Boston-based alternative mutual fund provider Direxion has made changes to the investment strategy of Direxion S&P 1500 RC Volatility Response Shares (VSPR), Direxion S&P 500 RC Volatility Response Shares (VSPY) and Direxion S&P Latin America 40 RC Volatility Response Shares (VLAT), effective June 14.
Each fund tracks a rules-based S&P Risk Control Index, which in turn assigns a target volatility level for the corresponding S&P cap-weighted index. The Risk Control indexes are designed to respond to the volatility levels of the underlying indexes by adjusting the exposure levels to equities and U.S. Treasury Bills at various volatility levels. As volatility increases, exposure to equities will decrease and exposure to the cash component will increase and vice versa.
Effective on June 14th, the funds’ percentage exposure to the stock component is expected to range between 10% and 100%, and will be limited not to exceed 100%. Exposure to the cash component is expected to range between 0% and 90%.
"Since periods of lower volatility have historically tended to offer growth opportunities, while periods of higher volatility usually indicate an increase in overall market risk, tracking volatility as a gauge for exposure to equities is an intelligent way for investors to protect their assets," stated Ed Egilinsky, Head of Alternative Investments at Direxion.
Direxion Funds and Direxion Shares are managed by Rafferty Asset Management, LLC and have approximately $7.8 billion in assets under management as of December 31, 2011.