It's a dream for many retail investors to invest like some of
the biggest and most influential institutional investors of the
likes of George Soros, Carl Icahn and John Paulson, to find the
next bunch of outperforming securities. Unfortunately, the hedge
fund industry is only accessible to very wealthy investors as these
funds generally require hefty minimum investments and also have
limits on cash withdrawals.
While tracking the 13-F filing from hedge funds is certainly one
way to match the performance of these investing legends, tracking
an ETF that follows the same strategy is a potentially more
convenient way to do so.
This idea has been gaining popularity, with Global X having
recently launched two more ETFs -
Global X Guru Small Cap Index ETF
Global X Guru International Index ETF
) - following its success of
Global X Guru Index ETF
) in the domestic part of the space (read:
Global X Launches Two More Hedge Fund Tracking
This winning strategy has pressed issuers to come up with more such
products particularly given the lackluster performance of the
broader market index, the S&P 500, since the start of the year.
All star managers can drive stocks higher and following their
techniques might be a way to outperform the broader markets.
In hoping to tap into this investor interest, fund provider
Direxion has come up with a fund of its own in the market. The new
product, which Direxion just made a filing for, looks to follow the
iBillionaire Index and give investors a new way to tap into hedge
fund strategies. We have detailed some of the key points from this
filing below for those investors who are looking for a different
way to access this intriguing corner of the market:
Direxion iBillionaire Index ETF
As per the
, the newly filed fund seeks to track the iBillionaire Index,
before fees and expenses. The index uses a set of criteria to
select its desired billionaire investor and hedge fund manager from
a list of 10 and excludes managers having a personal net worth of
less than $1 billion and hedge funds with high turnover.
Information regarding the billionaire's holdings is selected from
Form 13F filings.
Using this strategy, 30 U.S. small cap and large cap stocks
included in the Index are based on the companies with the highest
allocations across the portfolios of the 10 billionaires that meet
the criteria chosen by the Index provider (read:
7 ETFs to Buy in 2014
Is this a new technique?
Though the recently filed ETF is looking to follow the footsteps of
the existing products in this space and gives investors new ways to
track the portfolios of hedge funds and billionaires, there are
Both GURU and a similar product from AlphaClone,
hold a larger basket of stocks as compared to the recently filed
product. While GURU holds a basket of 54 stocks tracking the
Solactive Top Guru Holdings Index, ALFA holds 86 stocks and tracks
the AlphaClone Hedge Fund Long/Short Index.
Moreover, while ALFA selects the managers' top holdings and equally
weights them, both GURU and iBillionaire Index ETF look for highly
concentrated portfolios managed by hedge funds and invest in only
their top picks (see
3 Niche ETFs That Will Keep Flying Higher
Also, though both ALFA and GURU seek to invest primarily in U.S.
stocks, still they have around 10% international exposure. However,
as per the filing, the iBillionaire Index ETF seeks to invest only
in U.S. stocks.
Furthermore, the recently filed fund is cheaper as compared to the
existing products in this space. While Direxion looks to charge 65
basis points as fees, GURU charges 75 basis points and ALFA is the
costliest in the space with 95 basis points as fees.
Though iBillionaire Index ETF has not yet decided on the sector
allocation of its assets, Technology, Consumer Cyclical and
Financials are the top three sectors which both ALFA and GURU focus
The recently filed fund is very similar to products like GURU, ALFA
and GURX and as such might face competition from them. However,
with increasing popularity and demand for these types of products
in the market, iBillionaire Index ETF might as well attract
investor interest and build a sizable asset base.
Moreover, it is the cheapest among all existing funds looking to
invest like hedge funds, giving this fund an added advantage over
the competition (read:
Invest in Proven Hedge Fund Strategies with These
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ALPHACLN-ALT AL (ALFA): ETF Research Reports
GLBL-X GURU INT (GURI): ETF Research Reports
GLBL-X GURU IDX (GURU): ETF Research Reports
GLBL-X GURU SC (GURX): ETF Research Reports
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