Hedge Fund Picks Make Up New Global X Guru ETF
Since its inception the Global X Top Guru Holdings Index ETF (GURU) has outperformed the S&P 500; quite an impressive feat and a tough benchmark in the recent past.
Bruno Del Ama, CEO of Global X, was interviewed by Bloomberg’s Adam Johnson and Trish Regan about the new ETF. Del Ama said GURU was up 49% since inception last year.
Del Ama explained how the ETF’s management team goes about selecting stocks to include in the fund; 1) they scout the quarterly 13F filings, 2) filter out funds with high turnover rates, and 3) only consider hedge funds with concentrated top holdings.
Del Ama said GURU only holds the long positions of the hedge funds it tracks. He added that 60 hedge funds meet the requirements for having their investments considered for inclusion in GURU.
The image below shows the top 10 holdings GURU as of May 31, 2013:
The interview (available below) continued with a discussion of the dismal performance of hedge funds in general, how GURU deals with changes in hedge fund holdings, some of the rules GURU uses to include positions, and a review of several of the top fund holdings.
SMA Comment: This is an interesting concept and a review of the GURU’s stats show it only has about $4 million in net assets and a reasonable annual expense ratio of 0.75%. It is a much cheaper way of accessing hedge fund ideas than investing in the actual funds themselves. It will be interesting to see how the performance measures up over time.