Direxion Plans Capital Gains Distributions On 11 ETFs (TYH, FAS, FAZ)

Direxion, the ETF issuer behind several of the most heavily traded inverse and leveraged ETFs, said that it would pay significant distributions on 11 of its 22 ETFs. The Direxion announcement bucks a trend of zero capital gains distributions from rivals ProShares and Rydex.

WisdomTree announced that only one of its 42 ETFs would pay capital gains distributions for 2009. Direxion said the distributions ranged from 8.2% to 17.3% of each fund’s net asset values, and were predominantly short-term capital gains.

The Direxion Daily Technology Bull 3x Shares (NYSE: TYH) paid the largest distribution at $23.02, or 17.3% of its net asset value.

Investors should note that Direxion’s two largest ETFs, the Direxion Daily Financial Bull 3x Shares (NYSE: FAS) and Direxion Daily Financial Bear 3x Shares (NYSE: FAZ), did not pay any gains.

When ETFs distribute capital gains, the net asset value falls to reflect the payout. Investors can then sell the ETF to book a short or long-term capital loss, but the loss can't be used to offset distributions from the ETF because these distributions are classified as regular income for tax purposes.