Direxion is a provider of financial products known for its

leveraged ETFs An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product, i.e., it is traded on stock exchanges. ETFs own financial assets such as stocks, bonds, currencies, debts, futures contracts, and/or commodities ...

. Founded in

Alexandria, Virginia Alexandria is an independent city (United States), independent city in Northern Virginia, United States. It lies on the western bank of the Potomac River approximately south of Washington, D.C., D.C. The city's population of 159,467 at the 2020 ...

, the company also has offices in

New York City New York, often called New York City (NYC), is the most populous city in the United States, located at the southern tip of New York State on one of the world's largest natural harbors. The city comprises five boroughs, each coextensive w ...

Boston Boston is the capital and most populous city in the Commonwealth (U.S. state), Commonwealth of Massachusetts in the United States. The city serves as the cultural and Financial centre, financial center of New England, a region of the Northeas ...

, and

Hong Kong Hong Kong)., Legally Hong Kong, China in international treaties and organizations. is a special administrative region of China. With 7.5 million residents in a territory, Hong Kong is the fourth most densely populated region in the wor ...

History

Direxion was founded in 1997 under the name Potomac Funds as a provider of

mutual fund A mutual fund is an investment fund that pools money from many investors to purchase Security (finance), securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in ...

s. The original name referred to the

Potomac River The Potomac River () is in the Mid-Atlantic (United States), Mid-Atlantic region of the United States and flows from the Potomac Highlands in West Virginia to Chesapeake Bay in Maryland. It is long,U.S. Geological Survey. National Hydrography D ...

near the company's first office in

. In November 1997, Potomac Funds became the second company to introduce an inverse mutual fund, following a similar move by Rydex Investments in 1994. The company began using the Direxion name in 2006. The use of the letter "X" in the new name was intended to draw attention to the leveraged index funds in the company's offerings. That year the company also opened an office in the

Prudential Tower The Prudential Tower, also known as the Prudential Building or, colloquially, the Pru,subscription required The Pru' everyone calls it: a resigned shrug of a name, as flat and uninflected as the wan moue its pronunciation requires." is an Interna ...

Boston, Massachusetts Boston is the capital and most populous city in the Commonwealth (U.S. state), Commonwealth of Massachusetts in the United States. The city serves as the cultural and Financial centre, financial center of New England, a region of the Northeas ...

. Direxion launched its first leveraged ETFs in 2008. In November 2008 the company was the first to offer ETFs with 3X leverage, a move that was copied some months later by its competitors

ProShares ProShares is an issuer of exchange-traded funds, including inverse exchange-traded funds, and similar products. History ProFunds Group was founded in 1997 by former Rydex employees Louis Mayberg and Michael Sapir for $100,000. That year, it in ...

and Rydex Investments. The move made it one of the fastest-growing ETF companies, with its sixteen 3X ETFs reaching a total of $3.4 billion in assets by April 2009. The move towards higher-leverage offerings by the three companies provoked scrutiny from the

U.S. Securities and Exchange Commission The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market m ...

and the

Massachusetts Secretary of the Commonwealth The secretary of the Commonwealth of Massachusetts is a constitutional officer in the executive branch of the Commonwealth (U.S. state), Commonwealth of Massachusetts. Originally appointed under authority of the Monarchy of the United Kingdom, Eng ...

, and a number of

broker-dealer In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and ...

s stopped selling leveraged ETFs. The criticisms centered around perceived

tracking error In finance, tracking error or active risk is a measure of the risk in an investment portfolio that is due to active management decisions made by the portfolio manager; it indicates how closely a portfolio follows the index to which it is benchmar ...

: the ETFs were designed to achieve the stated multiple of the return on the

underlying In finance, a derivative is a contract between a buyer and a seller. The derivative can take various forms, depending on the transaction, but every derivative has the following four elements: # an item (the "underlier") that can or must be bou ...

on a daily basis only (with the cost of the daily

rebalancing In finance and investing, rebalancing of investments (or constant mix) is a strategy of bringing a portfolio that has deviated away from one's target asset allocation back into line. This can be implemented by transferring assets, that is, selling i ...

passed on to investors in the form of higher

expense ratio The expense ratio of a stock or asset fund is the total percentage of fund assets used for administrative, management, advertising (12b-1), and all other expenses. An expense ratio of 1% per annum means that each year 1% of the fund's total assets ...

s), but commentators suggested that some investors, even

institutional investor An institutional investor is an entity that pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked ...

s, had mistakenly tried to use the inverse products as longer-term hedges against their underlyings. In December 2010, Direxion added 24 ETFs to its range of offerings, including some non-leveraged funds, and continued to expand its offering of non-leveraged funds in 2011. The company's gold miner bull and bear ETFs are among the most-traded gold-related leveraged ETFs. In February 2020, the company announced the launch of its first leveraged

environmental, social and corporate governance Environmental, social, and governance (ESG) is shorthand for an investment, investing principle that prioritizes environmental issues, social issues, and corporate governance. Investing with ESG considerations is sometimes referred to as social ...

fund, offering 150% long exposure and 50% short exposure respectively to the best- and worst-scoring companies in the

MSCI MSCI Inc. (formerly Morgan Stanley Capital International) is an American finance company headquartered in New York City. MSCI is a global provider of equity, fixed income, real estate indices, multi-asset portfolio analysis tools, ESG and ...

USA ESG index, with a quarterly rebalance. In March 2020, amidst the

2020 stock market crash On 20 February 2020, stock markets across the world suddenly crashed after growing instability due to the COVID-19 pandemic. The crash ended on 7 April 2020. Beginning on 13 May 2019, the yield curve on U.S. Treasury securities inverted, ...

, Direxion announced that it would reduce the leverage of ten of its ETFs from 3x to 2x and close eight others. This was part of a broader trend among providers of leveraged ETFs during the first quarter of 2020; nevertheless, Direxion saw inflows of nearly $4 billion during March 2020 alone.

List of funds

Leveraged and inverse ETFs

Thematic and other funds

References

External links

*{{official, https://www.direxion.com/ Financial services companies established in 1997