The AlphaClone Alternative Alpha ETF (NYSEArca: ALFA), an exchange traded fund that holds stocks that frequently appear in the 13F filings of well-known hedge funds, received a five-star overall rating from Morningstar.

ALFA, the first ETF to track hedge fund equity positions, was rated against 25 Large Cap Growth ETFs for its overall risk-adjusted performance over the three-year period ending May 31, 2015, according to a statement. The ETF debuted on May 31, 2012 and has returned 84.1% since coming to market.

ALFA and rival hedge fund ETFs track holdings selected from quarterly hedge fund disclosures. 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. [ETFs for Your Inner Hedge Fund Hero]

“AlphaClone uses a proprietary “Clone Score” methodology to aggregate on a quarterly basis the ideas of hedge funds for which historically it has made the most sense to follow based on their disclosures. AlphaClone’s clone score for each manager is based on the monthly returns in excess of a broad market index and a fixed hurdle rate exhibited by the manager’s follow strategies over time,” according to S&P Capital IQ.

ALFA’s underlying index selects stocks from managers with the highest ranking, or “Clone Score.” Additionally, the index can vary from long only positions and market hedged based on rules-driven relative price targets. Holdings are also rebalanced quarterly. [ETFs a Better Way to Hedge Fund Investing]

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