ADVISORY BUSINESS Rafferty Asset Management, LLC (“Rafferty”) generally provides investment advisory services to registered investment companies and subsidiaries of registered investment companies (each a “Fund”, and
collectively, the “Funds”). Rafferty is organized under the laws of the State of New York as a limited
liability company. Rafferty is also registered as a Commodity Pool Operator (“CPO”). Rafferty Holdings
LLC is the principal owner of Rafferty. Rafferty began operations in 1997.
Rafferty serves as the investment advisor and provides advisory services to the Direxion Funds
(formerly the Potomac Funds), the Direxion Insurance Trust, and the Direxion Shares ETF Trust (each a
“Trust” and collectively, the “Trusts”), each of which are investment companies registered under the
Investment Company Act of 1940, as amended (“1940 Act”). The portfolios of the Trusts can broadly be
divided into seven categories: (1) leveraged index exchange-traded funds (“ETFs”), leveraged inverse index
ETFs, and inverse ETFs which seek returns that are 3X/-3X/2X/-2X/1.35X/-1X the return of an index for
a single day before fees and expense (collectively, the “Leveraged ETFs”); (2) leveraged and leveraged
inverse mutual funds that seek returns that are 2X/-2X/1.35X/-1.35X/1.25X/-1.25X/1.2X of an index for a
single month before fees and expenses (collectively, the “Leveraged Funds”); (3) Relative Weight ETFs
which seek a return which is 150% of one index and negative 50% of a second index (4) unleveraged index
ETFs which seek to track the return of an index before fees and expenses (“Conventional ETFs”); (5) an
actively managed ETF (“Active ETF”); (6) mutual funds which seek to track the return of an index before
fees and expenses (“Conventional Funds”); and (7) a mutual fund that is actively managed by a subadviser
(“Subadvised Fund”).
Rafferty primarily uses mathematical models to determine the amount and type of investments the
Leveraged ETFs, Leveraged Funds, Conventional ETFs and Conventional Funds should utilize to meet its
investment objective. For these funds, Rafferty does not make judgments regarding the investment merit
of a particular security or instrument and does not apply any economic, financial or market analysis to its
management of these funds because each fund tracks an index, a multiple, inverse, or inverse multiple of
an index or indices.
Rafferty manages the Active ETF pursuant to the investment objective outlined in the Active ETF’s
prospectus.
Hilton Capital Management, LLC (“Subadviser”) is an affiliate of Rafferty and is engaged by
Rafferty and approved by the Direxion Funds’ Board of Trustees to manage the Subadvised Fund pursuant
to the investment objective outlined in the Subadvised Fund’s prospectus, subject to Rafferty’s oversight.
Rafferty personnel perform ongoing oversight and routine due diligence reviews of the Subadviser.
Rafferty is the subadviser for six ETFs that are registered with the Securities and Futures
Commission of Hong Kong and traded on the Stock Exchange of Hong Kong (“Hong Kong ETFs”).
Rafferty does not market these funds.
Advisory services consist of managing each fund’s portfolio in accordance with the fund’s
investment objective and strategies, applicable regulatory guidelines, and is subject to oversight by the
Board of Trustees of each Trust.
Rafferty also acts as the Investment Advisor for two Cayman Island investment entities, which are
wholly owned subsidiaries of one mutual fund and one exchange-traded fund. Rafferty does not market
these funds to individuals, nor are they available for purchase as investment products.
As of December 31, 2018, Rafferty manages $11,545,815,493 client assets on a discretionary basis
and $0 of client assets on a non-discretionary basis.
please register to get more info
FEES AND COMPENSATION A. Describe how you are compensated for your advisory services. Provide your fee schedule. Disclose whether the fees are negotiable.
Fees for providing advisory or management services to the Trusts are approved by the Board of
Trustees of the Trusts. The advisory fee for operational funds is calculated at an annualized rate of each
Fund’s average daily net assets, unless otherwise noted below:
Rafferty generally charges the following in management fees:
3X/-3X Leveraged ETFs 0.75%;
2X/-2X Leveraged ETFs 0.50%, 0.60% and 0.75%;
-1X Leveraged ETFs 0.35%, with the exception of one ETF which charges 0.60%;
1.35X Leveraged ETFs 0.45%
150/50 Relative Weight ETFs 0.40%
Conventional ETFs 0.30%, 0.40% and 0.50%;
Active ETF 0.50%;
Subadvised Fund 0.90%;
Leveraged Mutual Funds and Conventional Mutual Funds 0.75%; and
Conventional Mutual Funds 0.85%.
