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A Wonderful Work-From-Home Outlook

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A Wonderful Work-From-Home Outlook

Just a few days shy of its four-month anniversary, the Direxion Work From Home ETF (NYSE: WFH) is already a story unto itself among this year's crop of new exchange traded funds.

What Happened

Already home to $136.43 million in assets under management, WFH is up 14.58% since inception, confirming its status as one of the prime ETFs born out of the coronavirus pandemic.

WFH, which tracks the Solactive Remote Work Index, focuses on four scorching hot themes: Cloud computing, cybersecurity, online document management and remote communications.

Why It's Important

Obviously, WFH is getting a lift from the pandemic, but as is the case with any other thematic ETF, the key with the Direxion fund is that the underlying theme has longevity beyond the here and now.

“The impositions of lockdowns and shut-ins forced many employers and employees to quickly revamp from their traditional office structure to remote working arrangements,” according to Morningstar. “By our estimates, at the peak of the pandemic lockdowns, 45% of employed U.S. workers were working from home.”

While the case for office and corporate real estate isn't dead and it's expected that many workers will return to offices when the virus is a thing of the past, the work from story is just getting started.

“By our estimates, 9% of the workforce was working remotely (defined as working outside the office more than 80% of the time) before the pandemic, and we expect that percentage to rise to 13% in 2024—a 44% increase over a five-year period,” notes Morningstar.

What's Next

Cloud computing and cybersecurity, two of WFH's themes of emphasis, were flourishing prior to the pandemic and that growth is expected to continue. Moreover, there's a vast reservoir of employees that could potentially work from home, providing a runway for long-term growth for WFH.

“In the long term, we think the maximum percentage of employees that could reasonably work from home is a little under 40% of the workforce—positions that are concentrated in the financial, business services, and technology industries,” notes Morningstar.

While multiples on many of WFH's 40 components are currently frothy, another catalyst for the fund looms in the form of hybrid work – the scenario where employers let employees work from home a few days a week. That would boost the number of work from home staffers, providing another long-term tailwind for WFH in the process.

 

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