| Summary Prospectus |
September 25, 2024 |
| Direxion Shares ETF Trust |
|
Direxion Daily Energy Bear 2X Shares
| Ticker: ERY |
| Listed on: NYSE Arca, Inc. |
Before you invest, you may
want to review the Fund’s prospectus, which contains more information about the Fund and its risks. You can find the Fund’s prospectus, reports to
shareholders, and other information about the Fund online at http://www.direxion.com/regulatory-documents. You can also get this information at no cost by
calling (866) 476-7523 or by sending an email request to info@direxionshares.com. The Fund’s prospectus and statement of additional information, both dated February 28, 2024, as supplemented, are incorporated by reference into this Summary Prospectus.
Important Information Regarding the
Fund
The Direxion Daily Energy Bear 2X Shares (the
“Fund”) seeks daily inverse leveraged (-2X)
investment results and is very different from most other exchange-traded funds. As a
result, the Fund may be riskier than alternatives that do not use leverage
because the Fund’s objective is to magnify the daily inverse performance of the Energy Select Sector Index (the "Index"). The return for investors that invest for periods longer or shorter than a
trading day should not be expected to be -200% of the performance of the Index for the period. The return of the Fund for a period longer than a trading day will be the result of each
trading day’s compounded return over the period, which will very likely differ from -200% of the return of the Index for that period. Longer holding periods, higher
volatility of the Index and leverage increase the impact of compounding on an investor’s returns. During periods of higher Index volatility, the volatility of the Index may affect the
Fund’s return as much as, or more than, the return of the Index.
The Fund is not suitable for all investors.
The Fund is designed to be utilized only by knowledgeable investors who understand the potential consequences of seeking daily
inverse leveraged (-2X) investment results, understand the risks associated with the use of leverage and shorting and are willing to monitor their portfolios frequently. The Fund is not intended to be used by, and is not appropriate for, investors who do not intend to actively monitor and manage their portfolios. For periods longer than a single day, the Fund will lose money if the Index’s performance is flat, and it is possible that the Fund will lose money even if the Index’s performance decreases over a period longer than a single
day. An investor could lose the full principal value of his/her investment within a single day if the Index gains more than 50% in
one day.
Investment Objective
The Fund seeks daily investment results, before fees and expenses, of 200% of the
inverse (or opposite) of the daily performance of the Index. The Fund does not seek to achieve its stated investment objective for a period of time different than a
trading day.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold, and sell
shares of the Fund (“Shares”). You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected
in the table and example below.
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
| Management Fees |
0.75% |
| Distribution and/or Service (12b-1) Fees |
0.00% |
| Other Expenses of the Fund |
0.27% |
| Acquired Fund Fees and Expenses(1)
|
0.13% |
| Total Annual Fund Operating Expenses |
1.15% |
| Expense Cap/Reimbursement(2)
|
-0.07% |
| Total Annual Fund Operating Expenses After Expense Cap/Reimbursement |
1.08% |
(1)
"Acquired Fund Fees and Expenses" include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including investments in money
market funds. Because Acquired Fund Fees and Expenses are not borne directly by the Fund, they will not be
reflected in the expense information in the Fund's financial statements and the information presented in
the table will differ from that presented in the Fund's financial highlights included in the Fund's reports to shareholders.
(2)
Rafferty Asset Management, LLC (“Rafferty” or the “Adviser”) has entered into an Operating
Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has
contractually agreed to waive all or a portion of its management fee and/or reimburse the Fund for Other Expenses through September 1, 2025, to the extent that the
Fund’s Total Annual Fund Operating Expenses exceed 0.95% of the Fund’s average daily net assets
(excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund
fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions
and extraordinary expenses).
Any expense waiver or reimbursement is subject to recoupment by the Adviser within the three years after the expense was waived/reimbursed only
if Total Annual Fund Operating Expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time the expense was waived/reimbursed. This agreement
may be terminated or revised at any time with the consent of the Board of Trustees.
Example - This example is intended to help you
compare the cost of investing in the Fund with the cost of investing in
other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that
your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs
would be:
| 1 Year |
3 Years |
5 Years |
10 Years |
| $110 |
$358 |
$626 |
$1,391 |
Summary
Prospectus
1
Direxion Daily Energy Bear 2X Shares
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher
portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating
Expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 0% of the average value of its portfolio. However, this portfolio turnover rate is calculated without regard to cash instruments or derivative transactions. If the
Fund's extensive use of derivatives was reflected, the Fund's portfolio turnover rate would be significantly higher.
Principal Investment Strategy
The Index is provided by S&P Dow Jones Indices (the “Index Provider”)
and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services. The Index is one of eleven Select
Sector Indexes developed and maintained in accordance with the following criteria: (1) each of the component securities in the Index is a constituent of the S&P 500® Index and (2) the Index is calculated by the Index Provider based on a proprietary “modified market capitalization”
methodology which means that modifications may be made to the market capitalization weights of single stock concentrations in order to conform to the requirements of the Internal Revenue Code of 1986, as
amended.
