ETFs That Follow Hedge Funds

05/29/2015 9:00 am EST

Focus: STOCKS

Todd Rosenbluth

Senior Director of ETF & Mutual Fund Research, CFRA Research

S&P Capital IQ analyzes 13F filings to determine the ten largest hedge funds, seeking out what stocks and sectors have been most in and out of favor, explains Todd Rosenbluth, director of ETF Research at S&P’s Marketscope Advisor.

While some investors may want to use this type of analysis to spot companies that are in and out of favor by hedge fund managers, others may want the benefits and liquidity that ETFs provide.

Global X Guru ETF (GURU), with $300 million in assets, is one of the various ways individuals can invest in stocks held by hedge funds.

There are 42 holdings that included a recent 2.4% stake in Actavis (ACT). Other large holdings include Pandora Media (P) and Celanese (CE).

From a sector perspective at the end of March 2015, information technology (29% of assets), financials (22%), and consumer discretionary (17%) are the three largest for this ETF.

Global X also recently launched a new ETF, Global X Guru Activist ETF (ACTX) that focuses on just those select asset managers that are deemed as activist.

ACT is also among the ETF's largest positions, but it is surrounded by Juniper Networks (JNPR) and Williams Companies (WMB).

Another ETF that seeks to track activities of the hedge funds is AlphaClone Alternative Alpha (ALFA), which launched in 2012 and has approximately $150 million in assets.

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.

Apple (AAPL), which is held by Icahn Capital and other hedge fund managers, is the largest position, followed by Valeant Pharmaceuticals (VRX) and Biogen Indec (BIIB).

ALFA has climbed 8.5% year to date through May 17, outperforming the S&P 500 index, despite a hefty 0.95% expense ratio. GURU has risen 3.1%, even though it charges a more modest 0.75%.

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