DXCTXDXSCXDXCIX Direxion Indexed Commodity Strategy Fund Mutual Fund

Overview

The Direxion Indexed Commodity Strategy Fund seeks investment results, before fees and expenses, that track the performance of the Auspice Broad Commodity ER Index (ABCERI), a long/flat commodities index.

Fact Sheet  Brochure  Prospectus 

Key Features

Why Invest in the Fund?

  • The long/flat approach provides exposure to commodities that can individually be positioned long or flat (in cash) based upon price trends
  • Seeks to mitigate the downside risk and maximum declines relative to notable long-only commodity indices
  • Has the flexibility to make individual commodity position changes intra-month
  • Risk management controls designed to adjust exposure levels if volatility gets too high
  • Low- or non-correlation to stocks and bonds
  • Disciplined, quantitative, rules-based approach to commodity investing

Not just commodities – Long/Flat commodities.

Most traditional commodity funds provide long only exposure to commodities. This limits their potential to contribute to a portfolio’s long-term performance because they only benefit if commodity prices rise.

The Direxion Indexed Commodity Strategy Fund is the only fund on the U.S. market today that seeks to match the performance of the Auspice Broad Commodity ER Index (ABCERI), which provides exposure to 12 commodities that can individually be positioned long or flat (in cash) based upon price trends.

This long/flat index is potentially more adaptive to volatile commodity markets because it seeksto take advantage of individual commodities by going long when prices rise, and preserving capital by going flat (to cash) when prices fall.

Strategy & Benefits

Investment Strategy

The Fund:

  • Tracks a quantitative, rules-based index
  • Provides exposure to 12 commodities that can individually be positioned long or flat (if a short signal is triggered, the position is moved to cash) based on price trends
  • Has the flexibility to make position changes intra-month based on price trends
  • Reviews trends over shorter time periods, making it more responsive to rapidly changing markets
  • Rebalances monthly based on risk, reducing individual component allocations, when volatility exceeds predetermined levels
  • Uses a smart-contract-roll approach designed to select the most cost effective futures contracts

Key Strategy Benefits

The Fund aims to provide improved risk/return profile relative to traditional long-only commodities funds by:

  • Provides exposure to commodities showing an upward price trend and goes to cash in a downward price trend
  • Providing commodity investment returns with potentially lower risk characteristics
  • Employing a disciplined, quantitative, rules-based index approach to commodity investing

Component Sectors

Component Sectors

Direxion Indexed Commodity Strategy Fund (DXCTX)
(as of 3/31/2014)

Energy Current Month (L/F)
Crude Oil LONG
Heating Oil LONG
Gasoline LONG
Natural Gas LONG

 

Metals Current Month (L/F)
Gold LONG
Silver FLAT (Cash)
Copper FLAT (Cash)

 

Agriculture Current Month (L/F)
Corn LONG
Soybeans LONG
Wheat LONG
Cotton LONG
Sugar FLAT (Cash)

Flat positions are held in cash and U.S. Treasury Bills. Individual component weightings may vary based on risk levels.

Monthly Commentary

The following commentary is provided by Auspice Capital Advisors. Direxion did not contribute to this content.

 

May 2014
Auspice Commodity Index Commentary
 

Market Review

The ABCERI lost 3.79% in May as Ag commodities pulled back. This correction was not universal as Energies moved higher. This is consistent with recent price movement as the commodity sector continues to build a base for possible recovery after falling out of favour for a number of years. Equities and Fixed Income markets moved higher in May and we continue to watch asset class rotation play out.

Index Review

The ABCERI index is off 3.57% in 2014 year-to-date.

May and 2014 Year-to-Date Performance

  ABCERI S&P GSCI ER DJ UBS ER DB LCI OY
April Return -3.79% -0.18% -2.88% -1.35%
YTD Return (1/1 - 5/31/2014 -3.57% 3.51% 6.43% 2.96%
Source: Bloomberg. Indices: S&P-GSCI Excess Return Index (S&P GSCI ER), Dow Jones-UBS Excess Return Commodity Index (DJ UBS ER) Index, and DBLCI Optimum Yield (OY) Index (DBLCI OY). Full index descriptions are available below. Past performance does not guarantee future results. Index returns and correlations are historical and are not representative of any fund performance. Total returns of the index include reinvested dividends. One cannot invest directly in an index.

 Cumulative Return Since Inception

10/1/2010 – 5/31/2014 ABCERI S&P GSCI ER DJ UBS ER DB LCI OY
Cumulative Return 10.39% 14.42% -4.61% 7.71%
Source: Bloomberg. Indices: Auspice Broad Commodity ER Index (ABCERI), S&P-GSCI Excess Return Index (S&P GSCI ER), Dow Jones-UBS Excess Return Commodity Index (DJ UBS ER) Index, and Deutsch Bank Liquid Commodities Optimum Yield Index (DBLCI OY). Full index descriptions are available below. Past performance does not guarantee future results. Index returns and correlations are historical and are not representative of any fund performance. Total returns of the index include reinvested dividends. One cannot invest directly in an index.

Portfolio Recap 

In May, the ABCERI made gains in the Energy sector while the Ag sector caused the majority of overall index correction. The strategy holds 8 components to be long 66% of the possible basket after exiting Cotton.