As of December 29, 2023, the Index had
23 constituents, which had a median total market capitalization of $42.3
billion, total market capitalizations ranging from $11 billion to $400.5
billion and were concentrated in the energy sector. The Index is rebalanced quarterly.
The components of the Index and the percentages represented by various sectors in the Index may change over time. The Fund will
concentrate its investment in a particular industry or group of industries (i.e., hold 25% or more of its total assets in investments that provide inverse leveraged exposure to a particular
industry or group of industries) to approximately the same extent as the Index is so concentrated.
The Fund, under normal circumstances, invests at least 80% of the Fund’s net assets (plus borrowing for investment purposes) in financial
instruments, including swap agreements, futures contracts, or short positions, that, in combination, provide 2X daily inverse (opposite) or short exposure to the Index or to exchange-traded
funds ("ETFs") that track the Index, consistent with the Fund’s investment objective. The financial instruments in which the Fund most commonly invests are swap agreements and
futures agreements which are intended to produce economically inverse leveraged investment
results.
The Fund may also gain inverse leveraged exposure by investing in a combination of
financial instruments, such as swap agreements or futures agreements that provide short exposure to the Index, to a representative sample of the securities in the Index
that has aggregate characteristics similar to those of the Index or to an ETF that tracks the same Index or a substantially similar index, or the Fund may
short securities of the
Index, or short an ETF that tracks the same Index or a substantially similar index. The Fund invests in derivatives as a substitute for directly shorting securities in order to gain inverse
leveraged exposure to the Index or its components. When the Fund shorts securities, including the securities of another investment company, it borrows shares of that security or
investment company, which it then sells. The Fund closes out a short sale by purchasing the security that it has sold short and returning that security to the entity that lent the
security. On a day-to-day basis, the Fund is expected to hold money market funds, deposit accounts with institutions with high quality credit ratings (i.e. investment grade or higher), and/or short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality
credit profiles, including U.S. government securities and repurchase agreements.
The Fund seeks to remain fully invested at all times consistent with its stated inverse leveraged investment objective, but may not always have inverse
exposure to all of the securities in the Index, or its weighting of inverse exposure to securities or industries may be different from that of the Index. In addition, the Fund may have
inverse exposure to securities, ETFs or financial instruments not included in the Index.
The Fund will attempt to achieve its investment objective without regard to overall
market movement or the increase or decrease of the value of the securities in the Index. At the close of the markets each trading day, Rafferty rebalances the Fund’s
portfolio so that its exposure to the Index is consistent with the Fund’s inverse leveraged investment objective. For example, if the Index has fallen on a given day, net assets of the Fund
should rise, meaning that the Fund’s exposure will need to be increased. Conversely, if the Index has risen on a given day, net assets of the Fund should fall, meaning the
Fund’s exposure will need to be reduced and that a shareholder should lose money, a result that is the opposite of traditional index tracking ETFs. This re-positioning strategy
may result in high portfolio turnover. The terms “daily,” “day,” and “trading day,” refer to the period from the close of the markets on one trading day to the close of the markets on the next trading
day.
The Fund is “non-diversified,” meaning that a relatively high percentage of
its assets may be invested in a limited number of issuers of securities. Additionally, the Fund’s investment objective is not a fundamental policy and may be changed by the Fund’s Board of
Trustees without shareholder approval.
Because of daily rebalancing and the compounding of each
day’s return over time, the return of the Fund for periods longer than a single day will be the result of each day’s returns compounded over the period, which will very likely differ from -200% of the return of the Index over the same period. The Fund will lose money if the Index performance is flat over time, and as a result of daily rebalancing, the Index’s volatility and the effects of compounding, it is even possible that the Fund will lose money over time while
the Index’s performance decreases over a period longer than a single day.
Principal Investment Risks
An investment in the Fund entails risk. The Fund may not achieve its inverse leveraged investment objective and there
Summary Prospectus
2
Direxion Daily Energy Bear 2X Shares
is a risk that you could
lose all of your money invested in the Fund. The Fund is not a complete investment
program. In addition, the Fund presents risks not traditionally associated
with other mutual funds and ETFs. It is important that investors closely
review all of the risks listed below and understand them before making an investment in the Fund. The realization of certain of the risks described below may result
in adverse market movements that may actually benefit
the Fund due to its inverse investment objective.
