Is Direxion Monthly Emerging Markets Bull 2X Investor (DXELX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Looking for a Non US - Equity fund? You may want to consider Direxion Monthly Emerging Markets Bull 2X Investor (DXELX) as a possible option. DXELX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

DXELX is classified in the Non US - Equity area by Zacks, and this segment is full of potential. Non US - Equity funds focus their investments on companies outside of the United States, which is an important distinction since global mutual funds tend to keep a sizable portion of their portfolio based in the United States. Most of these funds will allocate across emerging and developed markets, and can often extend across cap levels too.

History of Fund/Manager

Direxion Funds is based in Newton, MA, and is the manager of DXELX. Direxion Monthly Emerging Markets Bull 2X Investor made its debut in November of 2005, and since then, DXELX has accumulated about $3.27 million in assets, per the most up-to-date date available. Paul Brigandi is the fund's current manager and has held that role since November of 2005.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of -6.41%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.36%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 12.75%, the standard deviation of DXELX over the past three years is 30.21%. Looking at the past 5 years, the fund's standard deviation is 32.48% compared to the category average of 13.34%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In DXELX's case, the fund lost 91.8% in the most recent bear market and underperformed its peer group by 33%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Even still, the fund has a 5-year beta of 1.86, so investors should note that it is hypothetically more volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. DXELX has generated a negative alpha over the past five years of -18.2, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is primarily on equities that are traded in the United States.

As of the last filing date, the mutual fund has 86.83% of its assets in stocks and it has a negligible amount of assets in foreign securities. Turnover is 0%, which means, on average, the fund makes fewer trades than comparable funds.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, DXELX is a no load fund. It has an expense ratio of 1.35% compared to the category average of 1.20%. From a cost perspective, DXELX is actually more expensive than its peers.

Investors should also note that the minimum initial investment for the product is $25,000 and that each subsequent investment needs to be at $500.

Bottom Line

Overall, Direxion Monthly Emerging Markets Bull 2X Investor ( DXELX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and higher fees, this fund looks like a somewhat average choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Non US - Equity, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


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