A New ETF Built On Stocks From Top Hedge Funds
(NEW YORK CITY) Want to buy like the best hedge fund managers? A new exchange-traded fund, Top Guru Holdings Index, offers a simplified way to become an at-home version of say, Greenlight Capital’s Daniel Einhorn.
Unlike other ETFs using hedge fund-like strategies, Guru sticks to stocks—mostly U.S. equities, with 20% of assets going outside the States. A portfolio of some 50 stocks are selected by screening for hedge funds with more than $500 million in assets; significant allocation to U.S. equities; a top holding that’s at least 5% of total assets and low turnover. “Any fund that’s out to hold for seconds or minutes is irrelevant to our investors, so we filtered those out,” says Bruno del Ama, CEO of Global X Funds (assets: $1.5 billion), which built the ETF.
Each hedge fund’s top holding goes into the portfolio. In effect, Global X built a basket of “high-conviction ideas,” as del Ama puts it, from some of the best living investors. When Global X first constituted the ETF earlier this year, the screen found 68 hedge funds that fit the bill: big names like Paulson & Co. and Pershing Square Capital Management, as well as, yes, Greenlight. Some held the same top holding, so Guru ended up with 51 different stocks to start, and about 2% went into each. The ETF’s top holding is home-loan lender Nationstar Mortgage Holdings. It’s a wide-mix, though, that includes names like Apple, Kraft, JPMorgan Chase and Google too. The ETF began trading last Tuesday, and finished the week up 2.5%.
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