Shorting or Inverse Risk – The Fund will lose money when the value of the Index rises because of the Fund’s inverse or short exposure
– this result is the opposite from a traditional index fund. The Fund’s assets will increase in value when the
Index’s value falls. The Fund’s assets will decrease in value when the Index’s value increases. Because historically most assets have risen in value over the long term, short positions and
therefore, the value of the Fund is expected to depreciate in value over time, notwithstanding any separate effects of compounding and the Fund’s daily repositioning of inverse
exposure. Additionally, if the level of the Index approaches a 100% increase at any point in the day, an investor could lose their entire investment. Accordingly, short positions
and exposure may be riskier and more speculative than traditional investments. The costs of obtaining short exposure or maintaining short positions will lower the Fund’s returns.
To the extent that the Fund obtains short exposure from derivatives, the Fund may be
exposed to heightened volatility or limited liquidity related to the reference asset of the underlying short position, which will adversely impact the Fund’s ability to meet
its investment objective or adversely impact its performance. If the Fund were to experience this volatility or decreased liquidity, the Fund may be required to obtain short exposure
through alternative investment strategies that may be less desirable or more costly to implement. If the reference asset underlying the short position is thinly traded or has
a limited market, there may be a lack of available securities or counterparties for the Fund to enter into a short position or obtain short exposure from a derivative.
Effects of Compounding and Market Volatility Risk — The Fund’s performance for periods greater
than a trading day will be the result of each day's returns compounded over
the period, which is likely to differ from -200% of the Index’s performance, before fees and expenses. Compounding has a significant impact on funds that are inverse leveraged and that rebalance daily.
The impact of compounding becomes more pronounced as volatility and holding periods increase and will impact each shareholder differently depending on the period of time an
investment in the Fund is held and the volatility of the Index during the shareholder’s holding period of an investment in the Fund.
Fund performance for periods greater than one single day can be estimated given any set of assumptions for the following factors: a) Index
volatility; b) Index performance; c) period of time; d) financing rates associated with inverse leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with
respect to securities of the Index. The chart below provides examples of how Index volatility and
its return could affect the
Fund’s performance. The chart shows estimated Fund returns for a number of combinations of Index volatility and Index performance over a one-year period. Performance shown in
the chart assumes that: (i) no dividends were paid with respect to the securities included in the Index; (ii) there were no Fund expenses; and (iii) borrowing/lending rates (to
obtain inverse leveraged exposure) of 0%. If Fund expenses and/or actual
borrowing/lending rates were reflected, the estimated returns would be
different than those shown. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a trading day to vary from -200% of the performance of the
Index.
As shown in the chart below, the Fund would be expected to lose 17.1% if the Index
provided no return over a one year period during which the Index experienced annualized volatility of 25%. At higher ranges of volatility, there is a chance of a significant
loss of value in the Fund, even if the Index’s return is flat. For
instance, if the Index’s annualized volatility is 100%, the Fund would be expected to lose 95% of its value, even if the cumulative Index return for the year was 0%. Areas shaded red (or dark gray) represent those scenarios where the Fund can be expected to return less than -200% of the
performance of the Index and those shaded green (or light gray) represent those scenarios where the Fund can be expected to return more than -200% of the performance of the Index. The
table below is not a representation of the Fund’s actual returns, which may be significantly better or worse than the returns shown below as a result of any of the
factors discussed above or in “Daily Inverse Index Correlation Risk” below. The volatility of exchange traded securities or instruments that reflect the value of the Index may differ
from the volatility of the Index.
| One
Year
Index |
-200%
One
Year
Index |
Volatility Rate | ||||
| Return |
Return |
10% |
25% |
50% |
75% |
100% |
| -60% |
120% |
506.5% |
418.1% |
195.2% |
15.6% |
-68.9% |
| -50% |
100% |
288.2% |
231.6% |
88.9% |
-26.0% |
-80.1% |
| -40% |
80% |
169.6% |
130.3% |
31.2% |
-48.6% |
-86.2% |
| -30% |
60% |
98.1% |
69.2% |
-3.6% |
-62.2% |
-89.8% |
| -20% |
40% |
51.6% |
29.5% |
-26.2% |
-71.1% |
-92.2% |
| -10% |
20% |
19.8% |
2.3% |
-41.7% |
-77.2% |
-93.9% |
| 0% |
0% |
-3.0% |
-17.1% |
-52.8% |
-81.5% |
-95.0% |
| 10% |
-20% |
-19.8% |
-31.5% |
-61.0% |
-84.7% |
-95.9% |
| 20% |
-40% |
-32.6% |
-42.4% |
-67.2% |
-87.2% |
-96.5% |
| 30% |
-60% |
-42.6% |
-50.9% |
-72.0% |
-89.1% |
-97.1% |
| 40% |
-80% |
-50.5% |
-57.7% |
-75.9% |
-90.6% |
-97.5% |
| 50% |
-100% |
-56.9% |
-63.2% |
-79.0% |
-91.8% |
-97.8% |
| 60% |
-120% |
-62.1% |
-67.6% |
-81.5% |
-92.8% |
-98.1% |
The Index’s annualized historical volatility rate for the five year period ended
December 31, 2023 was 36.37%. The Index’s highest volatility rate for any one calendar year during the five year period was 60.56% and volatility for a shorter period of time may have been
substantially higher. The Index’s annualized performance for the five-year period ended December 31, 2023 was 13.57%. Historical Index volatility and performance are not
indications of what the Index volatility and performance will be in the future. The volatility
Summary Prospectus
3
Direxion Daily Energy Bear 2X Shares
of ETFs or instruments that
reflect the value of the Index, such as swaps, may differ from the volatility of the Index.
