For better or worse, exchange traded funds are not intimately
involved in the Herbalife (NYSE:
That being the one where Pershing Square founder Bill Ackman
is short 20 million shares of the nutritional supplements maker
on the thesis that the company is pyramid scheme. The same one
where Carl Icahn, Dan Loeb and other hedge fund luminaries have
amassed significant stakes in Herbalife perhaps more because they
dislike Ackman personally than for any other reason.
For now, not many
offer exposure to Herbalife. Although BlackRock (NYSE:
), owner of iShares, the world's largest ETF sponsor,
recently increased its stake in Herbalife
, few iShares ETFs feature Herablife among their lineups. None
have what could be deemed as "significant" exposure to the
For example, the $161.6 million iShares Morningstar Mid Growth
Index Fund (NYSE:
) features a weight of just 0.36 percent
Vanguard, the third-largest U.S. ETF issuer, is another
large holder of Herbalife shares
, but the stock is not on prominent display in any of the fund's
highly popular index ETFs. Herbalife can be found in the Vanguard
Mid-Cap Growth ETF (NYSE:
but at a scant percentage
of the 239-stock ETF's weight.
All that said, Herbalife's ETF status could (emphasis on
"could") change thanks to a pair of funds designed to give retail
investors exposure to hedge fund-style tactics without the burden
of paying a hedge fun manager two percent to get in the door and
20 percent of profits.
The AlphaClone Alternative Alpha ETF (NYSE:
) and the Global X Top Guru Holdings Index ETF (NYSE:
) both debuted in the second quarter of last year to a fair
amount of criticism from naysayers that believed the funds were
too narrowly focused.
At their respective cores, the objective of each is to give
investors exposure to stocks that pop up in 13F filings made by
hedge funds. For example, ALFA tracks the AlphaClone Hedge Fund
Long/Short Index, which "uses AlphaClone's 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. The index also employs a hedge
mechanism that allows the index to vary from being long only to
according to the ETF's fact sheet
Global X's GURU tracks the Top Guru Holdings Index, which "is
comprised of the top U.S. listed equity positions reported on
Form 13F by a select group of entities that Structured Solutions
AG characterizes as hedge funds,"
according to its fact sheet
Neither ALFA nor GURU currently hold any shares of Herbalife.
ALFA's adjustment date is February 27 and due to regulatory
restrictions, the fund's issuer cannot comment on possible
additions and subtractions from the ETF prior to that date. Apple
) and American International Group (NYSE:
) combined for 10.5 percent of ALFA's weight as of February 14.
Other top-10 holdings in the ETF include names that frequently
populate 13F filings such as Google (NASDAQ:
) and Simon Property Group (NYSE:
GURU, which utilizes 13F filings to compile the top stock
holding from the hedge funds in its selection pool, screens for
liquidity and uses an equal-weight approach. Currently home to 47
stocks, GURU's top holdings include Pandora (NYSE:
), J.P. Morgan Chase (NYSE:
) and Canadian Pacific Railway (NYSE:
). Coincidentally, Canadian Pacific is one of Ackman's largest
To be clear, there are no guarantees that Herbalife will find
a home in ALFA or GURU. However, with Icahn, Loeb and others
showing long positions in the stock, it is not out of the realm
of possibility that at least one of these ETFs will include
Herbalife at some point.
Then again, assuming Ackman is right and Herbalife is destined
to trade significantly lower, ALFA and GURU may not want to ruin
a good thing. For all the criticism these funds received
following their respective debuts, both have surged since then.
GURU is up more than 27 percent since June 2012 while ALFA is up
21.1 percent since its May 31, 2012 debut.
For more on ETFs, click
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