Hedge Funds' Top ETF Picks

Exchange traded funds are a popular investment tool among many types of investors, including financial advisors, average retail traders and even large hedge funds.

Hedge funds are required to disclose their holdings on a quarterly 13F filing, and Meena Krishnamsetty for MarketWatch pointed out the top five ETF picks in the most recent filings.

  • SPDR Gold Shares (NYSEArca: GLD). 57 funds revealed a long position in GLD, the largest gold-related ETF on the market. Many investors have been bullish on gold as a result of the Fed’s loose monetary policy, but the precious metal has fallen off this year on fears of changes to the accommodative policies. John Paulson’s Paulson & Co. had $1.2 billion in GLD at the end of June. David Einhorn also had a majority stack in gold, but he prefers bullion to the ETF. [Gold ETFs Slide as Markets Eye Fed Tapering]
  • iShares MSCI Emerging Markets Index (NYSEArca: EEM). Developing markets provide higher returns at a greater risk to U.S. equities. Moreover, the emerging markets provide a way to diversify away from a U.S. heavy portfolio. These markets are starting to turn around after a sell-off on speculation of an end to easy money. Ray dalio has a large position in EEM while George Soros held a put position. [Emerging Market ETFs Cheer Louder for the End of Summers]
  • Financial Select Sector SPDR (NYSEArca: XLF). 29 filers held XLF. The four largest banks show strong results and are still fairly cheap in terms of forward earnings estimates. The sector continues to lead the market but potential investors should monitor the effects of rising rates.
  • Market Vectors Gold Miners ETF (NYSEArca: GDX). Gold miners typically lagged behind gold, but overtime, higher bullion prices should help bolster miner revenue. Additionally, investors would diversify risk with a broad basket of miners through GDX. However, the faltering bullion price has cut into the sector’s profit outlook. [Gold Miners ETF Goes Along with Index Changes]
  • WisdomTree Japan Hedged Equity ETF (NYSEArca: DXJ). DXJ tries to mitigate impact of the fluctuations in the yen-dollar exchange rate to potential returns. The fund has surged on the Bank of Japan’s aggressive monetary policy and depreciating yen currency. [WisdomTree: Japanese Yen Weakness Flowing Through to Exporters’ Bottom Line]

For more information on ETF asset flows, visit our ETF performance reports category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD, EEM, XLF and DXJ.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.