Technology, Financials and Industrials are the top three allocations of the index, with 17.5%, 17.1% and 15.8% exposure, respectively (as of Dec 31, 2017). From a top holdings perspective, the index has 0.7% exposure each to Take Two Interactive Software Inc, SVB Financial Group and NVR Inc. (as of Dec 31, 2017). The fund has returned 16.2% in a year. Zacks does not rank inverse and leveraged ETFs in view of their short-term performance objectives.

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