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Two ETFs To Invest Like George Soros, Carl Ichan and John Paulson

September 24th, 2013

The product launched in June 2012, has attracted $147.5 million in assets so far.  It charges 75 basis points in expenses per year. Pandora, Cumulus Media and US Airways are the top holdings at present.

Daily average trading volume is about 50,000 shares per day.

AlphaClone Alternative Alpha ETF (ALFA)

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This ETF is based on the AlphaClone Hedge Fund Long/Short Index. The index uses AlphaClone’s proprietary “Clone Score” methodology to aggregate the hedge funds ideas on a quarterly basis. Clone scores, which are calculated bi-annually, are based on hedge funds managers’ performance.   Index constituents are equally weighted but can have overlap bias.

The index also has a hedge mechanism built in, which is triggered on or off when the S&P
500 index crosses its 200 day moving average at any month end. If the market goes down, the index goes from long-only to market hedged (50% short exposure to S&P 500).

Launched in May last year, this product has been able to garner only $17.5 million in assets so far. It has 78 holdings currently; Twenty-First Century Fox, American International Group and Valeant Pharmaceuticals being the top holdings.

ALFA is slightly more expensive than GURU, charging 95 basis points in expenses.  Further due to low trading volume of just about 5,000 shares, trading costs may be higher due to high bid-ask spread.

The Bottom Line

As can be seen from the chart above, these two ETFs have been outperforming the broader market over the past few months. Looking at the one-year performance, GURU and ALFA have returned 37% and 23% respectively compared to about 20% return for SPY.

GURU has obviously has delivered a much better performance at a lower cost. One possible advantage of investing in ALFA is its hedging strategy. If the market suddenly turns bearish, ALFA may be able to provide some protection to the portfolio.

This article is brought to you courtesy of Neena Mishra From Zacks.

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NYSE:ALFA, NYSE:GURU, NYSE:SPY


 

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