The fund has seen more than $110 million vacate via redemption flows, which is substantial given its asset size is just north of $300 million. This said, Biotech stocks have had quite a run since mid-August, with LABU for example trading at a new 52-week high just last Friday.
LABU has become rather popular among aggressive directional traders in the segment since its May 2015 inception, and the position trimming that is evident in recent flows is not terribly surprising given relative levels in the sector. LABU tracks the S&P Biotechnology Select Industry Index but on a three times levered daily basis, while its sister “Bear” ETF is the smaller LABD (Direxion Daily S&P Biotech Bear 3X, Expense Ratio 1.08%, $127 million in AUM).
Both of these funds are linked to the same underlying index as the $4.2 billion XBI (SPDR S&P Biotech, Expense Ratio 0.35%), which has seen healthy inflows year-to-date in the $700 million range. XBI, of course, follows a modified equal-weighted design, whereas some of the other prominent Biotech ETFs employ a market-capitalization weighted scheme like the $9.7 billion IBB (iShares Nasdaq Biotechnology, Expense Ratio 0.47%) and the $714 million BBH (VanEck Vectors Biotech, Expense Ratio 0.35%).
Thus, traders of XBI, LABU, and LABD are likely simply expressing views on the sector in general when taking on or taking off positions in the segment. IBB for example has top three holdings that appear as follows: 1) BIIB (8.70%), 2) GILD (8.68%), and 3) CELG (8.31%), while BBH has even more concentration in the top several names (CELG, 11.20% AMGN, 11.07%, and GILD, 10.98%).
XBI (and thus LABU and LABD) on the other hand thanks to the modified equal-weighted methodology has top holdings that some investors may not even be terribly familiar with that appear as follows: 1) KITE (3.60%), 2) JUNO (2.66%), 3) EXEL (2.61%), 4) ALXN (2.44%), and 5) NBIX (2.36%).
If weakness in Biotechs persist and if the recent redemptions in LABD are telling direction wise, we would expect a spike in interest in not only LABD but competing “Bear” fund BIS (ProShares UltraShort Nasdaq Biotechnology, Expense Ratio 0.95%) as well as LABS (Direxion Daily S&P Biotech Bear 1X, Expense Ratio 0.50%).
The Direxion Daily S&P Biotech Bull 3X Shares (NYSE:LABU) was trading at $77.28 per share on Wednesday morning, down $0.81 (-1.04%). Year-to-date, LABU has gained 146.82%, versus a 11.26% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.