Expanding on its successful Global X Guru Index ETF (NYSEArca: GURU), Global X has filed with the Securities and Exchange Commission to launch a small-cap and international exchange traded funds based on top hedge funds picks.
According to a SEC filing, Global X is working on the Global X Guru Small Cap Index ETF (NYSEArca: GURX) and the Global X Guru International Index ETF (NYSEArca: GURI). Both ETFs will have a 0.75% expense ratio. [Unleash Your Inner Hedge Fund Manager With ETFs]
The two new ETFs, like the original GURU ETF, are comprised of high conviction ideas based on 13F filing data from a select pool of hedge funds.
GURX will track small-cap companies reported on Form 13F by hedge funds and other institutional investors while GURI will follow international companies. The index provider also screens hedge funds based on the size of their reported equity holdings, efficacy of replicating their publicly disclosed positions and management teams with a record of creating shareholder value.
GURX will take the top 100 small-cap stock picks with market capitalization ranging from $100 million to $3 billion. The holdings are equally weighted and rebalanced quarterly.
GURI includes the top 50 international picks, and holdings are equally weighted and rebalanced quarterly.
The SEC Form 13F, or Information Required of Institutional Investment Managers Form, is a quarterly filing required of institutional managers with over $100 million in qualifying assets. The filing contains information on the manager’s list of recent investing holdings, which provide the public a glimpse of how the heavy weights are moving around the changing markets.
Since the ETF’s holdings are based on numbers from the previous quarter, potential investors should be aware that the ETF’s positions may become stale in a quickly changing market. Additionally, the ETF may not perfectly reflect hedge fund positions as many hedge funds utilize derivatives, which are not required to be disclosed.
GURU has proved to be an outperforming strategy. The fund has gained 29.1% over the past year, compared to the S&P 500’s gain of 22.4%. However, the ETF’s equal weight strategy and tilt toward smaller companies have weighed on performance this year, with GURU dropping 3.1% year-to-date while the S&P 500 fell 1.3%.
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.