In an industry that is often quick to jump on any and all of the latest trends, this shouldn't be a surprise.
Leveraged ETF specialist Direxion takes a bit of a strategic left turn in order to jump on the latest hot trend - working from home.
Earlier this week, the company filed to launch the Direxion Work From Home ETF (WFH).
The new fund is set to track the Solactive Remote Work Index. According to the filing:
The Index is comprised of 40 U.S. listed securities and American Depository Receipts (“ADRs”) that have significant exposure to the companies that specialize in providing products that focus on the ability to work from home: remote communications, cyber security, project and document management, and cloud technologies.
Since the fund is yet to be launched, we have to guess a little at this point as to what it might look like. Solactive doesn't have a listing for a Remote Work Index on its site, but it does have information on a Solactive Flexible Office Index. I don't know if this is the same index with a different name, but it sure sounds like it. It even mentions holding 40 names broken down into the same categories.
If we're to assume that this is index is closely correlated to WFH, I'm not too optimistic.
Take a look at the top holdings for the index.
When I think of a work from home ETF, I think of names like Zoom, Dropbox and probably a handful of tech mega-caps like Google.
But, if the fund's top 5 holdings do actually turn out to be Microsoft, Amazon, Facebook, Alphabet and Cisco, WFH will be nothing more than a bland, generic tech ETF.
The biggest factor in determining whether or not this ends up being a successful ETF is how much of a pure play on the trend it is. The Innovation Shares NextGen Protocol ETF (KOIN) was designed to be an early adopter of the blockchain theme. But it cast its net too wide in deciding what type of activity qualified as having blockchain exposure. Its top holdings include Intel, Amazon, Microsoft, Cisco, Nvidia, Oracle, IBM and Visa.
Instead of being a blockchain ETF, it looks like a generic large-cap growth fund.
If WFH is going to be successful, it can't end up looking like a plain vanilla tech fund and I fear that's the direction it seems to be headed in.
Granted, we don't have much in the way of concrete information so all of this should still be considered speculation. We'll know here soon enough.
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