Hedge Fund ETFs Reveal Where Institutional Investors Like to Invest | ETF Trends

Retail investors can glean into the outlook of some of the largest billionaires through ETFs that specifically select popular company stocks among institutional investors.

For instance, consumer discretionary and healthcare are the two largest sectors in the Direxion iBillionaire Index ETF (NYSEArca: IBLN) at 30.8% and 24.7%, respectively, according to Morningstar data.

These hedge fund-esque ETFs track holdings selected from quarterly hedge fund disclosure. 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.

As of the most recent rebalance, IBLN added more healthcare and consumer discretionary exposure, including Abbvie (NYSE: ABBV), Baxter International (NYSE: BAX), Starwood Hotels (NYSE: HOT), Netflix (NasdaqGS: NFLX), Perrigo (NYSE: PRGO) and Yum! Brands (NYSE: YUM).

According to a Direxion research note, the access to cheap capital has helped innovation driven sectors, like biotech and technology, and fueled increased merger and acquisition activity. Healthcare M&A activity also accounted for almost a quarter of U.S. acquisitions this year, strengthening the sector.

Moreover, Direxion argues that billionaires are betting on consumers’ stronger purchasing power both domestically and internationally. For instance, Dan Loeb has a $1 billion position in YUM and pointed to opportunity in China where it is seeing a rising middle class.

ETF investors may also find similar themes in other hedge fund-replicating ETFs. For instance, the AlphaClone Alternative Alpha ETF (NYSEArca: ALFA) also includes a 18.3% position in consumer cyclicals and 23.7% in healthcare. However, the fund recently trimmed exposure to healthcare on profit taking after the outperformance. [Where This Hedge Fund ETF is Going Shopping]