Global X and AlphaClone recently rolled out ETFs designed to mimic the buying patterns of top hedge fund managers.
Skeptics have voiced concerns about the ability of a rules-base index to successfully replicate hedge-fund tactics. Proponents say hedge fund ETFs give investors access to these complex strategies with lower fees and no lock-up periods. [If You Don’t Understand How an ETF Works, Don’t Buy It]
“Global X Top Guru Holdings Index ETF (NYSEArca: GURU) tracks an equal-weight index that uses a proprietary methodology that compiles the highest-conviction ideas held by large hedge funds with more than $100 million in assets. Under U.S. securities law, hedge funds containing more than $100 million in assets are required to publicly disclose their holdings,” Robert Goldsborough wrote in a recent Morningstar article. [Global X Launches Hedge Fund Replication ETF]
The ETF is a portfolio of 50 stocks from qualifying hedge funds; requirements of hedge funds that are reviewed include a large allocation to U.S. equities, a top holding that take up at least 5% or more of the portfolio and low turnover.The each qualifying hedge funds’ top holding goes into the GURU portfolio, reports Abram Brown for Forbes. [New Hedge Fund Replication ETF]
The fund’s top holding is Nationstar Mortgage Holdings and has holdings that vary from consumer discretionary to technology and financials.