August 18, 2008

Direxion Commodity Trends Strategy Fund (DXCTX)

As I have previously mentioned, I am always looking for ways to diversify my portfolio and hedge against downturns in the market. From time to time on this site, I will highlight some of the investment products I come across that may be used in your portfolio to help diversify.

In mid-June, Direxion launched a new fund called the "Direxion Commodity Trends Strategy Fund". The ticker is DXCTX. The fund invests in six commodity sectors including energy, industrial metals, precious metals, livestock, grains and softs.

From the Direxion website -

"The Commodity Trends Strategy Fund seeks daily investment results, before fees
and expenses, of the performance of the Standard and Poors Commodity Trends

"The Standard and Poors Commodity Trends Indicator is an investible long / short
strategy that offers exposure to 16 commodity markets (in six sectors) and will
hold them long or short, based on a seven month exponentially weighted moving
average. The long / short decision involves monitoring the price of the sectors
in relation to their respective seven month moving average price. The exception
to the model is the Energy sector which, due to geopolitical issues, economic
changes, and other factors uniquely related to the sector, is positioned either
long or neutral."

Energy and grains make up the largest component of the fund at 37% and 23%, respectively

The index has a 10 year average annual return of 12.3%.

The correlation of the fund versus the S&P 500 is -0.16 making it a great diversifying tool within a portfolio.

The fund can be purchased through Fidelity's network of no cost funds.

This post is not a recommendation one way or the other for the product, but is simply pointing out that it could be used as part of the commodities allocation within a portfolio for diversification.