Direxion is a provider of financial products known for its leveraged ETFs. 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

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Boston Boston (), officially the City of Boston, is the state capital and most populous city of the Commonwealth of Massachusetts, as well as the cultural and financial center of the New England region of the United States. It is the 24th- mo ...

, and

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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, flowing from the Potomac Highlands into Chesapeake Bay. It is long,U.S. Geological Survey. National Hydrography Dataset high-resolution flowline dataThe National Map. Retrieved Augu ...

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 Guggenheim Partners is a global investment and advisory financial services firm that engages in investment banking, asset management, capital markets services, and insurance services. Organization The firm is headquartered in New York City an ...

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 Inter ...

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 ProShares is an issuer of exchange-traded funds, including inverse exchange-traded funds, and similar products. History ProFunds Group was founded in 1997 with $100,000 by former Rydex employees Louis Mayberg and Michael Sapir. 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 U.S. 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. The primary purpose of the SEC is to enforce the law against market ...

and the Massachusetts Secretary of the Commonwealth, and a number of broker-dealers 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 benchmarked ...

: 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 use ...

on a daily basis only (with the cost of the daily rebalancing passed on to investors in the form of higher expense ratios), but commentators suggested that some investors, even institutional investors, 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 MSCI Inc. is an American finance company headquartered in New York City. MSCI is a global provider of equity, fixed income, real estate indexes, multi-asset portfolio analysis tools, ESG and climate products. It operates the MSCI World, MSCI ...

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