For information regarding the effects of volatility and Index performance on the long-term performance of the Fund,
see “Additional Information Regarding Investment Techniques and Policies” in the Fund’s statutory prospectus, and "Leverage - Special Note Regarding the Correlation
Risks of the Funds" in the Fund’s Statement of Additional Information.
Leverage Risk
— The Fund obtains
investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund
that does not utilize leverage. An investment in the Fund is exposed to the risk that a rise in the daily performance of the Index will be magnified. This means that an
investment in the Fund will be reduced by an amount equal to 2% for every 1% daily rise in the Index, not including the costs of financing leverage and other operating
expenses, which would further reduce its value. The Fund could lose an amount greater than its net assets in the event of an Index rise of more than 50%. This would result in a total
loss of a shareholder’s investment in one day even if the Index subsequently moves in the opposite direction and eliminates all or a portion of its earlier daily change. A total
loss may occur in a single day even if the Index does not lose all of its value. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with the
Index and may increase the volatility of the Fund.
Under market circumstances that cause leverage to be expensive or unavailable, the Fund may increase its transaction fee, change its
investment objective by, for example, seeking to track an alternative index, reduce its leverage or close.
Derivatives Risk — Derivatives are financial instruments
that derive value from the underlying reference asset or assets, such as
stocks, bonds, or funds (including ETFs), interest rates or indexes. Investing in derivatives may be considered aggressive and may expose the Fund to greater risks, and may result in larger losses or
smaller gains, than investing directly in the reference assets underlying those derivatives, which may prevent the Fund from achieving its investment objective.
The Fund’s investments in derivatives may pose risks in addition to, and greater
than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect correlations with underlying investments or the
Fund’s other portfolio holdings, higher price volatility, lack of availability, counterparty, liquidity, valuation and legal restrictions. The performance of a derivative may not track the
performance of its reference asset for various reasons, including due to fees and other
costs associated with it.
Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of the amount
initially invested. As a result, the value of an investment in the Fund may change quickly and without warning. A swap on an ETF may not closely track the performance of the Index
due to costs associated
with trading ETFs, such as an ETF’s premium or discount and the difference between
its market price and its net asset value. If the Index has a dramatic intraday increase or decrease that causes a material change in the Fund’s net assets, the terms of a swap
agreement between the Fund and its counterparty may permit the counterparty to immediately close the swap agreement with the Fund. In that event, the Fund may not be able to enter
into another swap agreement or invest in other derivatives to achieve its
investment objective. This may occur even if the Index reverses all or a
portion of its intraday movement by the end of the day.
Upon entering into certain derivatives contracts, such as swap agreements, and to maintain open positions in such agreements, the Fund may be
required to post collateral, the amount of which may vary. As such, the Fund may maintain cash balances, which may be significant, with service providers such as the
Fund’s custodian or its affiliates in segregated accounts. Maintaining larger cash and cash equivalent positions may also subject the Fund to additional risks, such as increased
credit risk with respect to the custodian bank holding the assets and the risk that a counterparty may be unable or unwilling to honor its obligations.
Counterparty Risk — If a counterparty is unwilling or unable
to make timely payments to meet its contractual obligations or fails to
return holdings that are subject to the agreement with the counterparty resulting in the Fund losing money or not being able to meet its daily inverse leveraged investment objective.
In addition, because the Fund may enter into swap agreements with a limited number of
counterparties, this increases the Fund’s exposure to counterparty credit risk. Further, there is a risk that no suitable counterparties will be willing to enter into,
or continue to enter into, transactions with the Fund and, as a result, the Fund may not be able to achieve its inverse leveraged investment objective or rebalance properly, which may
result in significant losses to the Fund, or the Fund may decide to change its inverse leveraged investment objective. The risk that no suitable counterparties will enter into
or continue to provide swap exposure to the Fund may be increased when there is
significant market volatility.
