Direxion launches nanotechnology ETF, closely following ProShares
Direxion has launched a nanotech ETF, in what appears to be a response to its competitor ProShares doing the same thing last month.
The Direxion Nanotechnology ETF (TYNE) will invest in companies that produce nanotechnology material. These are companies that make things the size of a molecule, or even smaller. In theory this can be any type of company. But in practice nanotech businesses tend to be either biotech companies making vaccines and medicines, or semiconductor businesses making microscopic computer components.
The index provider is Kensho, the S&P Global subsidiary specialising in thematics. It identifies companies using keyword searches on their public documents, such as press releases and quarterly reports.
Companies are market weighted, subject to a 4.5% cap. This weighting scheme is curiously similar to the ProShares competitor product. Much like the ticker and the investment strategy.
The fee is 0.65%.
Bernie’s commentary –ProShares and Direxion have to pivot
The story of leveraged and inverse ETFs and US regulators is an interesting case. They were given the greenlight in 2008. The SEC had been defunded and smashed for years by George W. Bush, and turned into a water boy for Wall St, with known results.
The SEC at the time didn’t bother understanding leveraged ETFs. Much like it didn’t bother understanding CDOs or CDSs. Wall St would self-regulate, it was believed. It was thus left wrongfooted when leveraged and inverse ETFs started burning retail investors in the coming years. The SEC has been feeling “regulator’s remorse”, as the WSJ calls it, ever since.
This all matters for ProShares and Direxion because bad will from regulators has forced them to launch products in areas other than L&I. Thus in the past year we have seen these two companies invest heavily in thematic ETFs such as today’s listing. This migration into thematics has been described by some as Direxions and ProShares’ effort to “go legit”.
For my part, I’m happy to see the pivot ( it is producing some interesting ETFs as well). And hopefully regulators will give us all some clarity on what they want from these products in the coming months.