A New Option For Traders Hoping To Fly To Safety

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Amid the coronavirus crisis, investors are thirsty for safe-haven assets. Among the more apt approaches to finding broad exposure to safety is the Direxion Flight to Safety Strategy ETF FLYT.

What Happened

FLYT debuted on Feb. 5 and while many new exchange-traded funds fall victim to bad timing, FLYT is a prime example of a right place, right time launch. Said another way, no issuer can foresee global pandemics, but in a positive coincidence for FLYT, the ETF launched just after COVID-19 spread beyond China.

The rookie ETF tracks the Solactive Flight to Safety Index. That benchmark “measures the performance of a volatility-weighted basket of gold, U.S. listed large-capitalization utility stocks, and U.S. treasury bonds with remaining maturities of greater than 20 years,” according to Direxion.

Why It's Important

Holding gold, U.S. Treasuries and utilities stocks may sound like a snoozefest, but FLYT is up 5.49% since inception. That's better than the 9.49% lost this year by the all equities MSCI USA Minimum Volatility (USD) Index.

Currently, FLYT allocates 22.5% of its weight to gold, 34.8% to utilities stocks and the remaining 42.7% to Treasuries. The bulk of that fixed income exposure is to long-dated Treasuries. Couple that with FLYT's utilities exposure and it's a decent income play and able to augment the lack of interest or dividends associated with gold.

FLYT rebalances on a quarterly basis so it's not wed to its current asset allocations, but gold is limited to 22.5%. The other allocations “will be based on the contribution of the volatility of each component to the overall Index. The least volatile component of the Index, based on each component's trailing 5 year volatility measure, will receive the largest weighting,” according to Direxion.

What's Next

Although it's a new ETF, in these turbulent times, FLYT could catch on with conservative, income-minded investors looking to smooth out some volatility within their portfolios.

“The Direxion Flight to Safety Strategy ETF (FLYT) is a potential core, multi-asset solution for providing defensive exposures to seek portfolio risk mitigation through periods of market stress,” said the Direxion. “By combining long-term U.S. Treasury bonds, utility stocks, and physical gold into a single portfolio, FLYT is designed to deliver a source of returns uncorrelated to the equity markets, with the ability to provide meaningful appreciation and yield potential over the long term.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.