With millions of people around the world stuck in their home offices to help contain the coronavirus outbreak, companies that specialize in remote-working products are becoming a hot spot.
For that reason, Direxion is planning to start a new “work-from-home” ETF that tracks industries such as cloud technologies, remote communications and cyber security, according to a filing to the SEC. The ETF will trade under the ticker WFH.
Thematic funds, which seek to capture trends that are easily explained to retail investors, have struggled in a crowded ETF marketplace. However, Direxion’s remote-work offering is likely to resonate with traders given the recent popularity of those companies, according to CFRA Research’s Todd Rosenbluth.
“This ETF combines some popular, well-established thematic strategies focused on cloud computing and cyber security with remote learning and document management that are all the more pressing, given Covid-19 concerns are likely to remain,” said Rosenbluth, CFRA’s director of ETF research.
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Worries about the proliferation of new funds were high at the first Bogleheads conference without the company’s former leader.
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"Asset managers need to be faster and smarter to make the right bets in a fast-changing external environment.”
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Passive ETFs are often among the first to feel the pain of investors fleeing risky emerging markets for safer assets.
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Cloud-computing companies have been a clear beneficiary of the stay-at-home and social distancing measures to help combat the spread of the virus. Shares of Microsoft soared last week after the company said its cloud services usage spiked by 775%.
Still, some analysts aren’t convinced about the positive trend for the industry. While WFH’s narrative is “compelling,” the valuations of the tracked companies likely reflect the market’s enthusiasm for this theme, according to Morningstar’s Ben Johnson.
“This too shall pass and investors have already bid up the shares of a lot of these stocks,” said Johnson, Morningstar’s co-head of passive strategy research.
Other issuers have sought to capitalize on the work-from-home boost. The Wedbush ETFMG Global Cloud Technology ETF, which tracks global small and mid-cap companies involved in cloud infrastructure and technology, began trading this week.
Unlike the majority of Direxion’s products, WFH won’t use leverage to amplify returns. The new offering is consistent with Direxion’s focus on broadening its thematic offerings to “buy-and-hold” investors, head of ETF product David Mazza wrote in an email. The firm launched three non-leveraged ETFs in February as part of that strategy.
“While leveraged ETFs remain part of their lineup, they have expanded beyond the nice and highly tactical short-term oriented products,” Rosenbluth said.
