Being a hedge fund manager sounds glamorous and, for some, it is very, very lucrative.
However, parsing through the largest individual holdings of famous investors is not as rewarding a strategy as it may appear.
For example, following a basket of Baupost’s top-10 holding “beat the markets but about 9% a year since 2000. Want to follow Baupost’s top holding? BAD IDEA. Returns -0.9% a year, over 4% a year worse than the S&P,” according to Mebane Faber.
Faber notes that the difference is roughly the same, about 9% a year, when applying a similar strategy to the equity holdings of Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A). [A Buffet Bounce For Energy ETFs]
However, resisting the allure of 13F ETFs, or those funds focused on some of the top holdings of noted hedged funds, is getting harder given the returns offered by those ETFs this year. Specifically, the AlphaClone Alternative Alpha ETF (NYSEArca: ALFA) has jumped about 26% this year while the rival Global X Guru Index ETF (NYSEArca: GURU) is higher by 34%. [Global X Gives Guru a Facelift]
ALFA “tracks the performance of US-traded equity securities to which hedge funds and institutional investors have disclosed significant exposure,” according to AlphaClone.
Top-10 holdings currently include American International Group (NYSE: AIG), Citigroup (NYSE: C) and Priceline (NasdaqGM: PCLN).