The top five holdings in the fund are German e-commerce platform Jumia Technologies AG, solar energy company Enphase Energy, electric vehicle maker Tesla Inc., e-commerce site Etsy Inc. and social media company Snap Inc. (It’s important to remember that equal-weighted indexes become unequal during rebalancing.)
For Direxion, whose forte has long been leveraged and inverse ETFs, the WWOW fund is its latest effort to diversify its product lineup and appeal to a broader investor audience—including financial advisors.
As part of that effort, this year it has rolled out several thematic funds designed to capture ongoing economic trends. That includes the Direxion Flight to Safety Strategy ETF (FLYT), which aims for risk mitigation from equity market drawdowns while also providing long-term appreciation potential by combining long-term U.S. Treasury bonds, utility stocks and gold bullion.
It also includes the Direxion Connected Consumer ETF (CCON), which offers exposure to companies across four technology pillars that stand to benefit from consumers connecting to products and services in new ways, especially virtually.
But two funds in particular have seemed to resonate with investors. One is the Direxion Moonshot Innovators ETF (MOON), which invests in what are considered the 50 most innovative U.S. companies at the forefront of changing how people live, and which have the potential to disrupt existing technologies or industries. This fund launched a month ago and already has more than $24 million in assets.
The other is the Direxion Work From Home ETF (WFH), which holds companies that stand to benefit from an increasingly flexible work environment. These companies work in the areas of cloud technologies, cybersecurity, online project and document management, and remote communications. WFH debuted in June and has $161.7 million in assets.
All told, these thematic funds have roughly $220 million in assets. That’s a drop in the bucket in Direxion’s overall ETF asset base of $18.2 billion. But Nestor says Direxion has big goals for its thematic ETF efforts.
“We think the thematics category offers a lot of runway in the ETF business,” he said. “It’s still a relatively small segment of the ETF space, but it’s growing something like three times the broader ETF business, which itself is growing rapidly."
As for the role thematic ETFs can play in investor portfolios, Nestor offered that it depends on an individual investor's goals. But for now, he acknowledges, they typically occupy the periphery of equity allocations dominated by core holdings such as broad-based index funds.
“I think it’ll remain that way for a while, but some of these thematics could eventually migrate into the core,” said Nestor, adding that investors increasingly are seeking opportunities tied to cutting-edge trends that could alter the economy and how people live.