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"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

- Warren Buffett
In this Edition
Direxion in Focus
The Direxion Indexed Managed Futures Strategy Fund

Web Event Replay: The "Next Generation" in Managed Futures Investing

QQQE: New Equal Weighted Index ETF by Direxion

Web Event Replay: Volatility, Strategies for Diversification and Risk Management

Endowments: High on Alternatives

A recent study* observed that University Endowments allocate significantly more to alternatives compared to retail investors and advisors.
They indicated that their allocations to alternative investments (as a dollar weighted average) exceeded 50% of their portfolio allocations. It was also observed that the greater the asset level of the endowment, the greater the allocation to alternatives and typically a greater investment return when compared to endowments with lower asset levels/allocations to alternatives

It should be noted, most endowments seek a conservative investment approach consistent with capital preservation, which is a testament to the use of alternative investments for risk mitigation.

Size of Fund	Domestic Equity %	Fixed Income %	International Equities %	Short Term Securities/ Cash %	Alternative Strategies %
Over $1 B	11	10	15	4	60
$51 M to $100 M	31	21	18	6	24
$25 M to $50 M	35	24	16	8	17
Under $25 M	40	27	13	8	12

Source: NACUBO Commonfund Study of Endowments 2010*
All Data is dollar-weighted unless otherwise specified.

Reversion to the Mean

$1 invested in long only commodities* in 1956 is worth approximately 64 cents today, adjusted for inflation.
Did You Know?

*Alternative Strategies are categorized in the NCSE as Follows: Private Equity (LBOs, mezzanine, M&A funds, and international private equity); Marketable Alternative Strategies (hedge funds, absolute return, market neutral, long/short, 130/30, event driven and derivative); Venture Capital; Private Equity Real Estate (non-campus); Energy and Natural Resources (oil, gas, timber, commodities and managed futures); and Distressed Debt

**Commodities - Referrencing Reuters CRB Futures Index as a proxy. The index invests in Energy, Grains, Industrials, Meats, Softs, Precious, Metals

***

Index Description	Index Name
Currencies	Barclays Currency Traders Index
Fixed Income	Barclays Capital U.S. Aggregate
Managed Futures	Barclays CTA BTOP 50 Index
Commodities	Dow UBS Commodity Index
Hedge Funds	HFRI Fund Weighted Hedge Fund Index
U.S. Equities	S&P 500® Index

Unlike investing in corporate stocks, which generally appreciate/depreciate in value as a result of business operations and earnings, the movement of commodity prices is based primarily on the supply and demand of each commodity. Identifying and timing the prices trends for various commodities can be very difficult for most investors and advisors.

Given the cyclical nature of commodities and the tendency for their prices to revert to the mean over time, a long only approach may not be the best strategy to gain access to commodities. Investors interested in commodity exposure may want to consider a strategy that takes both upward and downward trends into consideration and has the flexibility to adjust positions in individual commodities accordingly.

Really Riskier?

There is a common misconception is that alternative investments are riskier than traditional asset classes, such as stocks and bonds. Though this may be true when comparing to long only commodities which exhibit marginally higher standard deviation than stocks, most other alternatives tend to have more stable risk metrics.

As you can see in the table below, Long/Short Currencies, Managed Futures and Hedge Funds reveal a lower standard deviation for the referenced 10 year period.

All data: 12/31/2001-12/31/2011	Annualized Return	Annualized Standard Deviation	Max Drawdown
Traditional Investments
U.S. Equities	2.92%	16.15%	-50.95%
Fixed Income	5.78%	3.69%	-3.83%
Alternative Investments
Long Commodities	6.63%	18.66%	-54.26%
Long/Short Currencies	3.06%	4.54%	-6.61%
Managed Futures	5.40%	6.82%	-7.74%
Hedge Funds	5.87%	6.56%	-21.42%

Investments defined in table below. *** The performance illustrated is index performance. One can not invest directly in an index. Index performance would not reflect fees inherent in investing in a fund that would invest in L.P.s and if a fund invested in L.P., returns would likely be lower as a result of expenses.

Average Returns by Stage of the Business Cycle

The below table illustrates the returns of stocks, bonds and commodity futures through 7 full business cycles starting in 1959.

	Stocks	Bonds	Commodity Futures
Expansion	13.29%	6.74%	11.84%
early	16.30%	9.98%	6.76%
late	10.40%	3.63%	16.71%
Recession	0.51%	12.59%	1.05%
early	-18.64%	-3.88%	3.74%
late	19.69%	29.07%	-1.63%

As illustrated, stocks and commodity futures exhibited average annual returns which were similar in overall periods of economic expansion and contraction, however, during late stages of economic expansion and early stages of recession, commodity futures outperform with relative significance which reinforces their diversification value.

Information from Gary Gorton The Wharton School, University of Pennsylvania and National Bureau of Economic Research and K. Geert Rouwenhorst School of Management, Yale University.

Diversification does not ensure a profit or protect against a loss.

An investor should consider the investment objectives, risks, charges, and expenses of the Direxion funds carefully before investing. The prospectus contains this and other information about Direxion Funds. To obtain a prospectus, please visit www.direxionfunds.com or contact Direxion Funds at 800.851.0511. The prospectus should be read carefully before investing. Investing in funds that invest in specific industries or geographic regions may be more volatile than investing in broadly diversified funds.

The principal risks of investing in the Direxion Indexed Managed Futures Strategy Fund are Active and Frequent Trading Risk, Adverse Market Conditions Risk, Agriculture Investment Risk, Commodity Linked Derivatives Risk, Counterparty Risk, Credit Risk, Currency Exchange Rate Risk, Currency Investment Risk, Debt Instrument Risk, Derivatives Risk, Emerging Markets Risk, Energy Investment Risk, Foreign Securities Risk, Futures Contracts Risk, Interest Rate Risk, Leverage Risk, Market Risk, Non-Diversification Risk, Other Investment Companies (including Exchange-Traded Funds) Risk, Precious Metals Investment Risk, Regulatory Risk, Sector Risk, Shorting Securities Risk, Subsidiary Investment Risk, Tax Risk, Tracking Error Risk, and Volatility Risk. Auspice Capital Advisors Ltd. is a registered Portfolio Manager/Investment Fund Manager in Canada and a registered Commodity Trading Advisor (CTA/CPO) and National Futures Association (NFA) member in the US.

Date of First Use: March 30, 2012. Distributed by: Rafferty Capital Markets, LLC.