What is the Direxion Moonshot Innovators ETF (NYSEArca: MOON ETF)? What is the fund’s objective? Which companies does it track? And what performance has it had since its recent inception? Let’s dive into the workings of this very popular ETF, looking to tap into the returns of leading startups of innovation.

MOON ETF: Fund Objective

The objective that MOON ETF seeks to achieve is to track the returns of 50 of the most innovative companies in the United States. These companies are in the foreground of making impactful changes to our daily lives.

The companies selected have the potential to disrupt existing technologies or industries with their innovation. They are deemed to have the highest level of “early-stage composite innovation scores” and are involved in emerging sectors such as smart transportation, clean power, and human evolution.

Early-stage composite innovation scores are composed of two factors: Allocation Innovation Score and Innovation Sentiment Score.

  • Allocation to Innovation Score: A ranking based on the ratio of investment in research and development to revenue compared to its peers in the same industry.
  • Innovation Sentiment Score: Review of the company’s regulatory filings over the previous twelve months regarding the use of words related to innovation. Companies selected make larger-than-average use of a variety of innovation terms.

MOON ETF: Basic Facts

Here are some of the main characteristics of MOON ETF:

IssuerDirexion
Inception Date11/12/2020
Expense Ratio0.65%
Assets Under Management$37.4 million
Average Daily Volume22,609 shares
Legal StructureOpen-End-Fund

Direxion Moonshot ETF Methodology

MOON ETF management attempts to identify the top 50 companies in the United States that have a strong commitment to innovation. Although, the ETF is mainly focused on American companies the fund also has exposure to the United Kingdom, Sweden, the Netherlands, and Canada.

The fund focuses on early-stage companies that are spending more on research and development as a percentage of revenue when compared to its peers. The managers also attempt to verify that concepts of innovation are purveyed in the corporate culture.

The combination of these two factors helps managers select the companies that are better positioned to take advantage of new technologies in information technology, nanotechnology, automated cars, or electric vehicles.

Which Index Does MOON ETF Track?

The MOON ETF fund tracks the S&P Kensho Moonshot Index (KMOON). The holdings of the ETF are similar to the fund and that explains the very similar returns to the index the fund has achieved. The KMOON index tracks 50 of the most innovative startups in the United States.

The mean market capitalization of the companies composing the index is $1.9 billion. The largest company in the index is worth $19.5 billion, while the smallest has a market cap of $138 million. 

Composition of the Moonshot Index

The composition of the Moonshot index is heavily weighted towards information technology which constitutes 41.3 percent of the index weighting. The other main sectors are health care 23.3 percent, and industrials 16.7 percent.

MOON ETF composition
Source: S&P Dow Jones Indices

MOON ETF: Main Holdings

In a similar fashion, the sector weightings for the MOON ETF are similar to the index, and the fund’s primary sector is information technology. The other sectors follow similar weightings to the index. Although the fund has a much higher weighting to information technology which accounts for 45.5 percent of holdings.

MOON ETF weightings
Source: YahooFinance

This ETF also gives you exposure to other sub-sectors such as biotechnology, semiconductors, and specialty chemicals to mention a few. These sectors may hold potential for high-performing companies.

These are the sectors that are reshaping and improving our daily lives for the better. When a new technology is developed that disrupts the status quo, the company that first developed it usually maintains a starter advantage.

That advantage can lead to the company dominating its rivals for decades. The fund is seeking to capture then the most innovative early-stage companies that will allow investors to gain exposure to the next generation of leading stocks in the technology sector.

The Top Ten Holdings of MOON ETF Are Listed Below:

Top 10 Holdings (30.89% of Total Assets)

NameSymbol% Assets
LendingClub CorpLC4.22%
Asana Inc Ordinary Shares – Class AASAN4.08%
Arcturus Therapeutics Holdings IncARCT3.57%
Varonis Systems IncVRNS3.08%
Sohu.com Ltd ADRSOHU3.02%
BIT Mining Ltd ADRBTCM2.63%
MongoDB Inc Class AMDB2.63%
Silicon Laboratories IncSLAB2.61%
Radware LtdRDWR2.56%
Adaptimmune Therapeutics PLC ADRADAP.L2.49%
Source: Direxion

Past Performance for MOON ETF

Direxion launched MOON ETF on November 12, 2020, priced at $25.00. During its first 3 months, the fund managed to more than double in value. By February 16, 2021, the price of MOON ETF peaked at $51.28.

The fortunes of this ETF have not been so bright since then, and the fund is now down 59.82 percent over the last year. However, MOON ETF’s performance should also be compared to the performance of its benchmark the Kensho Moonshot Index.

MOON ETF has performed in line with its benchmark over the past year which has also lost a lot of ground. The Moonshot Index is down 60.12 percent over the past twelve months, while over the past five years the index is up 6.33 percent.

Performance Chart All
Source: ETF.com

Wrapping Up

The MOON ETF invests in sectors and companies that are at the forefront of innovation. These companies may eventually develop into businesses with key advantages in the sectors they operate in. The fact that they are leading research and development into new technologies may give them an unlimited potential for profits.

However, at the same time, these companies are at an early stage of development and are operating on a business frontier. So, we can expect that many may not make it to the later stages of a business cycle.

Clearly given the nature of new businesses in general, and the extra uncertainty created when operating in the search of groundbreaking technology, there is a considerable amount of risk. Having said that, without risk there can be no risk premium and you wouldn’t have the potential for the reward that may be present in some of these companies.

To avert the high risk of some stock investments it’s always a good idea to diversify your portfolio. A highly diversified portfolio has a lower overall risk than the individual risk of each component. The risk reduction comes from the low or opposite correlation between these assets.

We always recommend holding a variety of alternative investments in your portfolio such as:

Bottom Line

When making decisions on investing and committing your hard-earned cash to make money for you. You inevitably take on risk, and that is the reason why we invest, as it can create higher returns than simply holding US Treasuries.However, to make the best-informed decisions you need information. Often that information is not easily accessible, or the quantity of information is simply overwhelming. To aid investors, several companies offer investment newsletters, you can read our reviews on 6 of the top companies here.

Gino D'Alessio

Gino D'Alessio is a Broker/Dealer with over twenty years experience in various OTC markets such as Bonds, FX and Derivatives. Currently a Financial Markets and Investments Writer & Analyst