Rebalancing Risk — If for any reason the Fund is unable
to rebalance all or a part of its portfolio, or if all or a portion of the
portfolio is rebalanced incorrectly, the Fund’s investment exposure may not be consistent with its investment objective which may lead to greater losses or reduced gains. In these instances, the
Fund may have investment exposure to the Index that is significantly greater or significantly less than its stated investment objective. Additionally, the Fund may close to purchases and
sales of Shares prior to the close of trading on the NYSE Arca or other national securities listing exchanges where Shares are listed and incur significant losses.
Cash Transaction Risk— Unlike most ETFs, the Fund currently
intends to effect creations and redemptions principally for cash, rather
than principally for in-kind securities, because of the nature of the financial instruments held by the Fund. As a result, the Fund is not expected to be tax efficient and
Summary Prospectus
4
Direxion Daily Energy Bear 2X Shares
will incur brokerage and
financing costs related to buying and selling securities and/or obtaining short derivative exposure to achieve its investment objective thus incurring additional expenses than
other funds that primarily effect creations and redemptions in kind. To the extent that such costs are not offset by transaction fees paid by an authorized participant, the Fund may
bear such costs, which will decrease the Fund’s net asset value.
Intra-Day Investment Risk— The intra-day performance of Fund shares traded in the secondary market will be different from the performance of
the Fund when measured from the close of the market on a given trading day until the close of the market on the subsequent trading day. An investor that purchases shares
intra-day may experience performance that is greater than, or less than, the Fund’s stated investment objective.
If there is a significant intra-day market event and/or the securities of the Index experience a significant change in value, the Fund may not meet
its investment objective, be unable to rebalance its portfolio appropriately, or may experience significant premiums or discounts, or widened bid-ask spreads.
Daily Inverse Index Correlation Risk— A number of factors may affect the Fund’s ability to achieve a high degree of inverse correlation with
the Index and therefore achieve its daily inverse leveraged investment objective. The Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is
unlikely that the Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Fund being materially over- or under-exposed to the Index increases on days when
the Index is volatile near the close of the trading day.
Market disruptions, regulatory restrictions, fees, expenses, transaction costs, financing costs related to the use of derivatives, investments in
ETFs, directly or indirectly, the Fund’s valuation methodology differing from the Index’s valuation methodology, accounting standards and their application to income items,
disruptions, illiquidity or high volatility in the markets for the securities or derivatives held by the Fund and regulatory and tax considerations, among other factors, will also
adversely affect the Fund’s ability to adjust exposure to meet its daily inverse leveraged investment objective.
In addition, the Fund may not have investment exposure to all of the securities in the Index or its weighting of investment exposure to the
securities may be different from that of the Index. The Fund may also invest in or have exposure to securities that are not included in the Index. The Fund may also be subject to large
movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding periodic Index
reconstitutions and other Index rebalancing events may also hinder the Fund’s ability to meet its daily inverse leveraged investment objective.
Other Investment Companies (including ETFs)
Risk— The Fund may invest in, or obtain exposure to, another investment company, including an
ETF or a money market fund (each, an “underlying fund”), to pursue its investment
objective or manage cash.
When investing in an underlying fund, the Fund becomes a shareholder of that underlying fund and as a result, Fund shareholders indirectly bear the Fund’s proportionate
share of the fees and expenses of the underlying fund, in addition to the fees and expenses of the Fund’s own operations. If the underlying fund fails to achieve its investment
objective or an ETF’s shares trade at a significant premium or discount, the Fund’s performance will likely be adversely affected. In addition, to the extent that the Fund invests in,
or has exposure to, an underlying fund that is an ETF, it will be exposed to all of the risks associated with the ETF structure.
Shares of ETFs may trade at a discount or a premium to an ETF’s net asset value which may result in an ETF’s market price being more
or less than the value of the index that the ETF tracks especially during periods of market volatility or disruption. There may also be additional trading costs due to an ETF’s bid-ask
spread, and/or the underlying fund may suspend sales of its shares due to market conditions that make it impracticable to conduct such transactions, any of which may adversely affect the
Fund.
Passive Investment and Index Performance Risk —
A third party (the “Index Provider”), who is unaffiliated with the Fund or Adviser, maintains and exercises complete control over the Index. The
Index Provider may delay or add a rebalance date, which may adversely impact the performance of the Fund and its correlation to the Index. There is no guarantee that the
methodology used by the Index Provider to identify constituents for the Index will achieve its intended result or positive performance. The Index relies on various sources
of information to assess the potential constituents of the Index, including information that may be based on assumptions or estimates. There is no assurance that the sources of
information are reliable, and the Adviser does not assess the due diligence conducted by the Index Provider with respect to the data it uses or the Index construction and computation
processes. There can be no guarantee that the methodology underlying the Index or the daily calculation of the Index or its methodology will be free from error or that an
error will be identified and/or corrected, which may have an adverse impact on the Fund.
