ETF Chart of the Day: Hedge Fund Index

January 11th at 1:10pm by Paul Weisbruch, Street One Financial

Earlier this week we profiled a relatively new actively managed ETF, ALFA (AlphaClone Alternative Alpha ETF), and this presents an opportunity to delve into a fund that also is categorized in the “hedge funds” ETF space.

GURU (Global X Top Guru Holdings Index, Expense Ratio 0.75%) follows a proprietary index, the Solactive Top Guru Holdings Index, which selects its holdings from a universe that Structured Solutions AG characterizes as “hedge funds.”

According to the fund fact sheet, the hedge fund selection criteria follows the logic, “Hedge funds are selected from a pool of thousands of privately offered pooled investment vehicles based on the size of their reported equity holdings and the efficacy of replicating their publicly disclosed positions.

Additional filters are applied to eliminate hedge funds that have high turnover rates for equity holdings. Only hedge funds with concentrated top holdings are included in the selection process. Once the hedge fund pool has been determined, the Index Provider utilizes 13F filings to compile the top stock holding from each of these hedge funds.

The stocks are screened for liquidity and equal weighted.” Top holdings in the fund have included names such as Cosan Ltd., Google, Nationstar Mortgage Holdings, GameStop, and Targa Resources Corp., and most recently the fund has owned forty nine individual equities.

GURU only debuted in June of 2012, so live performance data simply does not go back very far, but like ALFA, the fund has displayed in its short tenure that it has out-performed relevant benchmarks impressively.

Like any new ETF, especially those that fit squarely in the “actively managed” space, it often takes time for such funds to show up on institutional screens given lower daily trading volumes and/or asset levels, as well as the lack of live 1, 3, and 5 year performance numbers versus benchmarks.

This said, GURU only averages approximately 1,900 shares traded on an average daily basis, so care and proper technique via the utilization of liquidity providers/trading desks is likely a prudent approach in attaining best execution.

Global X Top Guru Holdings Index

hedge-fund-etf

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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