Here's What The New "Work From Home" ETF Will Look Like
I wrote recently about Direxion's intent to bring a Work From Home ETF to the marketplace. Direxion is a leveraged ETF specialist, so its decision to launch a work from home ETF is a bit of a strategic left turn, but give them credit for capitalizing on the current hot trend!
The Direxion Work From Home ETF (WFH) will be tied to the Solactive Remote Work Index, which just officially launched on Tuesday. Before, we had to guess at what would be in the portfolio based on a handful of general statements, but now we can see exactly what the portfolio will look like.
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The index will consist of 40 names total, 10 each from four categories - Cloud Technologies, Cybersecurity, Online Project and Document Management, and Remote Communications.
An AI-based natural language processing algorithm is used to identify companies with significant exposure to their designated field. The 40 companies that are selected for the final index are then equal-weighted.
Several names we expected to be included are in there - Zoom, Dropbox, Google and Slack - but there are a large number of cybersecurity names in there as well.
Fortinet, Fireeye, Palo Alto Networks and Proofpoint are all holdings emphasizing the heightened risks of work-at-home arrangements.
Solactive has backtested the index for the past 5 year period. Because of its tech-heavy nature, it easily outdistances not just the S&P 500 but also the major tech indices.
The Work From Home index would have returned roughly 150% since the beginning of 2015. Over the same time, the Dow Jones U.S. Technology Index returned about 120% and the Nasdaq 100 gained roughly 105%.
Will the idea fly? Direxion said that it's hoping the ETF will begin trading in late June or early July. Themed ETFs tend to gain popularity based on how hot the trend is at the moment. If the economy begins opening in a significant way by the end of May, the work from home trend may lose some of its buzz.
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