Strength in Direxion HCM Tactical EnhU.S.EqStratETF's People Pillar is partially offset by an Average Process Pillar rating, leading to a Morningstar Medalist Rating of Neutral. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.  

 The strategy receives an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The management team's large personal investment in the strategy helps it earn an Above Average People Pillar rating. The strategy has a solid parent that earns an Above Average Parent Pillar rating. This firm has had high portfolio manager retention and overall affordable fees.

Analyst Rating

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Broadcom

Eli Lilly

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Direxion HCM Tactical EnhU.S.EqStratETF earns an Average Process Pillar rating. 

The largest contributor to the rating is the firm's five-year retention rate of 100% over the period. Management team experience, which averages 20 years at this fund, also strengthens the process. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 25%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy leans toward smaller, higher-growth companies compared with its average peer in the Large Blend Morningstar Category. Looking at additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to experience a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, this strategy has taken on exposure to high-momentum stocks in these years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In this month, the strategy also had more exposure to the Momentum factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio has allocations in its top two sectors, technology and communication services, that are similar to the category. The sectors with low exposure compared to category peers are industrials and financial services; however, the allocations are similar to the category. The portfolio is positioned across 507 holdings and is diversified among those holdings. In its most recent portfolio, 29.9% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 49.5% average. And in closing, in terms of portfolio turnover, this fund trades more frequently than its average peer, potentially racking up additional expenses for investors and creating a drag on performance.

Average

Process

Direxion HCM Tactical EnhU.S.EqStratETF earns an Above Average People Pillar rating. The number one contributor to the rating is the firm's five-year retention rate of 100%. The rating is limited by the parent firm's five-year success ratio of 25%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.


Vance Howard, the longest-tenured manager on the strategy, provides strong guidance, bringing forward 21 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, reflecting average risk-adjusted performance versus category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 20 years of listed portfolio management experience. The highest personal investment in this offering by any of its managers is at least $1 million. An investment of that size is large enough to align managers' interests with investors.

Above Average

People

Overall, Direxion benefits from a strong investment culture, earning it an Above Average Parent Pillar rating. The firm has proven successful at holding onto portfolio management talent, providing continuity for strategies, as displayed by lower-than-average turnover in the past five years compared with asset management peers. The firm stands out in its commitment to investor values by offering an open-end and exchange-traded product lineup at a low cost. On average, the firm charges fees on its funds that are within the second cheapest quintile of its category. The firm has not had a durable product lineup. Specifically, its five-year risk-adjusted success ratio demonstrates that only 25% of products were both able to survive and beat their respective category median on a risk-adjusted basis. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development.

Parent

Direxion HCM Tactical Enhanced US ETF

HCMT is an actively managed fund-of-funds that toggles between a 200% leveraged US equity position and a 100% investment to cash or cash equivalents based on a proprietary tactical indicator that identifies broad trends in the US equity markets.

Direxion launched the actively managed Direxion HCM Tactical Enhanced US ETF (NYSE Arca: HCMT) on the New York Stock Exchange. HCMT seeks to provide enhanced returns across multiple market cycles that are broadly correlated to the U.S. equity markets.

News for Direxion HCM Tactical Enhanced US ETF ETF (HCMT)