The Fund generally will not change its investment exposures, including by buying or selling securities or instruments, in response to market
conditions. For example, the Fund generally will not sell an Index constituent due to a decline in its performance or based on changes to the prospects of an Index constituent, unless
that constituent is removed from the Index with which the Fund seeks correlated
performance.
Market Risk
— The Fund’s investments are subject
to changes in general economic conditions, general market fluctuations and
the risks inherent in investment in securities markets. Investment markets can be volatile and prices of investments can change substantially due to various factors including, but not limited to, economic
growth or recession, changes in interest rates, changes in the actual or perceived creditworthiness of issuers, general market liquidity, exchange trading suspensions and
closures, geopolitical events, natural disasters, and public health risks. Interest rates and inflation
Summary Prospectus
5
Direxion Daily Energy Bear 2X Shares
rates may change frequently
and drastically due to various factors and the Fund’s investments may be adversely impacted.
Energy Sector Risk — The energy markets may experience
significant volatility. For example, Russia’s invasion of Ukraine in
February 2022, and the resulting sanctions on Russia and other responses by the U.S and other countries led to disruptions and increased volatility in energy and commodity futures markets due to
actual and potential disruptions in the supply and demand for certain commodities, including oil and naturel gas. The effect of this continued conflict and any other potential
geopolitical market disruptions, as well as the effect of the current sanctions and restrictions and any potential additional sanctions and associated market disruptions are impossible
to predict and depend on many factors and may have an adverse impact on the energy sector. Companies that engage in energy-related businesses may be cyclical and highly dependent on energy
prices.
Energy sector securities may be adversely impacted by the following factors, among
others: changes in the levels and volatility of global energy prices, global supply and demand, and capital expenditures on the exploration and production of energy sources; changes in
the actual or perceived availability of oil or other resource deposits; the enactment or cessation of trade sanctions or import controls, war or other geopolitical conflicts,
negative perception, increased litigation, energy infrastructure developments or service failures; exchange rates, interest rates, economic conditions, and tax treatment; and
energy conservation efforts, increased competition and technological advances. Companies in this sector may be subject to substantial government regulation and contractual fixed
pricing, which may increase the cost of doing business and limit earnings. A significant portion of an energy company’s revenue may come from a relatively small number of
customers, including governmental entities and utilities. Energy companies may operate or engage in, transactions involving countries with less developed regulatory regimes or a history of
expropriation, nationalization or other adverse policies. Energy companies may also be significantly impacted by the supply of, and demand for, specific products, such as oil
and natural gas, and services, exploration and production spending, government subsidization, world events and general economic conditions. Energy companies may have
relatively high levels of debt and may be more likely than other companies to restructure if there are downturns in energy markets or the global economy. In addition, these
companies are at risk of civil liability from accidents resulting in injury, loss of life or property, pollution or other environmental damage claims and risk of loss from
terrorism, political unrest and natural disasters.
Large-Capitalization Company Risk — Large-capitalization companies typically have significant financial resources, extensive product lines and
broad markets for their goods and/or services. However, they may be less able to adapt to changing market conditions or to respond quickly to competitive challenges or to
changes in business, product, financial, or market conditions and may not be able to maintain growth at rates that may be achieved by
well-managed smaller and mid-size companies, which may affect the companies’ returns.
Liquidity Risk — Holdings of the Fund may be difficult
to buy or sell or may be illiquid, particularly during times of market
turmoil. There is no assurance that a security or derivative instrument that is deemed liquid when purchased will continue to be liquid. Illiquid securities may be difficult to value, especially in
changing or volatile markets. If the Fund is forced to buy or sell an illiquid security or derivative instrument at an unfavorable time or price, the Fund may be adversely impacted. Certain
market conditions or restrictions may prevent the Fund from limiting losses,
realizing gains or achieving its investment objective. In certain market
conditions the Fund may be one of many market participants that is attempting to transact in the securities of the Index. Under such circumstances, the market for securities of the Index may lack
sufficient liquidity for all market participants' trades. Therefore, the Fund may have more difficulty transacting in the securities or financial instruments and the Fund's
transactions could exacerbate illiquidity and price volatility in the securities of the Index.
To the extent that the instruments utilized by the Fund are thinly traded or have a limited market, the Fund may be unable to meet its investment
objective due to a lack of available investments or counterparties. During such periods, the Fund’s ability to issue additional Creation Units may be adversely affected.
As a result, the Fund’s shares could trade at a premium or discount to their net asset value and/or the bid-ask spread of the Fund’s shares could widen. Under such circumstances, the
Fund may be unable to rebalance its exposure properly which may result in significantly more or less exposure and losses to the Fund. In such an instance, the Fund may increase its
transaction fee, change its investment objective by, for example, seeking to track an
alternative index, reduce its exposure or close.
