While tracking 13-F filings from hedge funds (which reveal their positions) is one way an individual investor can tap into the ideas of investing gurus, an ETF approach that does the work for you is another way to go.
This technique has been successfully developed by the Global X Guru Index ETF (NYSEARCA:GURU) which has not only crushed the market, but it has attracted a decent sized following as well. In fact, total AUM for the fund is approaching $600 million, while it has added over 28% in the past twelve months compared to a roughly 20% gain for the S&P 500 in the same time frame (see Invest in Proven Hedge Fund Strategies with These ETFs).
Thanks to this outperformance and the success in accumulating assets, it shouldn’t be too surprising to note that Global X has expanded the idea to other markets. In its most recent launch, Global X revealed a fund tracking top hedge fund picks in the small cap space, as well as one that focuses on international stocks.
“There is a strong foundation in academic literature for the value of 13F filings” said Bruno del Ama, chief executive officer of Global X Funds in a press release. “To properly derive this value, however, you need a well-defined methodology that filters for the right information. There’s a lot of data out there, and the Guru funds are designed to invest only in the stocks where we believe the value of this information is greatest.”
Both of these funds are looking to follow in the footsteps of GURU and to give investors new ways to track hedge fund picks without huge initial investment minimums or excessive fees. This approach could definitely find some traction with investors, and below, we highlight some of the key details from these new products:
Global X Guru Small Cap Index ETF – GURX
This new ETF tracks the Solactive Guru Small Cap Index, charging investors 75 basis points a year for the exposure and holding 100 stocks in the process. The benchmark looks to track the price movements of the highest conviction U.S. listed small cap equity holdings of a select group of hedge funds and institutional investors based on quarterly filings from the SEC (see 3 Niche ETFs That Will Keep Flying Higher).
Currently, this portfolio is skewed towards the consumer discretionary space which accounts for 27% of the index, followed by an 18% allocation to energy, and then 14% to technology. The ETF appears to be light in health care (9%), materials (7%), and telecoms (2%), in comparison.
Global X Guru International Index ETF – GURI
This product follows the Solactive Guru International Index, tracking the highest conviction international stock holdings of a select group of hedge funds and institutional investors, based on regulatory filings from the SEC. The fund also charges 75 basis points a year in fees from investors, though it only holds 50 stocks in its basket.
Energy stocks take the top spot at 22% of the basket, followed by technology (20%), and consumer discretionary (16%) to round out the top three. Meanwhile, from a country look, Canada (26%), China (14%), and Mexico (10%), take the top three spots and show that the fund will have a nice mix between developed countries and emerging markets.
Both GURX and GURI are looking to tap into the same trends that have propelled GURU to its incredible success over the past year. Plus, there is clearly a great deal of demand for this type of investing and international and small cap focuses seem to be the next logical steps for this type of strategy.
So while competition looks to be fierce, both GURX and GURI do have a pretty good chance of building up a sizable asset base. Investors will just have to hope that the same techniques that worked so well in the large-cap focused fund hold up in the small cap and international markets too, and allow these new funds to shine as well.
This article is brought to you courtesy of Eric Dutram.