Rafferty serves as subadviser to the Hong Kong ETFs for which Rafferty is paid a fee of 0.495%
from each of the Hong Kong ETFs.
For the Subadvised Fund, Rafferty pays the Subadviser 0.70% of its advisory fee pursuant to the
Subadvisory Agreement between Rafferty and Subadviser.
The Board of Trustees of each Trust may terminate the investment advisory agreement with
Rafferty at any time with 60 days’ prior written notice. Additionally, Rafferty may terminate the
Subadvisory Agreement between Rafferty and the Subadviser at any time with 60 days’ prior written notice.
The above fees are not negotiable. Rafferty does not charge a performance fee. For additional information
regarding a specific Fund’s management fee rates, please refer to the Fund’s offering documents.
please register to get more info
TYPES OF CLIENTS Rafferty generally provides investment advice to registered investment companies and subsidiaries of registered investment companies, which typically have minimum investment requirements as described
in their respective prospectuses.
please register to get more info
METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS Rafferty utilizes a variety of methods and strategies to make investment decisions and
recommendations and these methods and strategies may vary between the registered investment products
that are series of the Direxion Shares ETF Trust and the Direxion Funds (collectively referred to as the
“Funds” or individually as a “Fund”). Rafferty manages index-linked products in a manner that attempts
to ensure that the portfolios are exposed to the markets in accordance with the stated goals of the Fund’s
investment objective. Rafferty generally invests the various Funds in: exchange-listed securities; ETFs,
securities traded over-the-counter; foreign issuers; corporate debt securities (other than commercial paper);
mutual fund shares; United States government securities; options contracts on securities and commodities;
futures contracts on tangibles and intangibles; and derivatives such as swap contracts and contracts for
differences.
For the Funds it manages, Rafferty generally uses a mathematical model to generate investment
decisions that may result in repositioning each index-linked ETF or Fund in accordance with its investment
objective. Using this approach, Rafferty determines the type, quantity and mix of investment positions that
it believes in combination should produce returns consistent with a Fund’s investment objective.
Investing involves various risks which include the possible loss of principal. An investment in a Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. When a shareholder sells their Fund shares, the shares could
be worth less than what the shareholder paid for them. Each Fund could lose money or its performance
could trail that of other investment strategies. There is no guarantee that a Fund will achieve its investment
objective. Rafferty may utilize investment strategies that have specialized risks including risks associated
with the use of derivatives such as swap agreements, futures contracts, forward contracts, and similar
instruments. These risks include imperfect correlation with a Fund’s underlying index, leveraged
compounding, leverage, market price variance, counterparty risk and liquidity risk, which could increase a
Fund’s volatility and decrease its performance. The primary types of risks investors will be subject to will
largely depend upon which Fund is chosen for investment. For a detailed list of risks that affect a particular
Fund, please refer to each Fund’s prospectus.
The Leveraged ETFs and Leveraged Funds that Rafferty manages seek returns that are a multiple,
or inverse multiple, of an index for single day or month, before fees and expenses, and are intended to be
used as short-term trading vehicles. The Leveraged ETFs and Leveraged Funds are not intended to be used
by, and are not appropriate for, investors who do not intend to actively monitor and manage their portfolios.
The Leveraged ETFs do not attempt to, and should not be expected to, provide returns which are a multiple
of the return of a Fund’s respective index for periods other than a single day. Each Leveraged ETF
rebalances its portfolio on a daily basis; for those ETFs with Bull in their name (a “Bull ETF”) increasing
exposure in response to the index’s daily gains or reducing exposure in response to the index’s daily losses,
and for those ETFs will Bear in their name (a “Bear ETF”), increasing exposure in response to the index’s
daily losses or reducing exposure in response to the index’s daily gains. This means that for a period longer
than one single day, the pursuit of daily goals may result in leveraged compounding. It also means that the
return of an index over a period of time greater than one day multiplied by the Leveraged ETF’s daily target
generally will not equal the Leveraged ETF’s performance over that same period.
The Leveraged Funds seek calendar month leveraged returns, which means that the funds attempt
to provide returns which are a multiple, or inverse multiple, of the return of an index for the period of one
calendar month. Each Leveraged Fund rebalances its portfolio on a calendar month basis to gain exposure
to the index. This means that if an investor purchases a Leveraged Fund on a day other than the last business
day of the month, they may receive more or less than the multiple of the return of a Fund’s respective index.
