What is the primary difference in risk and return potential between TMF and ZROZ?

TMF is a leveraged exchange-traded fund designed to deliver three times the daily performance of a 20+ year Treasury index, amplifying both gains and losses significantly. In contrast, ZROZ provides direct exposure to long-dated zero-coupon US Treasuries without leverage. Consequently, TMF exhibits much higher volatility and is sensitive to daily price fluctuations due to compounding effects. ZROZ offers lower volatility and steady interest rate exposure, making it suitable for long-term holding without the decay risks associated with leveraged funds.

How does the expense ratio difference between these two funds impact long-term returns?

TMF has an expense ratio of 0.90%, while ZROZ has a significantly lower expense ratio of 0.15%. This creates a 0.75% annual fee difference. Over long investment horizons, higher fees can erode compounded returns more noticeably. For example, on a $10,000 investment, the higher fee structure of TMF costs more annually before any trading losses or gains are considered. Investors must weigh this cost against the potential for leveraged upside or the need for lower-cost, stable Treasury exposure.

What does 'index tracked' being not available mean for these funds?

For both TMF and ZROZ, the specific index tracked is listed as not available in the provided data. Typically, leveraged Treasury funds like TMF track a percentage change of a Treasury yield index, while zero-coupon funds like ZROZ track a duration-specific Treasury index. Without exact index details, investors should review the prospectus to understand the precise calculation methods and rebalancing strategies. This lack of clarity necessitates deeper due diligence to ensure the fund's methodology aligns with the investor's expectations for exposure.

Do TMF and ZROZ share any overlapping top holdings?

According to the available data, there are no shared top-10 holdings between TMF and ZROZ. This is likely because TMF is a leveraged fund that uses derivatives and swap agreements to achieve 3x exposure, rather than holding physical Treasuries directly. ZROZ, conversely, invests directly in zero-coupon US Treasury bonds with maturities of 25 years or more. Therefore, their structural approaches to gaining Treasury exposure result in distinct portfolio compositions, despite both targeting long-term Treasury interests.

How do the dividend yields of TMF and ZROZ compare?

ZROZ has a higher stated dividend yield of 5.50% compared to TMF's 4.85%. However, comparing yields between a leveraged fund and a direct bond fund can be misleading. TMF's yield reflects income from its underlying positions and swaps, net of costs, and fluctuates with interest rates. ZROZ's yield represents the coupon income from holding long-term zero-coupon Treasuries. A higher yield in ZROZ suggests stable income generation, whereas TMF's lower yield is part of its leveraged total return strategy.

Which fund is more suitable for long-term interest rate exposure?

ZROZ is typically associated with long-term interest rate exposure due to its direct investment in 25+ year zero-coupon US Treasuries and low expense ratio of 0.15%. It is often used by investors seeking to hedge against economic downturns or declining interest rates without the complexity of leverage. TMF, with its 3x daily reset and 0.90% expense ratio, is generally not recommended for buy-and-hold strategies due to volatility decay. Thus, ZROZ aligns better with traditional long-term Treasury bond allocation goals.

How do these funds react to changes in long-term interest rates?

Both funds have high sensitivity to long-term interest rates, but TMF amplifies this reaction by three times. If long-term Treasury prices rise, TMF aims to gain approximately 3%, while ZROZ gains 1%. Conversely, if prices fall, TMF loses about 3% and ZROZ loses 1%. This means TMF can generate substantial returns in strong bull markets for Treasuries but suffers severe drawdowns in rising rate environments. ZROZ offers more linear and predictable price movements tied directly to bond yields.

What is the impact of daily rebalancing on TMF compared to ZROZ?

TMF undergoes daily rebalancing to maintain its 3x leverage target, which can lead to performance deviations from its annualised 3x goal over longer periods, especially in volatile markets. This phenomenon is known as volatility decay. ZROZ does not use leverage, so it tracks its underlying index more closely over time without the compounding risks associated with daily resets. Investors in TMF must be aware that short-term market swings can disproportionately affect its net asset value relative to ZROZ.

