Where This Hedge Fund ETF is Going Shopping

With 13F filing season, 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, is primed to make some changes among its holdings.

Maz Jadallah, CEO of AlphaClone told Aparna Narayanan of Investor’s Business Daily that ALFA could see increased exposure to the financial services sector and reduced exposure to health care stocks as some professional investors take profits in previously high-flying biotechnology names.

ALFA had three health care stocks among it top 10 holdings as of Aug. 17, according to issuer data. At the end of the second quarter, the ETF had 86 holdings.

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.