It also means that for a period greater than one full calendar month, the return of a Fund will be better or
worse than the return of its index multiplied by a Fund’s monthly target as a result of leveraged
compounding. Each Leveraged Fund rebalances its portfolio on a monthly basis; for those funds with Bull
in their name (a “Bull Fund”) increasing exposure in response to the index’s monthly gains or reducing
exposure in response to the index’s monthly losses, and for those funds will Bear in their name (a “Bear
Funds”), increasing exposure in response to the index’s monthly losses or reducing exposure in response to
the index’s monthly gains. This means that for a period longer than one a month, the pursuit of monthly
goals may result in leveraged compounding. It also means that the return of an index over a period of time
greater than one month multiplied by the Leveraged funds monthly target generally will not equal the
Leveraged fund’s performance over that same period.
All the Funds are affected by adverse market conditions. Because certain Leveraged ETFs and
Leveraged Funds attempt on a daily or monthly basis to track the performance of an index or magnify the
performance of an index, these Funds’ performance will suffer during conditions in which their target index
declines. Other Leveraged ETFs or Leveraged Funds attempt to track the inverse or leveraged inverse of
the performance of a target index on a daily or monthly basis, the performance of these Funds will suffer
when the target index increases. There can be no guarantee that a Fund will achieve a high degree of
correlation with its investment objective relative to its benchmark index.
Certain Funds focus their investments in a particular industry, sector or geographic region to
approximately the same extent as their respective indices; as a result, these Funds may be subject to
concentration risk and the performance of these Funds may be more volatile than a fund that does not
concentrate its investments in a particular industry, sector or geographic region. The Funds are also subject
to non-diversification risk because the Funds may invest a high percentage of their assets in a limited
number of securities.
To the extent that a Fund invests in, or seeks exposure to, foreign securities or indexes, as
applicable, the investments may be in the form of depository receipts or swaps on depository receipts or
futures, and although these provide an alternative to directly purchasing the underlying foreign securities
in their respective national markets, they are still subject to certain risks associated with investing directly
in foreign securities. For Funds that invests in, or have exposure to, foreign securities, share price may be
affected by changes in foreign currency exchange rates. Certain Funds also invest in, or have exposure to,
emerging market instruments, which involve greater risks than indirectly investing in foreign instruments
in general. Overall, investing in foreign instruments entails greater risk because they are affected by
fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory
requirements in other countries, among other factors.
Further, because Funds may invest in, and/or have exposure to, investments that may be traded in
markets that are closed when the NYSE Arca, Inc. is open, there are likely to be deviations between the
current value of an underlying investment and last sale pricing (
i.e., the last quote from its closed foreign
market), resulting in premiums or discounts to net asset value that may be greater than those experienced
by other ETFs or funds.
Investments in derivatives by the Funds may pose risks in addition to, and greater than, those
associated with directly investing in the securities underlying those derivatives or in other investments. A
Fund may invest in derivatives involving counterparties for the purpose of attempting to gain exposure to
a particular group of securities or an asset class without actually purchasing those securities or investments.
The use of derivatives, such as swaps and futures contracts, is a highly specialized activity that involves
investment techniques and risks different from those associated with ordinary portfolio securities
transactions. For example, a Fund is exposed to the risk that the counterparty may be unwilling or unable
to make timely payments to meet its contractual obligations or may fail to return holdings that are subject
to the agreement with the counterparty. If the counterparty becomes bankrupt or defaults on its payment
obligations to a Fund, a Fund may not receive the full amount it is entitled to receive. In addition, a Fund
may enter into swap agreements that involve a limited number of counterparties, which may increase a
Fund’s exposure to counterparty credit risk. Each Fund does not specifically limit its counterparty risk with
respect to any single counterparty. Further, there is a risk that no suitable counterparties are willing to enter
into, or continue to enter into, transactions with a Fund and, as a result, the Fund may not be able to achieve
its investment objective. Derivatives, as well as other securities, may be difficult to sell, or deemed to be
illiquid, particularly during times of market turmoil. Illiquid securities also may be difficult to value. If a
Fund is forced to sell an illiquid security at an unfavorable time or at a price that is lower than Rafferty’s
judgment of the security’s true market value, a Fund may be forced to sell the security at a loss.
Each Leveraged ETF or Conventional ETF sells and redeems creation units to Authorized
Participants who work with market makers to place shares in the secondary market. Each Leveraged ETF
or Conventional ETF 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, ETF shares may trade at a premium or discount to net asset value.
