Work-from-home ETFs: Just a fad or here to stay?
The coronavirus pandemic has changed how and where millions of people around the world now work. So it should come as no surprise that an ETF on the fast-growing work-from-home economy could soon emerge..
Stock company Direxion has filed an application with the US Securities and Exchange Commission to create a fund that will own companies that are likely to benefit from more telecommuting workers..
The ETF will be based on Solactive’s forthcoming new telecommuting index, which Direxion said will likely include web conferencing leader Zoom Video Communications (ZM), cybersecurity firm Fortinet (FTNT) and Okta (OKTA), and also a document management software company Box (BOX).
Proposed ticker symbol for ETFs – «WFH». If approved by the regulator, it will be traded on the NYSE Arca electronic exchange.
Themed ETFs related to emerging trends are prevalent in the investing world. Nowadays, for example, there are many ETFs for cannabis stocks, cloud computing companies and blockchain technology..
Solactive told CNN Business that the new index is still in the making.
If the proposed Work From Home ETF is approved by regulators, it will be Direxion’s latest attempt to attract long-term investors..
The company is mostly known for its so-called leverage and inverse ETFs, which are geared more towards active traders than long-term investors. Leveraged ETFs allow traders to oversize bets on daily index moves, while inverse ETFs offer people the ability to bet the market or short..
«We are committed to developing new ETFs with buy and hold capabilities», – said Dave Mazza, managing director and head of product at Direxion, in an interview with CNN Business.
Many of the stocks that could be traded in ETFs, notably Zoom, have skyrocketed this year as investors are betting more people will work from home for the foreseeable future..
The trend towards telecommuting has been around for a while now, and Mazza said Direxion had been working on a WFH ETF plan – as well as ideas for several different thematic strategies – prior to the current pandemic. However, Mazza acknowledged that the company changed its plans to launch a WFH fund after the Covid-19 outbreak made working from home a reality for many Americans – which is unlikely to change anytime soon..
Direxion hopes the ETF will be approved by the SEC by early summer so that it can start trading in late June or early July, Mazza said..
The WFH ETF will complement several other new products from Direxion that aim to capitalize on broader investing trends.
Direxion launched new thematic ETFs in February that focused on environmental, social and governance (ESG) investments, high-quality stocks, and investments in safe-haven instruments such as Treasuries, utilities and gold..
The last ETF to be called a fund «Escape to safety strategy» (FLYT) has grown 3% since its debut in mid-February. Two other new ETFs from Direxion have failed. Direxion Foundation MSCI USA ESG Leaders vs. Laggards (ESNG) and Direxion S funds&P 500 High minus Low Quality (QMJ) have dropped more than 10% since their launch.
However, it is better than most of its counterparts in the wider market. The Dow has dropped more than 20% in the past two months.