Market Overview

A Look At The New Guru ETF (GURU, ALFA, CPI)

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For those that have always wanted to invest in a hedge fund, but can't afford those pesky minimum investments (often well into six and seven figures) or for those that want to part with 2% or 3% in management fees on top of 20%-30% of the profits, the ETF industry is attempting to come to the rescue.

Hedge fund ETFs have been around for several years, but some new entrants to the hedge fund ETF game have popped up recently. The newest is the Global X Top Guru Holdings Index ETF (NYSE: GURU), which debuted today.

GURU's goal is to aggregate on a quarterly basis the expertise and knowledge of hedge fund managers into the transparent, cost-efficient and easily accessible format of an ETF—with no minimum investment, according to a statement issued by New York-based Global X.

Home to 52 stocks, GURU is an equal-weight fund as each of its constituents has an allocation of 1.96%. The ETF's roster includes Apple (Nasdaq: AAPL), Google (Nasdaq: GOOG), Microsof (Nasdaq: MSFT), Kraft (NYSE: KFT), J.P. Morgan Chase (NYSE: JPM), BHP Billiton (NYSE: BHP) and Cisco Systems (Nasdaq: CSCO).

GURU tracks the top Guru Holdings Index uses a proprietary methodology to compile the highest conviction ideas from a select pool of hedge funds where the 13F information is most valuable.  Hedge funds with high turnover and non-concentrated positions are eliminated from the pool.  The fund is designed to rebalance quarterly in accordance with the 13F reports to capture any significant position changes, Global X said in the statement.

Piggybacking the elite hedge fund managers sounds like a good idea, but what makes this endeavor tricky is these managers may already be out of certain stocks by the time the 13F's are filed. Not to mention, not all hedge fund legends are legendary all the time. Sure, David Einhorn has been of fire as of late, but John Paulson's eponymous Paulson & Co. struggled through a nasty 2011.

In GURU's defense, it charges just 0.75% per year and all of the profits are the investor's to keep. At least that's a better deal than one would get with the typical hedge fund.

Other hedge fund ETFs include the newly minted AlphaClone Alternative Alpha ETF (NYSE: ALFA), the IndexIQ Merger Arbitrage ETF (NYSE: MNA) and the IndexIQ CPI Inflation Hedge ETF (NYSE: CPI).

Posted-In: Long Ideas News Broad U.S. Equity ETFs Short Ideas Specialty ETFs New ETFs Hedge Funds Intraday Update


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