There is a risk that an exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments maybe restricted, which may result in the
Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, a Fund
unable to rebalance its portfolio, possibly unable to accurately price its investments, and incur substantial
trading losses. Certain Funds may engage in active and frequent trading due to daily or monthly rebalancing
of their portfolios, as applicable, which may lead to increased portfolio turnover, higher transaction costs,
and the possibility of increased short-term capital gains, which will generally be taxable to shareholders as
ordinary income when distributed to them. This high portfolio turnover also causes certain Funds to
generate significant amounts of taxable income and such Funds will generally need to distribute this income
in order to satisfy certain tax requirements. As a result, these Funds could make large and/or frequent
distributions, and these distributions could comprise a substantial portion or even all of the Fund’s net
assets. Because of high portfolio turnover, transaction costs, and/or a temporary lack of liquidity in the
markets for the securities held, a Fund may have difficulty achieving its target investment return due to fees
and expenses.
Certain Funds may invest in, and/or have exposure to, the securities of micro-capitalization, small
and/or mid-capitalization companies which involves greater risks and the possibility of greater price
volatility than investing in more-established, larger-capitalization companies.
Each Fund may also invest in, and/or have exposure to, the securities of other investment companies
and ETFs. There are special risks associated with investments in the securities of other investment
companies and ETFs. Investments in the securities of other investment companies and ETFs may involve
duplication of advisory fees and certain other expenses. Fund shareholders indirectly bear the Fund’s
proportionate share of the fees and expenses paid by shareholders of the other investment company or ETF,
in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own
operations.
The Trust has entered into a Securities Lending agreement with the Bank of New York. There is
a risk that securities which have been lent out to a third party will not be returned when called. To mitigate
this risk Bank of New York has agreed to indemnify the Trust for any securities which are not retuned
within the required parameters. There is also a risk that Bank of New York could fail leaving Direxion
unable to recovery securities which have been lent.
Shares of ETFs are not individually redeemable and may be redeemed by the Fund at the Net Asset
Value only in large blocks known as Creation Units by Authorized Participants. A shareholder may incur
brokerage costs purchasing enough shares to constitute a Creation Unit. Trading in shares on an exchange
may be halted to due to market conditions that, in the view of the exchange, make trading in shares
inadvisable, such as extraordinary market volatility or other reasons. The market prices of shares will
fluctuate in response to changes in NAV and supply and demand for shares. Rafferty cannot predict whether
shares of a Fund will trade above, below or at their NAV on the secondary market.
If a Fund’s investment objective is to track a benchmark, Rafferty keeps the portfolios fully
invested at all times in securities or other financial instruments that provide exposure to the Fund’s
benchmark without regard to market conditions. For Funds that track an index, or a multiple of an index,
Rafferty does not generally make judgments regarding the merits of any particular security and does not
attempt to apply economic, financial or market analysis or attempt to take temporary or defensive positions
based on market conditions. Rafferty may execute many of its transactions at or near the end of the trading
day based on estimates of the net cash available from a Fund’s net purchase and redemption activity as well
as other adjustments to ensure the Fund’s achieve their investment objectives of tracking an index or a
multiple of an index.
The Subadviser manages the Subadvised Fund in accordance with its investment objectives and
guidelines and is subject to oversight by Rafferty. In managing the Subadvised Fund, the Subadviser is
expected to apply different strategies than Rafferty’s investment management approach as described above.
The Subadviser may invest the Subadvised Fund’s assets in a variety of investment vehicles, including
equities, bonds, options and various derivative instruments. The Subadviser’s investment strategy and
related risks are described within the Subadvised Fund’s prospectus.
Since the use of technology has become more prevalent in the course of business, the Funds may
be more susceptible to operational risks through breaches in cybersecurity. A cybersecurity incident may
refer to either intentional or unintentional events that allow an unauthorized party to gain access to fund
assets, customer data, or proprietary information, or cause a Fund or a Fund service provider to suffer data
corruption or lose operational functionality. A cybersecurity incident could, among other things, result in
the loss or theft of customer data or funds, customers or employees being unable to access electronic
systems (“denial of services”), loss or theft of proprietary information or corporate data, physical damage
to a computer or network system, or remediation costs associated with system repairs. Any of these results
could have a substantial impact on the Funds. For example, if a cybersecurity incident results in a denial of
service, Fund shareholders could lose access to their electronic accounts for an unknown period of time,
and employees could be unable to access electronic systems to perform critical duties for the Funds, such
as trading, NAV calculation, shareholder accounting or fulfillment of Fund share purchases and
redemptions. Cybersecurity incidents could cause a Fund or the Funds’ Adviser or distributor to incur
regulatory penalties, reputational damage, additional compliance costs associated with corrective measures,
or financial loss of a significant magnitude. They may also cause a Fund to violate applicable privacy and
other laws. The Funds’ service providers have established risk management systems that seek to reduce the
risks associated with cybersecurity, and business continuity plans in the event there is a cybersecurity
breach. However, there is no guarantee that such efforts will succeed, especially since a Fund does not
directly control the cybersecurity systems of the issuers of securities in which each Fund invests or the
Funds’ third party service providers (including the Funds’ transfer agent and custodian).