Early Close/Trading Halt Risk — An exchange or market may close or issue trading halts on specific securities or financial instruments. Under
such circumstances, the Fund may be unable to buy or sell certain portfolio securities or financial instruments, may be unable to rebalance its portfolio, may be unable to accurately price
its investments, and may disrupt the Fund’s creation/redemption process which means the Fund may be unable to achieve its investment objective and it may incur substantial losses.
Equity Securities Risk — Publicly issued equity securities, including common stocks, are subject to market risks that may cause their prices to
fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests, and/or has exposure to, will cause the net asset value of the Fund to fluctuate.
Tax Risk — In order to qualify for the special
tax treatment accorded a regulated investment company (“RIC”) and its shareholders, the Fund must derive at least 90% of its gross income for each taxable
year from “qualifying income,” meet certain asset diversification tests at the end of each taxable quarter, and meet annual distribution requirements. The Fund’s pursuit of
its investment strategy will potentially be limited by the Fund’s intention to qualify for such treatment and could adversely affect the Fund’s ability to so qualify.
Summary Prospectus
6
Direxion Daily Energy Bear 2X Shares
The Fund may make certain
investments, the treatment of which for these purposes is unclear. If, in any year, the Fund were to fail to qualify for the special tax treatment accorded a RIC and its
shareholders, and were ineligible to or were not able to cure such failure, the Fund would be taxed in the same manner as an ordinary corporation subject to U.S. federal income tax on all its
income at the fund level. The resulting taxes could substantially reduce the Fund’s net assets and the amount of income available for distribution. In addition, in order to
requalify for taxation as a RIC, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make certain distributions. Please see the section
entitled “Dividends, Other Distributions and Taxes” in the Statement of Additional Information for more information.
Non-Diversification Risk — The Fund has the ability to invest a relatively high percentage of its assets in the securities of a small number of
issuers or in financial instruments with a single counterparty or a few counterparties. This may increase the Fund’s volatility and increase the risk that the Fund’s
performance will decline based on the performance of a single issuer, the credit of a single counterparty, and/or a single economic, political or regulatory event.
Special Risks of Exchange-Traded Funds
Authorized Participants Concentration Risk. The Fund may have a limited number of financial institutions that may act as Authorized Participants. To the extent that those Authorized Participants exit
the business or are unable to process creation and/or redemption orders, Shares may trade at larger bid-ask spreads and/or premiums or discounts to net asset value. Authorized
Participant concentration risk may be heightened for a fund that invests in non-U.S. securities or other securities or instruments that have lower trading volumes.
Absence of Active Market
Risk. Although Shares are listed for trading on a stock exchange, there is no assurance
that an active trading market for them will develop or be maintained. In
the absence of an active trading market for Shares, they will likely trade with a wider bid/ask spread and at a greater premium or discount to net asset value.
Market Price Variance Risk. Fund Shares can be bought and sold in the secondary market at market prices, which may be higher or lower than the net
asset value of the Fund. When Shares trade at a price greater than net asset value, they are said to trade at a “premium.” When they trade at a price less than
net asset value, they are said to trade at a “discount.” The market price of Shares fluctuates based on changes in the value of the Fund’s holdings, the supply and demand for Shares
and other market factors. The market price of Shares may vary significantly from the Fund’s net asset value especially during times of market volatility or stress. Further, to the
extent that exchange specialists, market makers, Authorized Participants, or other market participants are unavailable or unable to trade the Fund’s Shares and/or create or redeem
Creation Units premiums or discounts may increase.
Trading Cost Risk. When buying or selling Shares in the secondary market, a buyer may incur brokerage commission
or other charges. In addition, a buyer may incur the cost of the “spread” also known as the bid-ask spread, which is the difference
between what investors are willing to pay for Fund shares (the “bid” price) and the price at which they are willing to sell Fund shares (the “ask” price). The bid-ask spread
varies over time based on, among other things, trading volume, market liquidity and market volatility. Because of the costs inherent in buying or selling Fund shares, frequent trading may
detract significantly from investment results.
Exchange Trading Risk. Shares are listed for trading on the NYSE Arca. They also may be listed or traded on other U.S. and non-U.S. stock exchanges
and may trade on electronic communication networks. Trading in Shares on their listing exchange may be halted due to market conditions or for reasons that, in the view of the
exchange, make trading in Shares inadvisable, including if they fail to meet the listing requirements of the exchange. Under certain circumstances, Shares may even be delisted.
Trading halts of Shares should be expected to disrupt the Fund’s creation/redemption process and may temporarily prevent investors from buying and selling Shares. Like other listed
securities, Shares of the Fund may be sold short, and short positions in Shares may place
downward pressure on their market price.
