Direxion is a provider of financial products known for its

leveraged ETFs An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the d ...

. Founded in

Alexandria, Virginia Alexandria is an independent city in the northern region of the Commonwealth of Virginia, United States. It lies on the western bank of the Potomac River approximately south of downtown Washington, D.C. In 2020, the population was 159,467. ...

, the company also has offices in

New York City New York, often called New York City or NYC, is the most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the most densely populated major city in the U ...

Boston Boston (), officially the City of Boston, is the capital city, state capital and List of municipalities in Massachusetts, most populous city of the Commonwealth (U.S. state), Commonwealth of Massachusetts, as well as the cultural and financ ...

, and

Hong Kong Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delta i ...

History

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

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

s. The original name referred to the

Potomac River The Potomac River () drains the Mid-Atlantic (United States), Mid-Atlantic United States, flowing from the Potomac Highlands of West Virginia, Potomac Highlands into Chesapeake Bay. It is long,U.S. Geological Survey. National Hydrography Datas ...

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 Intern ...

in Boston, Massachusetts. 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 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 and the

Massachusetts Secretary of the Commonwealth The Massachusetts Secretary of the Commonwealth is the principal public information officer of the government of the U.S. state of Massachusetts. The Secretary of the Commonwealth oversees the Corporations Division, the Elections Division, the ...

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

underlying In finance, a derivative is a contract that ''derives'' its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying". Derivatives can be us ...

on a daily basis only (with the cost of the daily rebalancing 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 which 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 co ...

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 ESG (environmental, social, and corporate governance) data reflect the negative externalities (costs to others) caused by an organization with respect to the environment, to society and to corporate governance. ESG data can be used by investo ...

fund, offering 150% long exposure and 50% short exposure respectively to the best- and worst-scoring companies in the MSCI 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. It ended on 7 April 2020. Beginning on 13 May 2019, the yield curve on U.S. Treasury securities inverted, and rema ...

, 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