please register to get more info
OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS Rafferty is under common control with Rafferty Capital Markets, LLC (“RCM”) and Hilton Capital Management, LLC (“Hilton”). RCM is the Distributor for the Direxion Funds which includes the
Conventional Funds, the Subadvised Fund and the Leveraged Funds. Hilton is an SEC registered
investment advisor and subadviser to the Subadvised Fund. Rafferty is registered as a commodity pool
operator (“CPO”) with the National Futures Association. Additionally, Rafferty has three wholly owned
subsidiaries, Direxion Asset Management, LLC, Direxion Advisors, LLC and Direxion Asia Limited.
Direxion Asset Management, LLC is a wholly-owned subsidiary of Rafferty and a CPO that is
registered with the National Futures Association and was previously the Sponsor of two Securities Act of
1933 registered commodity pools that traded on the New York Stock Exchange as part of the Direxion
Shares ETF Trust II. While there are no products currently registered in the Direxion Shares ETF Trust II,
Direxion Asset Management, LLC may consider opening similar type products in the future. Rafferty has
adopted policies and procedures designed to detect and monitor for such conflict of interests and when they
do arise, to ensure that it effects transactions for clients in a manner that is consistent with its fiduciary duty
to its clients and in accordance with applicable laws.
Direxion Advisors, LLC is a wholly-owned subsidiary of Rafferty and a CPO that is registered with
the National Futures Association. Direxion Advisors, LLC offers a suite of 1.35X leveraged ETF products
which are managed in the same manner as the other ETF products sponsored by Rafferty. Rafferty has
adopted policies and procedures designed to detect and monitor for such conflict of interests and when they
do arise, to ensure that it effects transactions for clients in a manner that is consistent with its fiduciary duty
to its clients and in accordance with applicable laws.
Direxion Asia Limited is a Hong Kong limited company that provides marketing services for
Rafferty in Hong Kong and other Asian countries.
Rafferty serves as subadviser to six ETFs that are registered with the Securities and Futures
Commission of Hong Kong and traded on the Stock Exchange of Hong Kong. Rafferty does not market
these funds.
Rafferty may simultaneously recommend the sale of a particular security for one client/Fund while
recommending the purchase of the same security for another client/Fund if such recommendations are
consistent with each client/fund’s investment objectives and strategies. Some clients/Funds may be
competing for similar positions in the market. When providing services to multiple clients, liquidity, price
volatility, and other differences in order execution may make it impossible to obtain identical trade
execution for all clients/Funds. Rafferty maintains policies and procedures designed to address these
inherent conflicts and to ensure all clients/Funds are treated fairly over time.
please register to get more info
CODE OF ETHICS, PARTICIPATION OR INTEREST IN CLIENT TRANSACTIONS AND PERSONAL TRADING Principals, officers and employees (and members of their households) of Rafferty may invest in
certain funds and ETFs advised by Rafferty. In addition, these individuals may trade certain securities for
their own accounts and may execute such trades through any broker/dealer. These may be the same
broker/dealers that Rafferty’s clients may utilize to conduct their trading. It is possible that officers and
employees may buy or sell securities or other instruments that Rafferty has transacted upon on behalf of
clients or may engage in transactions that are inconsistent with the recommendations that Rafferty has made
to clients regarding certain securities. Similarly, employees of Rafferty may buy or sell securities or other
instruments that Rafferty or its subadviser transact for client accounts. Rafferty has adopted policies and
procedures designed to detect and mitigate such conflicts of interest and to ensure that Rafferty conducts
transactions for clients in a manner that is consistent with its fiduciary duty to its clients and in accordance
with applicable law. For example, Rafferty does not perform the trading functions for its Subadvised Fund
and Rafferty employees are generally not privy to subadviser trading activity in advance of each trade.
Rafferty employees may engage in personal securities transactions in accordance with Rafferty’s
Code of Ethics, which: a) is designed to be consistent with Rule 17j-1 under the 1940 Act and Section
204A-1 under the Investment Advisers Act of 1940; and b) requires Rafferty employees to routinely report
personal securities transactions and securities holdings information. Upon request, Rafferty will provide
a client or prospective client with a copy of its Code of Ethics.
