For many investors the words "hedge fund" is viewed as a world
that only the ultra wealthy are privy to. When in reality the
average investor now has a backdoor into this secret Wall Street
There are two ETFs in particular that offer investors exposure
to the strategies and stocks the hedge funds are buying. Both
ETFs use proprietary methodologies to track the movements of
hedge funds in an attempt to beat the overall returns of the
AlphaClone Alternative Alpha ETF (NYSE:
The ETF began trading in 2012 and was the first to invest in
disclosed equity positions held by established hedge fund
managers. The ETF differs in that it offers investors
transparency into the positions they hold based on their
exclusive strategy. An added feature of ALFA is that if its
rules-driven system gives specific signals the ETF will hedge its
long-only positions by shorting the market. Ideally this will
help lighten any losses during a market downturn.
Since its inception on 5/30/12 the ETF is up 43 percent versus
a gain of 31 percent for the S&P 500. It may be tough to
judge the ETF in a short period of time that has not had a major
sell-off, however there has been enough volatility to show the
benefits of owning. The ETF currently has 83 stocks in its
portfolio with the largest holdings being Twenty First Century
), Valeant Pharmaceuticals (NYSE:
), and American International Group (NYSE:
). The expense ratio is above average at 0.95 percent.
Global X Top Guru Holdings Index ETF (NYSE:
The ETF is comprised of the top U.S. listed equities based on
the Form 13F that hedge funds report. Several filters are
implemented to determine which hedge funds are included and the
stocks from the selected funds. One key filter is that hedge
funds with high turnover are not included in the process.
The ETF began trading on 6/14/12 and is composed of 53
individual stocks. The current top holdings include Education
), Cumulus Media (NASDAQ:
) and US Airways Group (NYSE:
). Since it began trading the ETF is up 53 percent versus a gain
of 34 percent for the S&P 500. The expense ratio is 0.75
While both ETFs may sound similar in nature because they base
their unique strategies on hedge funds, in reality they are very
different. There is a case that both ETFs could be held in the
same portfolio. It is difficult to deny the past performance
numbers in this type of market environment.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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