Providing retail investors an easy way to track institutional investors’ top picks, Goldman Sachs is crafting an exchange traded fund version of its widely observed Hedge Fund Trend Monitor research report.
According to a recent Securities and Exchange Commission exemptive relief filing, the Goldman Sachs Hedge Fund VIP ETF will try to reflect the performance of the Goldman Sachs Hedge Fund VIP Index, which is comprised of stocks that appear most frequently among the top ten equity holdings of U.S. hedge funds that select investments based on fundamental analysis.
Hedge funds with over $100 million invested in U.S. equities are required to disclose their holdings 45 days after the end of each calendar quarter.
The Goldman Sachs Hedge Fund VIP Index would access the disclosed holdings in hedge funds’ quarterly 13F filings with the SEC. Components are ranked within each individual hedge fund portfolio by descending market value. Approximately 50 stocks that appear most frequently in the top 10 holdings of the U.S. hedge fund universe are then included in the Goldman index. The index is also rebalanced quarterly.
Comparing the Q4 2015 13F filings to the previous quarter, hedge funds have been increasing their exposure to energy, industrials and utilities while cutting the most exposure to financials, according to a recent S&P Global market Intelligence research note. The 10 largest funds bought $1.5 billion in energy sector stocks during the quarter but dumped $2.2 billion in financial sector stocks.
The largest funds were also hit hard by the market volatility in Q4, with the top funds down $44 billion from Q3. The funds also cut down their equity exposure to the lowest for the year. Top picks among hedge funds include American International Group (NYSE: AIG), Priceline Group (NasdaqGS: PCLN), Valeant Pharmaceuticals (NYSE: VRX), Teva Pharmaceuticals (NYSE: TEVA) and Apple (NasdaqGS: AAPL). The top sells include Allergan (NYSE: ACT), Next Plc (LON: NXT), Walgreens Boots Alliance (NYSE: WBA), Lloyds Banking Group (NYSE: LYG) and Hallibruton Company (NYSE: HAL).