Rafferty and its affiliated persons may from time to time come into possession of material
nonpublic and other confidential information about companies which, if disclosed, could impact an
investor’s decision to buy, sell or hold a security. Under applicable law, Rafferty and its affiliated persons
would be prohibited from improperly disclosing or using this information for their personal benefit or for
the benefit of any person, regardless of whether the person is a client of Rafferty. Therefore, Rafferty has
policies and procedures that are designed to comply with applicable law if Rafferty or any of its affiliated
persons come into possession of material nonpublic or other confidential information with respect to any
company.
please register to get more info
BROKERAGE PRACTICE If clients have given Rafferty authority to select broker-dealers, Rafferty allocates portfolio transactions principally based on Rafferty’s evaluation of the broker-dealers execution capability and
execution price. Rafferty also uses other factors when selecting broker-dealers for transactions or a series
of transactions which are include but are not limited to the following items:
1. The ability to execute trades;
2. The brokers access to liquidity in a given security;
3. The quality of the brokers trade settlement process;
4. Relationship management between the Rafferty and the broker;
5. Operations and the ability to self-clear;
6. The brokers analytics; and
7. The risk of the broker including such items as headline risk.
The trading practices used for some clients may be different from those used for other clients. For
example, Rafferty may purchase or sell transactions at the market close price for some clients and then for
other clients conduct transactions intra-day or prior to close. The trading practices used are determined
based on the client’s respective investment objectives. The transactions prices for securities in client
accounts may vary, especially during volatility markets, depending on the time of execution and price
movements.
For the registered investment products it managers, Rafferty has authority to determine, without
obtaining specific consent, the securities to be bought or sold, the amount of the securities to be bought or
sold, the broker or dealer to be used, and the commission rates paid. Rafferty does not consider the
promotion of a Fund’s shares and does not enter into any agreements or understanding, written or oral,
under which brokerage transactions or remuneration are directed to a broker-dealer or counterparty to pay
for a Fund’s distribution or any other Fund’s shares.
Rafferty does not maintain formal or informal “soft dollar arrangements” with broker-dealers. In
a soft dollar arrangement, a broker-dealer provides lawful research or other services intended to assist an
adviser with its investment decision making processes in exchange for commission dollars routed to the
broker-dealer. While Rafferty does not maintain any such soft dollar arrangement, Rafferty may receive
research information from broker-dealers generally made available to all advisers who trade with such
broker-dealers. The Subadviser may maintain formal or soft dollar arrangements, subject to the
requirements of Section 28(e) of the Securities Exchange Act of 1934 and reasonable internal policies and
procedures in effect at the sub-adviser.
Rafferty maintains a Trade Error Policy, which outlines Rafferty’s approach to addressing trade
errors. For purposes of this policy, a “trade error” refers to the execution of a transaction by Rafferty on
behalf of a client on terms other than those intended by Rafferty, but specifically excludes administrative
or operational errors committed by personnel at Rafferty. Rafferty’s policy is to act promptly to correct,
limit or mitigate the effect of the trade error. Rafferty defers to each Fund’s NAV Error Correction policy
to determine the appropriate action to take with respect to a Fund following identification of a trade error.
Rafferty faces an inherent conflict in addressing trade errors, as trade errors are often detected by
Rafferty personnel who may have an incentive to mitigate such trade errors in Rafferty’s favor, to the
detriment of the Funds. To address this risk, Rafferty logs all trade errors onto a Trade Error Log, and
Rafferty’s Trade Operations Committee actively reviews all trade errors on a quarterly basis. Rafferty
believes these controls, along with Rafferty’s compliance education training program and routine reviews
of trading activity by Rafferty’s Risk Management and Compliance Departments, function to mitigate these
inherent risks.
