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February 18, 2022 at 02:46 PM
Direxion has set off a race to deliver the first U.S. exchanged-traded funds that would allow investors to make leveraged bets on single stocks.
The asset manager, one of the biggest providers of leveraged ETFs, is planning 24 new funds that would offer the inverse, double the inverse or double the gain on single companies including Tesla Inc. and Meta Platforms Inc., according to Thursday filings with the Securities and Exchange Commission.
That comes a week after AXS Investments filed for 18 new funds that would also offer double the inverse or gain on single companies.
“There’s this sort of interesting arms race taking place in the registration world for these single-stock leveraged ETFs,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “I feel as though AXS might just be taking a shot, and then Direxion is like, ‘well hey this is our territory, we better take a shot too just in case.’”
Leveraged and inverse ETFs use derivatives to amplify returns, reverse performance or both, and they typically target an index or a fund. They were falling out of favor after featuring in a number of market blowups in recent years, but demand is rising again as investors ride the recent market volatility.