May 2014 Monthly Index Return Attribution

abceri-053114
Source: Auspice Capital Advisors

Energy

The Energy sector moved higher in a low volatility fashion led by Crude and Gasoline in May. The index is long all components within the Energy Sector.

Metals

Metals corrected on the back of single sector weight in Gold. Copper moved higher while the index has not yet allocated a long weight.

Agriculture

After several months of exceptional contributions to the index, the Ag sector corrected sharply in May. The strategy responded by exiting Cotton. The Grains sub-sector was responsible for the bulk of the weakness with substantial pull-backs in Corn and Wheat. 

1Standard Deviation – A measure of the dispersion of a set of data from its mean.

2Sharpe Ratio – The Sharpe ratio tells us whether a portfolio’s returns are due to smart investment decisions or a result of excess risk.

3MAR Ratio – A measurement of returns adjusted for risk that can be used to compare the performance of commodity trading advisors, hedge funds and trading strategies.

4Drawdown – The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted as the percentage between the peak and the trough.

Index Descriptions:

  • The S&P GSCI is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are calculated on a fully collateralized basis with full reinvestment. The combination of these attributes provides investors with a representative and realistic picture of realizable returns attainable in the commodities markets.
  • The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify a certain date for the delivery of the underlying physical commodity. In order to avoid the delivery process and maintain a long futures position, nearby contracts must be sold, and contracts that have not yet reached the delivery period must be purchased. This process is known as “rolling” a futures position. The DJ-UBSCI is a “rolling index.”
  • The Deutsche Bank Liquid Commodities Indices Optimum Yield are designed to maximize potential roll returns by selecting, for each commodity, the futures contract with the highest implied roll yield. The index aims to maximize the potential roll benefits in backwardated markets and minimize the loss from rolling down the curve in contango markets. This index rebalances yearly to fixed weights on the 6th Business day of November according to the index holiday calendar Index.

 Auspice Capital Advisors Disclaimer – Futures trading is speculative and is not suitable for all customers. Past performance may not be indicative of future results and there is no assurance that any of the strategy’s investment objectives will be met. This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. Auspice Capital Advisors Ltd. makes no representation or warranty relating to any information herein, which is derived from independent sources. No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offense to claim otherwise.

Fund Symbol DXCTX DXSCX DXCIX
Bloomberg Index Symbol ABCERI ABCERI ABCERI
CUSIP 254939457 254939341 254939382
Gross Expense Ratio 1.26% 2.01% 1.01%
Net Expense Ratio 1.26% 2.01% 1.01%
Inception Date Oct 06, 2008 Jan 03, 2010 Jan 05, 2009

Pricing and Performance

Price Information
NAVs and market price information as of July 29, 2014

Ticker Fund Name NAV NAV Change $ NAV Change % Market Price Closing Market Price Closing Change($) Market Price Closing Change(%) Premium / Discount
DXCTX Direxion Indexed Commodity Strategy Fund - A Shares 17.93 -0.04 -0.22
DXSCX Direxion Indexed Commodity Strategy Fund - C Shares 17.41 -0.04 -0.23
DXCIX Direxion Indexed Commodity Strategy Fund - Institutional 18.11 -0.04 -0.22

Performance
NAVs and market price information as of July 29, 2014

All data as of 6/30/2014
Ticker Fund Name 1 Mo % 3 Mo % YTD 1 YR % 3 YR % 5 YR % 10 YR % Since Inception Inception Date Expense Ratio* (Gross/Net %)
DXCTX Direxion Indexed Commodity Strategy Fund - A Shares 0.87 -1.86 -3.19 -5.81 -12.24 -8.29 -7.23 1.26 / 1.26
DXSCX Direxion Indexed Commodity Strategy Fund - C Shares 0.79 -2.07 -3.54 -6.50 -12.87 -7.74 2.01 / 2.01
DXCIX Direxion Indexed Commodity Strategy Fund - Institutional 0.86 -1.84 -3.06 -5.56 -12.05 -8.05 -7.60 1.01 / 1.01
All data as of 6/30/2014
Ticker Fund Name 1 Mo % 3 Mo % YTD 1 YR % 3 YR % 5 YR % 10 YR % Since Inception Inception Date Expense Ratio* (Gross/Net %)
DXCTX Direxion Indexed Commodity Strategy Fund - A Shares 0.87 -1.86 -3.19 -5.81 -12.24 -8.29 -7.23 1.26 / 1.26
DXSCX Direxion Indexed Commodity Strategy Fund - C Shares 0.79 -2.07 -3.54 -6.50 -12.87 -7.74 2.01 / 2.01
DXCIX Direxion Indexed Commodity Strategy Fund - Institutional 0.86 -1.84 -3.06 -5.56 -12.05 -8.05 -7.60 1.01 / 1.01

The performance data quoted represents past performance; past performance does not guarantee future results; the investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. Returns for performance for one year and under are cumulative, not annualized.

Short term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. For additional information, see the fund(s) prospectus or summary prospectus.

Distributions

Ticker Fund Name Record Date Ex Date Pay Date Income Dividend Short-Term Capital Gain Long-Term Capital Gain
DXCTX Direxion Indexed Commodity Strategy Fund - A Shares 0.76887
DXCIX Direxion Indexed Commodity Strategy Fund - Institutional 0.87346