The Subadviser is required to maintain appropriate policies, procedures and controls surrounding
their brokerage and trading practices, ensuring the Subadvised Fund is not disadvantaged in connection
with the Subadviser’s portfolio management trading activities. Rafferty personnel consider the
Subadviser’s portfolio management and trading activities in connection with Rafferty’s ongoing oversight
of the Subadviser.
please register to get more info
REVIEW OF ACCOUNTS Rafferty currently provides investment advisory services to pooled investment vehicles (registered investment companies and their subsidiaries) which generally have net asset values (“NAVs”) that are made
available each day. As a consequence, the performance of each of Rafferty’s clients is available with the
release of the NAVs for the shares of each Fund. Rafferty reviews client accounts for accuracy and
consistency with Fund objectives and provides holdings and transaction information to each registered
investment company or its subsidiary’s fund accountant or administrator every business day.
please register to get more info
CLIENT REFERRALS AND OTHER COMPENSATION The Funds may pay fees to broker-dealers and other financial intermediaries that provide distribution
services for the Funds. This practice presents an inherent conflict for Rafferty, as its trading personnel may
have an incentive to direct trades to broker-dealers that provide distribution services for the Funds as an
additional means of compensating those broker-dealers. Rafferty’s Trade Operations Committee routinely
reviews broker-dealers used by Rafferty for propriety.
please register to get more info
CUSTODY Rafferty is deemed to have custody of client funds and securities because it has the authority to
obtain client funds or securities, for example, by deducting advisory fees from a client’s account or
otherwise withdrawing funds from a client’s account. Account statements related to the clients are sent by
qualified custodians to Rafferty.
Rafferty is subject to Rule 206(4)-2 under the Advisers Act (the “Custody Rule”). However, it is
not required to comply (or is deemed to have complied) with certain requirements of the Custody Rule with
respect to each Fund because it complies with the provisions of the so-called “Pooled Vehicle Annual Audit
Exception”, which, among other things, requires that each fund be subject to an audit at least annually by
an independent public accountant that is registered with, and subject to regular inspection by, the Public
Company Accounting Oversight Board and requires that each fund distribute its audited financial
statements to all investors within 120 days of the end of its fiscal year (180 days in the event of a fund that
is a fund of funds). Further, the Trusts are required under the 1940 Act to maintain their assets with certain
qualified financial institutions pursuant to an agreement between the Funds and the custodian.
please register to get more info
INVESTMENT DISCRETION Rafferty provides discretionary investment advisory services to registered investment companies
and their wholly owned subsidiaries. Rafferty places orders to buy and sell portfolio securities, determines
what securities are bought or sold and the total amount of securities bought or sold. Rafferty also selects
the qualified broker-dealers or counterparties with whom orders are placed for purchase or sale of securities
or other financial instruments. Rafferty negotiates the price per share, the commission rates for the
transactions and the financing costs if applicable. Please see Item 4 for more detail regarding Rafferty’s
discretionary authority. Prior to assuming discretion in managing a client’s assets, Rafferty enters into an
investment management agreement or other agreement that sets forth the scope of our discretion.
The Subadviser to the Subadvised Fund is granted discretionary authority to manage the portfolio
securities pursuant to the Subadvised Fund’s investment objectives and restrictions.
please register to get more info
VOTING CLIENT SECURITIES Rafferty has been granted authority to vote proxies for client securities and has adopted policies and procedures with respect to voting these proxies related to portfolio securities of clients, including the
Subadvised Fund.
The proxy voting policies and procedures Rafferty has adopted are designed to ensure that Rafferty
votes proxies with respect to client securities in the best interests of our clients. Rafferty currently utilizes
Institutional Shareholder Services (“ISS”) to assist Rafferty with overall proxy voting process. ISS is a
subsidiary of Vestar Capital Partners and has expertise in providing a variety of proxy-related services to
institutional investment managers, plan sponsors, custodians, consultants and other institutional investors.
ISS provides in-depth research, global issuer analysis and voting recommendations, vote execution,
reporting and recordkeeping. ISS provides routine reports to Rafferty which confirm whether proxies are
voted consistent with Rafferty’s guidelines.
Proxies are generally voted by ISS in accordance with the voting recommendations contained in
Rafferty’s guidelines, which: a) are modeled on ISS’ recommended proxy voting guidelines; b) have been
adopted by Rafferty; and c) are periodically reviewed by Rafferty. If necessary, ISS will consult Rafferty
on non-routine matters, which rarely occur and are generally due to potential conflicts with ISS’ ability to
independently vote the shares.
Rafferty works with ISS and the Funds’ administrator to file Form N-PX for each Trust which
provides a record of the proxy’s voted for each portfolio of the applicable Trust. Form N-PX is available
on the SEC’s website (www.sec.gov). These records are maintained for five years and the previous two
years proxy voting records can be accessed by the funds administrator. Clients may obtain a copy of
Rafferty’s proxy voting policies and procedures and information about how Rafferty voted a client’s proxies
upon request.
please register to get more info
FINANCIAL INFORMATION Rafferty does not require the prepayment of advisory fees and there are no financial conditions
that is reasonably likely to impair Rafferty’s ability to meet contractual commitments to clients.