How significant is the difference in net assets between the two funds?

TMF has net assets of $2.2 billion, while ZROZ has $1.7 billion. Both funds have substantial size, indicating high liquidity and institutional interest. While larger assets can facilitate tighter bid-ask spreads, both figures are significant enough that size differences are unlikely to affect day-to-day trading efficiency for retail investors. The key distinction lies in their structure: TMF's size reflects active trading demand for leveraged exposure, whereas ZROZ's size reflects stable, long-term demand for Treasury duration.

Can I find top holdings and sector weights for TMF and ZROZ?

The provided data states that top holdings and sector weights are not available for both TMF and ZROZ. This is common for leveraged ETFs like TMF, which may rely heavily on derivatives rather than physical stocks or bonds. For ZROZ, specific bond holdings might be available in detailed prospectuses but are summarised as not available here. Investors should consult the issuers' websites for detailed composition to understand the specific credit and duration risks involved.

What should beginners consider when choosing between TMF and ZROZ?

Beginners should prioritise understanding the complexity and risk profiles. TMF is a 3x leveraged fund with a 0.90% fee, intended for short-term trading by sophisticated investors who understand volatility decay. ZROZ is an unleveraged long-Treasury fund with a 0.15% fee, suitable for those seeking interest rate exposure with lower structural complexity. Newcomers should likely avoid TMF due to its high-risk mechanics and consider ZROZ only if they have a specific thesis on long-term interest rates.

TMF vs ZROZ

Two funds, one decision: we compare cost, performance and what each ETF actually holds in September 2026.

This page compares TMF and ZROZ, detailing fees, holdings, dividends, and tracking methods. It helps you understand how each fund operates and fits your portfolio. Educational content, not financial advice.

Fund Snapshot

Key Fund Metrics

TMF

Metric

ZROZ

0.90%

Expense Ratio

0.15%

4.85%

Dividend Yield

5.50%

$2.16B

Net Assets

$1.66B

Holdings

Apr 16, 2009

Inception Date

Oct 30, 2009

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Index Tracked

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Trading--Leveraged Debt

Fund Category

Long Government

ZROZ costs about $75.00 less per year for every $10,000 invested.

Shared Top Holdings

These funds do not share any of their top holdings.

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Investment Analysis

TMF

Pros

Considerations

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ZROZ

Pros

Considerations

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About TMF and ZROZ

TMF (TMF)

The Direxion Daily 20+ Year Treasury Bull 3x ETF (TMF) is a sophisticated exchange-traded fund designed to provide three times the daily performance of long-term US government bonds. By leveraging exposure to the 20+ Year US Treasury Index, it aims to amplify gains when bond prices rise, typically during periods of falling interest rates or economic uncertainty. However, this leverage acts as a double-edged sword; it also magnifies losses if bond prices decline, often due to rising rates. With a net asset value of $2.16 billion and an inception date of April 2009, TMF is a popular tool for active traders seeking short-term tactical opportunities. It is crucial to understand that the fund's strategy resets daily, making it less suitable for long-term buy-and-hold investors due to the potential for compounding effects and decay over time.

ZROZ (ZROZ)

The PIMCO 25+ Year Zero Coupon US Treasury Index ETF (ZROZ) is an exchange-traded fund that invests in a portfolio of US Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) with maturities greater than 25 years. STRIPS are zero-coupon bonds, meaning they do not make regular interest payments. Instead, they are bought at a discount to their face value and mature at par. ZROZ aims to track the performance of long-term US Treasuries, offering exposure to government debt with a very long duration. Because of this extended duration, ZROZ is highly sensitive to changes in interest rates; if rates rise, the fund's price may fall, and vice versa. It is designed for investors seeking potential capital appreciation or a hedge against certain economic scenarios, but it carries significant volatility risks associated with long-term rates. The fund has a low expense ratio and no regular dividend yield due to its zero-coupon nature.

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TMF vs ZROZ

Fund Snapshot