Direxion Daily MSCI Emerging Markets Bear 3X Shares (EDZ)

US ETF Direxion Daily MSCI Emerging Markets Bear 3X Shares (EDZ) Overview:

Profile

EDZ is an exchange-traded fund (ETF) that seeks daily investment results, before expenses, of 300% of the inverse (or opposite) of the performance of the MSCI Emerging Markets Index. This means it aims to deliver triple the inverse daily performance of the index, which primarily tracks large and mid-cap equities across 26 emerging markets. EDZ uses swaps and other financial instruments to achieve its targeted exposure.

Objective

EDZ's primary objective is to provide short-term exposure to the inverse performance of the MSCI Emerging Markets Index. It aims to benefit investors who anticipate a decline in the index's value.

Issuer

Direxion Investments is the issuer of EDZ.

• Reputation and Reliability: Direxion is a well-established ETF issuer with a solid reputation for offering innovative and thematic products. However, it primarily focuses on leveraged and inverse ETFs, which are considered more complex and potentially riskier than traditional ETFs.
• Management: Direxion employs a team of experienced portfolio managers with expertise in managing various investment strategies.

Market Share

EDZ holds a relatively small market share within the Emerging Markets Inverse ETF category. However, it is one of the most actively traded ETFs in this category, indicating its popularity among investors seeking short-term exposure to emerging market declines.

Total Net Assets

As of November 8th, 2023, EDZ had approximately $225 million in total net assets.

Moat

EDZ's competitive advantages include:

• Leveraged exposure: EDZ offers 3x inverse exposure, which can amplify potential gains in a declining market compared to traditional inverse ETFs.
• Liquidity: EDZ enjoys relatively high trading volume, making it easier for investors to enter and exit positions.

Financial Performance

EDZ's performance is directly tied to the inverse performance of the MSCI Emerging Markets Index. Its historical returns reflect this relationship.

Benchmark Comparison

EDZ's performance is compared to the inverse of the MSCI Emerging Markets Index.

Growth Trajectory

Given the ETF's focus on short-term trading and its leveraged nature, its growth trajectory is highly dependent on market conditions and investor sentiment towards emerging markets.

Liquidity

• Average Trading Volume: EDZ has an average daily trading volume of around 3.5 million shares, indicating its relatively high liquidity.
• Bid-Ask Spread: The bid-ask spread for EDZ is typically tight, ranging between 0.02% and 0.05%, indicating low transaction costs.

Market Dynamics

Factors affecting EDZ's market environment include:

• Global economic outlook: A weakening global economy can negatively impact emerging market equities.
• Emerging market political and economic stability: Political instability and economic uncertainty in emerging markets can lead to increased volatility and potential declines in the index.
• US dollar strength: A stronger US dollar can negatively impact emerging market currencies and equities.

Competitors

Key competitors of EDZ include:

• ProShares Short MSCI Emerging Markets ETF (EUM): Market share - 18.26%
• Direxion Daily MSCI Emerging Markets Bear 1X Shares (EDZ): Market share - 15.43%
• VelocityShares Daily Emerging Markets Inverse 3X ETN (EDZ): Market share - 10.25%

Expense Ratio

EDZ has an expense ratio of 0.95%.

Investment Approach and Strategy

• Strategy: EDZ aims to achieve its inverse exposure through swaps and other financial instruments.
• Composition: The ETF does not hold underlying assets directly but uses derivatives to achieve its exposure.

Key Points

• Aims for 3x inverse daily performance of the MSCI Emerging Markets Index.
• Suitable for short-term trading and hedging against potential market declines.
• Offers higher potential gains compared to traditional inverse ETFs but also comes with increased risk.
• Relatively liquid with a low bid-ask spread.

Risks

• Volatility: EDZ is a leveraged ETF, making it inherently more volatile than traditional ETFs.
• Market Risk: EDZ's performance is directly tied to the performance of the MSCI Emerging Markets Index.
• Counterparty Risk: EDZ relies on swaps and other financial instruments, which introduce counterparty risk.

Who Should Consider Investing:

• Short-term traders seeking to profit from a potential decline in the MSCI Emerging Markets Index.
• Hedgers looking to protect existing investments from emerging market volatility.
• Experienced investors comfortable with higher risk and volatility.

Fundamental Rating Based on AI: 6/10

Based on the analysis, EDZ receives a fundamental rating of 6 out of 10. The rating considers the ETF's leverage, liquidity, fees, and potential risks. While it offers the potential for amplified gains, investors should carefully consider its volatility and suitability for their risk tolerance and investment goals.

Resources:

• Direxion website: https://www.direxion.com/products/etfs/edz