PART 2B OF FORM ADV: BROCHURE SUPPLEMENT RAFFERTY ASSET MANAGEMENT, LLC March 1, 2019
Rafferty Asset Management, LLC
Paul Brigandi
1301 Avenue of the Americas (6th Ave.), 28th Floor
New York, New York 10019
(646) 572-3390
www.direxioninvestments.com
This brochure supplement provides information about Paul Brigandi that supplements the Rafferty Asset Management, LLC Form ADV Part 2A brochure. You should have received a copy of that brochure. Please contact Client Services at 646-572-3390, or at [email protected] via www.direxioninvestments.com, if you did not receive the Rafferty Asset Management, LLC brochure or if you have any questions about the contents of this supplement. ITEM 2 EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Paul Brigandi, Rafferty Asset Management, LLC- Managing Director, Head of Trading and Portfolio
Management since January 2010 through the present period. He was a Portfolio Manager from 2004 to January
2010. Mr. Brigandi is responsible for the day to day trading, management, and oversight of the portfolio
management for the Direxion Shares ETF Trust, Direxion Funds Trust and the Direxion Insurance Trust. Prior
to joining the firm he worked for FleetBoston Financial as an Associate Financial Consultant. Mr. Brigandi
earned a Bachelor of Science degree in Finance from Fordham University and currently holds a Series 7, Series
66 and Series 55 license.
ITEM 3 DISCIPLINARY INFORMAITON The Advisor is unaware of any disciplinary events that may require disclosure.
ITEM 4 OTHER BUSINESS ACTIVITIES The named supervised person is a Principal of Direxion Asset Management, LLC, a Commodity
Pool Operator, a wholly owned subsidiary of Rafferty Asset Management, LLC. The named supervised
person is also a Principal of Direxion Advisor, LLC, a wholly owned subsidiary of Rafferty Asset
Management, LLC and a registered investment advisor and Commodity Pool Operator.
ITEM 5 ADDITIONAL COMPENSATION Mr. Brigandi has no additional compensation that required disclosure.
ITEM 6 SUPERVISION Mr. Brigandi is supervised by Mr. Robert Nestor, President (646) 572-3464 of Rafferty Asset
Management, LLC.
PART 2B OF FORM ADV: BROCHURE SUPPLEMENT RAFFERTY ASSET MANAGEMENT, LLC March 1, 2019
Rafferty Asset Management, LLC
Tony Ng
1301 Avenue of the Americas (6th Ave.), 28th Floor
New York, New York 10019
(646) 572-3390
www.direxioninvestments.com
This brochure supplement provides information about Tony Ng that supplements the Rafferty Asset Management, LLC Form ADV Part 2A brochure. You should have received a copy of that brochure. Please contact Client Services at 646-572-3390, or at [email protected] via www.direxioninvestments.com, if you did not receive the Rafferty Asset Management, LLC brochure or if you have any questions about the contents of this supplement. ITEM 2 EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Tony Ng, Rafferty Asset Management, LLC- Managing Director, Head of Trading and Portfolio
Management since June 2013 through the present period. He was a Portfolio Manager from 2006 to June 2013.
Mr. Ng is responsible for the day to day trading, management, and oversight of the portfolio management for
the Direxion Shares ETF Trust, Direxion Funds Trust and the Direxion Insurance Trust. Prior to joining the
firm Mr. Ng was a Trading Assistant at Deutsche Asset Management from 1998 through 2004. He completed
his undergraduate studies at the State University of New York at Buffalo in 1998 with a Bachelor of Science
in Finance. He currently holds the Series 7 and Series 63 licenses.
ITEM 3 DISCIPLINARY INFORMAITON The Advisor is unaware of any disciplinary events that may require disclosure.
ITEM 4 OTHER BUSINESS ACTIVITIES The named supervised person is a Principal of Direxion Asset Management, LLC, a Commodity
Pool Operator, a wholly owned subsidiary of Rafferty Asset Management, LLC. The named supervised
person is also a Principal of Direxion Advisor, LLC, a wholly owned subsidiary of Rafferty Asset
Management, LLC and a registered investment advisor and Commodity Pool Operator.
ITEM 5 ADDITIONAL COMPENSATION Mr. Ng has no additional compensation that required disclosure.
ITEM 6 SUPERVISION Mr. Ng is supervised by Mr. Robert Nestor, President (646) 572-3464 of Rafferty Asset
Management, LLC.
please register to get more info
Open Brochure from SEC website