Direxion, begun trading a new Diversified Commodity, the Direxion Auspice Broad Commodity Strategy ETF (NyseArca: COM), on Thursday, March 30, 2017. Here is a synopsis of the new ETF:
|Symbol: COM||Exchange: NYSE ARCA|
|Name: Direxion Auspice Broad Commodity Strategy ETF||Net Expense Ratio: 0.70%|
The Direxion Auspice Broad Commodity Strategy ETF is an actively managed ETF that seeks to provide total return that exceeds that of the Auspice Broad Commodity Index over a complete market cycle.
The Fund will generally seek to maintain a portfolio of instruments similar to those included in the Index by utilizing exchange-traded commodity futures contracts, swap contracts and investments in other investment companies or exchange-traded notes, thereby obtaining exposure to the commodities markets. The Fund attempts to exceed the return of the Index primarily through the active management of a portfolio of Treasury bills, other government securities, money market funds, cash, other short-term bond funds, highly rated corporate or other non-government fixed-income securities, with maturities of up to 12 months. The Fund is an actively managed ETF that does not seek to replicate the performance of a specified index and is not required to invest in the specific components of the Index.
The Index is a rules-based index that attempts to capture trends in the commodity markets. The Index uses a quantitative methodology to track a diversified portfolio of 12 different commodity futures contracts (components).
The position size of each component included in the Index is dependent on the historical volatility of that component and the total Index value, and is independent of the volatility and position of other components in the Index. Each Index component is then positioned either long or flat (no position, which has the effect of removing exposure to a particular commodity) by the Index, depending upon the prevailing price trend of an individual component. The Index will modify the position size of each component at each month-end based on the factors discussed above, however, each component’s position may be adjusted as frequently as daily.
When the Index rules indicate that a component should have a flat position in a component, the Index will not have exposure to that component and at times the Index may not have exposure to all 12 commodities that comprise the Index. The Fund will generally reposition the size of each portfolio holding following each month-end in accordance with the rebalancing of the Index, but also may change the position in a component from a long position to a flat or no position, or vice versa, in any given commodity on a daily basis if the Index is so adjusted. The Fund may invest in futures contracts on the 12 commodities that comprise the Index, which are soybeans, corn, wheat, cotton, sugar, crude oil, natural gas, gasoline, heating oil, copper, gold and silver. These 12 components are grouped into 3 sectors: Agriculture, Energy, and Metals.
As of December 31, 2016, the Index had exposure to cotton, crude oil, natural gas, gasoline, heating oil and copper and had exposure to the Agriculture, Energy and Metals sectors. As of December 31, 2016, the Index did not have exposure to soybeans, corn, wheat, sugar, gold or silver. The concentration in a sector or specific commodity may change over time.
The Index will replace expiring futures contracts based on an optimization process that selects a contract from the universe of all exchange-traded futures contracts within the next 13 month period. (Futures contracts on commodities generally are agreements between two parties where one party agrees to buy, and the counterparty to sell, a set amount of a physical commodity (or, in some contracts, a cash equivalent) at a pre-determined future date and price. The value of commodity futures contracts is based upon the price movements of the underlying commodities.)
Index Top Holdings (12/31/16):
|Soybeans Flat||Crude Oil Long||Copper Long|
|Corn Flat||Natural Gas Long||Gold Flat|
|Wheat Flat||Gasoline Long||Silver Flat|
|Cotton Long||Heating Oil Long|
COM Home Page
Here is a comment from Tim Pickering, Founder and CIO at Auspice Capital Advisors:
“Investors recognize the value of diversification and inflation protection provided by commodities within a portfolio. We can seek to maximize these benefits with a tactical strategy that rides the strongest trends for upside potential, then allows for an exit to limit downside risk and volatility while providing for the best risk-adjusted results.”
Edward Egilinsky, Managing Director at Direxion refers:
“Commodities markets are cyclical and tend to revert to the mean. Traditional funds have long-only exposure to commodities, which limits their potential because investors can only benefit when commodity prices rise. Successfully investing in commodities depends on the ability to adapt to change. COM uses a long/flat (cash) approach to take advantage of rising commodity prices, in addition to mitigating risk when individual commodities are in downward trends. That makes it uniquely adaptive to volatile commodities markets. Its 40-Act structure means there’s no K-1 tax reporting.”