Hedge Funds & ETFs

Exchange traded funds have found their way into self-directed brokerage accounts of the average retail investor, financial advisor investment strategies, and even the world’s largest hedge fund.

According to the hedge fund’s quarterly 13F report, Bridgewater Associates, which overseas $140 billion in investments for institutions such as pensions, endowments and foundations, held heavy allocations in three ETFs: the iShares MSCI Emerging Markets Index ETF (NYSEArca: EEM), SPDR S&P 500 Trust ETF (NYSEArca: SPY) and Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO), reports Ryan Glosier for The Motley Fool.

As of March 31, the hedge fund held $3 billion in EEM, $3.3 billion in SPY and $3.6 billion in VWO. To put this in perspective, Bridgewater held around $11 billion in equity positions, with Microsoft as its largest single stock holding with a little over $40 million.

Recently, the emerging market performance has been disappointing, especially compared to the phenomenal returns in previous and to rally in the U.S. markets. Nevertheless, the EEM ETF provides individual investors with the right exposure to the emerging markets, and Bridgewater seems to remain bullish on the regions. [Outperforming ETF for Emerging Markets Hits Rough Patch]

Glosier opines that Bridgewater also thought it best to split its emerging market exposure between EEM and VWO for liquidity reasons so that the hedge fund did not have an extremely large foot print in just one of the funds. Additionally, the two funds provide varying exposure.

Notably, VWO has a 0.59% distribution yield and EEM has a 12-month yield of 1.78%. Additionally, VWO follows the FTSE emerging market index, whereas EEM tracks the MSCI index.