Form 13F: The Easy Way to Track Hedge Funds’ Favorite U.S. Stocks With One ETF (GURU)
According to a recent study from U.S. audit, tax and advisory services firm KPMG, over the past 17 years, hedge funds have actually outperformed equities, bonds and even commodities. What’s more, The Wall Street Journal reports, the hedge fund industry is expected to more than double in size over the next five years to over $5 trillion in assets.
I don’t know about you, but if hedge funds have earned investors more profits than bonds, stocks and commodities, and are only expected to continue growing, wouldn’t it be beneficial to know what these funds are buying and why?
Of course it would.
And here’s the best part for regular investors.
Any hedge fund with over $100 million in U.S.stocks under management is required to file a Form 13F with the Securities and Exchange Commission (SEC). (Read more about Form 13Fs here.)
In fact, in June, Global X launched an ETF dedicated specifically to following the biggestU.S.stock holdings of a number of top hedge funds.
In just over three months, the fund has already ticked up 11%. And if past performance is any indication, there’s much more room for growth.
It’s called the Global X Top Guru Holdings Index ETF (NYSEArca:GURU).
Double-Digit Gains in Just Three Months
Let’s face it, if you’re not rich, you won’t be investing in a hedge fund anytime soon.
Truth is, the SEC won’t even allow you to invest in hedge funds unless you can prove you’re an “accredited investor.” That means you must have a net worth of more than $1.5 million, or income in excess of $200,000 in each of the last two years.
On top of this, they typically charge clients a 2% management fee and a 20% performance fee.
It adds up to a lot of money that most people don’t have.
But thanks to 13F filings, every quarter, investors can see exactly what these managers are buying and selling, and can piggyback their picks for steady and solid gains, year after year.
I’m talking about following the moves of funds like Paulson & Co., David Einhorn’s Greenlight Capital, and Daniel Loeb’s Third Point. And that’s just to name a few…
But it doesn’t stop there.
Following the Gurus to Even Higher Gains
Global X’s Guru ETF follows 68 different hedge funds.
What are they investing in?
Well, here’s a look at their top 10 holdings in terms of market value:
CNN Money reports, “According to backtesting results, the ETF would have climbed roughly 30% annually during the past three years, beating the S&P 500’s 22% average yearly gain…”
It’s worth noting, GURU allocates over half of its holdings to the technology, financial and industrial sectors.
This shows these are clearly the places most hedge fund managers believe have the most potential for gains in the future.
Not everything about GURU is money in the bank, though.
Perhaps the biggest drawback is its expense ratio of 0.75%. The average expense ratio for ETFs is currently just about 0.55%.
But thus far, its performance has been well worth the higher-than-average fees. And at the end of the day, having a free look into what many of the most successful hedge fund managers are buying today is of great value just by itself.
Bottom line: Whether you want to buy shares of GURU or just use it to see which stocks hedge funds are trading, this is one ETF you’ll want to keep on your radar.