Fund Performance
The following performance information provides some indication of the risks of investing in the Fund by demonstrating how its returns have
varied from calendar year to calendar year. The bar chart shows changes in the Fund’s performance from calendar year to calendar year. The table shows how the
Fund’s average annual returns for the one-year, five-year, and ten-year periods compare with those of one or more broad-based market indexes for the same periods. The Fund’s past performance, before and after taxes, is not necessarily an indication of how the
Fund will perform in the future. Updated performance is available on the Fund’s website at www.direxion.com/etfs?producttab=performance or by calling the Fund toll-free at (866)
476-7523.
The performance noted below, and prior to April 1, 2020, reflects the Fund’s
previous daily inverse leveraged investment objective, before fees and expenses, of -300% of the Index. If the Fund had continued to seek its previous investment objective, the calendar year
performance of the Fund would have varied from that shown.
Total Return for the Calendar Years Ended December 31
During the period of time shown in the bar chart, the Fund’s
highest calendar quarter return was 198.98% for the quarter ended March 31,
2020 and its lowest calendar quarter return
Summary
Prospectus
7
Direxion Daily Energy Bear 2X Shares
was -57.76% for the quarter
ended June 30, 2020. The year-to-date return as of December 31, 2023 was -0.31%.
Average Annual Total Returns (for the periods ended
December 31, 2023)
| |
1 Year |
5 Years |
10 Years |
| Return Before Taxes |
-0.31% |
-46.04% |
-29.68% |
| Return After Taxes on Distributions |
-1.89% |
-46.29% |
-29.86% |
| Return After Taxes on Distributions and Sale of Fund Shares |
-0.15% |
-22.83% |
-12.55% |
| S&P
500® Index
(reflects no deduction for fees, expenses or taxes) |
26.29% |
15.69% |
12.03% |
| Energy Select Sector Index
(reflects no deduction for
fees, expenses or taxes) |
-0.59% |
13.57% |
3.51% |
After-tax returns are calculated using the historically highest
individual federal marginal income tax rates and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an investor’s tax
situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.
In addition, the "Return After Taxes on Distributions and Sale of Fund Shares" is higher
because the calculation recognizes a capital loss upon the redemption of Fund shares and assumes the investor received the benefit of a tax deduction.
Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for long periods of
time.
Management
Investment Adviser. Rafferty Asset Management, LLC is the Fund’s investment adviser.
Portfolio Managers. The following members of Rafferty’s investment team are jointly and primarily responsible for
the day-to-day management of the Fund:
| Portfolio Managers |
Years of Service
with the Fund |
Primary Title |
| Paul Brigandi |
Since Inception in November
2008 |
Portfolio Manager |
| Tony Ng |
Since September
2015 |
Portfolio Manager |
Purchase and Sale of Fund Shares
The Fund’s individual shares may only be purchased or sold in the secondary market
through a broker-dealer or other financial intermediaries at market price rather than at net asset value. The market price of Shares will fluctuate in response to changes in the
value of the Fund’s holdings and supply and demand for the Shares, which may result in shareholders purchasing or selling the Shares on the secondary market at a market
price that is greater than net asset value (a premium) or less than net asset value (a discount). Additionally, a shareholder may incur costs attributable to the difference
between the highest price
a buyer is willing to pay for the Fund’s Shares (bid) and the lowest price a
seller is willing to accept for the Fund’s Shares (ask) when buying or selling Shares on the secondary market (the “bid-ask spread”) in addition to brokerage commissions. The bid-ask
spread may vary over time for Shares based on trading volume and market liquidity. Recent information regarding the Fund Shares such as net asset value, market price, premiums and discounts,
bid-ask spreads, and related other information is available on the Fund’s website,
www.direxion.com/etfs?producttab=performance.
The Fund’s shares are not individually redeemable by submitting Shares to the
Fund. The Fund will issue and redeem Shares for cash only to Authorized Participants in large blocks, known as creation units, each of which is comprised of 50,000 Shares.
Tax Information
The Fund intends to make distributions that may be taxed as ordinary income or long-term capital gains. Those distributions will be subject to
federal income tax and may also be subject to state and local taxes, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement
account. Distributions or investments made through tax-deferred arrangements may be taxed later upon withdrawal. Distributions by the Fund may be significantly higher
than those of most other ETFs.
Payments to Broker-Dealers and
Other Financial Intermediaries
If you purchase
shares of the Fund through a broker-dealer or other financial intermediary (such as a bank or financial adviser), the Fund and/or its Adviser may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend the
Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
Index Information
The “Energy Select Sector Index” is a product of S&P Dow Jones Indices
LLC (“SPDJI”), and has been licensed for use by Rafferty. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”);
Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these
trademarks have been licensed for use by SPDJI and sublicensed for certain
purposes by Rafferty. The Fund is not sponsored, endorsed, sold or promoted
by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any
liability for any errors, omissions, or interruptions of the Energy Select Sector Index.
Summary Prospectus
8
Direxion Daily Energy Bear 2X Shares
SEC File Number: 811-22201