Direxion/Wilshire Dynamic Fund

Overview

Overview

With its world allocation focus and comprehensive exposure to multiple asset classes, financial professionals can use the Wilshire Dynamic Fund as:

• A core portfolio holding for those who employ “core + satellite” strategies;
• The baseline allocation in a client’s portfolio (while other more narrowly focused investments can be used to seek additional non-correlated returns);
• A satellite fund to supplement advisors’ primary portfolios; or
• A tracking portfolio for those advisors who wish to benchmark their own modeling and measure the value of the tactical overlay applied by Wilshire.

The Direxion/Wilshire Dynamic Fund is a global asset allocation fund designed to help investors navigate today’s ever changing markets. The fund incorporates tactical strategies to take advantage of short-term market trends; and navigate changing markets with the objective of achieving sustainable, long-term positive returns.

About Wilshire

Wilshire Associates is a leading global investment consulting and services firm with an expertise in both the creation of asset allocation models and their implementation. Wilshire was among the first to produce investment management tools for such diverse applications as creating index funds, optimizing portfolios, developing dedicated and immunized bond portfolios and measuring performance.

In these unpredictable markets, advisors are looking for ways to provide better risk-adjusted returns to their clients—and investors are looking for investment alternatives that have the potential to provide better long-term results than traditional buy-and-hold portfolios. The Direxion/Wilshire Dynamic Fund is an investment option that can help to achieve these goals.

Strategy & Benefits

Investment Strategy

Under normal circumstances, the Dynamic Fund is managed by the Adviser pursuant to the Subadviser’s traditional asset allocation model which allocates approximately 60% of the Dynamic Fund’s total assets to equity securities and 40% to fixed income securities, with a tactical overlay to increase or decrease the Dynamic Fund’s risk exposure based on the Subadviser’s outlook for the market. The Subadviser’s tactical model evaluates asset class allocations on at least a monthly basis, but may make adjustments as frequently as daily. In response to market conditions, the Subadviser may recommend that the Adviser rebalance the Dynamic Fund’s portfolio, use short positions and/or employ leverage in its tactical allocations.

Benefits of the fund

In the view of Direxion Funds, the Dynamic Fund is well suited for longer-term, buy-and-hold investing because it does not rely solely on a traditional strategic asset allocation (SAA) approach. In fact, Direxion feels that this fund may be used to compliment a SAA Strategy due to its tactical components. The combined use of the SAA and the TAA, in tandem with the Fund’s ability to reallocate portfolio assets, as needed, helps to ensure that the Fund is well positioned for both the short term as well as the long.

Benefits of the Dynamic Fund

By investing in the Dynamic Fund, investors can enjoy numerous benefits. For example, the Fund may enable individuals to:

• Capture returns from directional trends;
• Take advantage of the features and benefits of both long and short investing;
• Benefit from the use of tactical tools, such as leverage and non-traditional asset classes, in an effort to
• Take advantage of short-term market events; and
• Leverage the wisdom and oversight of Wilshire Funds Management’s Investment Committee.

Fund Risk/Return Metrics (A Shares as of 03/31/2013)

 Data as of 03/31/2013 is subject to change at any time and are not recommendations to buy or sell any security.

Fund Exposure

Fund Exposure

Data as of 04/30/2013 is subject to change at any time and are not recommendations to buy or sell any security.

Fund Sector Changes

Data as of 04/30/2013 is subject to change at any time and are not recommendations to buy or sell any security.

Manager Commentary

April 30, 2013

For the month of May, The Direxion/Wilshire Dynamic Fund maintained its overweight position in investment grade fixed income while shortening the duration by reducing allocation in TIPS and increasing the allocation in bank loans.  As the credit spread continues to tighten, the Fund also reduced exposure to high yield bond. The Fund maintained its neutral weight position in U.S. Equities as the equity market continues to benefit from steady earnings growth.  However, given the large run up the market has experienced in the first four months of the year, we continue to maintain exposure to a low volatility ETF in an effort to reduce volatility while still maintaining market exposure. The Fund reduced its position in Non-U.S. Equities as Europe and emerging markets continue to show signs of weakness.  However, the Fund increased its position in Japanese equity as The Bank of Japan unveiled aggressive easing leading to further Yen depreciation, which we believe should improve and serve as tailwind for its equity market. The Fund reduced its exposure to commodities as concerns over weaker global economic data have led to an increase in downside risk in commodities prices. As of May 13, 2013, the Fund continued to be neutrally positioned relative to the Strategic Asset Allocation, increasing the beta¹  for the Fund to 1.02.

The U.S. equity markets continued to advance in April, with Wilshire 5000 Total Market Index^SM adding 1.74 percent during the month. All size and style segments were positive in April, with large cap value stocks performing the best, as the Wilshire U.S. Large Cap Value IndexSM returned 2.57 percent. While most GICS sectors were positive for the month, Industrials was the worst performing sector, losing -1.11 percent, while Telecomm was the best performing sector, adding 7.05 percent.

In April, the 10-Year U.S. Treasury yield continued to trade around the 2 percent mark, closing the month at 1.70 percent. All U.S. bond sectors were positive this month, with the broad Barclays U.S. TIPS Index gaining 1.01 percent. Long Term Treasuries was the best relative performer, with the Barclays Long-Term Treasury Index adding 4.00 percent.

¹ Beta is a measure of price volatility in comparison to the market as a whole. Generally, a beta of 1 indicates that a portfolio will move with the market; a beta of less than 1 indicates that the portfolio may be less volatile than the market.

Asset Allocation

The Principal Investment Strategy

Wilshire Funds Management, the global investment management business unit of Wilshire Associates, Inc., bases its investment strategy on a traditional strategic asset allocation model, in conjunction with a tactical overlay, whereby approximately:

• 60% of the Fund’s total assets are invested in US and foreign equity securities including the securities of small-, mid-, and large-capitalization companies; and
• 40% of Fund assets are invested in US and International fixed income securities.

This investment approach is intended to provide investors with a long-term investment strategy that incorporates increased or decreased risk exposure, depending on Wilshire’s expectations of short-term market risk or opportunity. Wilshire uses a tactical overlay to take advantage of short-term market inefficiencies based on its outlook for key asset classes and the market in general. Wilshire’s tactical model evaluates asset class allocations on a monthly basis. As a result of this evaluation and current market conditions, the Dynamic Fund may be rebalanced.

Tactical Investing

The Importance of Tactical Investing

The ultimate goal of a tactical overlay is to smooth out the short-term volatility that a typical investor may experience if not properly positioned to handle short-term market inefficiencies.

How Tactical Overlays Work

The Dynamic Fund is based on a strategic asset allocation model that allocates approximately 60% of total assets to equity securities, and approximately 40% of assets to fixed income securities. This model, which is listed in the “Traditional Allocation” column in the table to the right, defines the broad long-term guidelines for the Dynamic Fund’s portfolio. Wilshire’s tactical asset allocation, listed in the “Tactical Allocation” column in the table below, defines the short-term, generally minor, variations that Wilshire will employ to enhance returns or manage risk by taking advantage of market pricing anomalies or strong market sectors. The “Over-/Underweighting” column illustrates how the tactical overlay manifests itself across the various asset classes.

Portfolio Holdings

Portfolio Holdings
As of 5/31/2013

Click to download the Portfolio Holdings (csv)

Fund Literature

Fund Literature

Download fund literature and regulatory documents

• Fact Sheet (pdf)
• Brochure (pdf)
• Regulatory Documents (including Prospectus, SAI, Semi-Annual Report, Annual Report)

Related Material

Related Material

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