Getting a peek at some of the top holdings of the world’s most famous and successful investors seems like an exciting moment that should be celebrated on the caliber of the Fed meeting. However, there are some poignant facts you should know before you go making any changes to your portfolio based on these findings.
Every quarter, the top hedge funds and institutional traders have to file Form 13F with the SEC that discloses any investment valued at $100 million or more that they have discretionary authority over. This form is required to be submitted within 45 days of the quarter end and is then made available for public consumption. That means you get to see what George Soros, Carl Icahn, John Paulson, and Bill Ackman have been buying and selling of late.
While it’s always interesting from an anecdotal standpoint to see which fund managers have reduced or increased their exposure in various areas, the end result is not likely to impact your everyday investment decisions in any meaningful way. For starters, the data is at least 6 weeks old by the time it makes the rounds to your doorstep. That means these investment rock stars have long since made their move and the market has likely responded in kind – either favorably or negatively.
If you are enthralled with the notion of worshipping at the altar of these master tacticians, several unique exchange-traded funds can give you access to their foremost ideas.
The Global X Guru ETF (NYSE:GURU) and Direxion iBillionaire Index ETF (NYSE:IBLN) are two available options for investors that are seeking a distinctive mix of equity exposure. These funds are designed to comb through 13F filings of well-known hedge funds and billionaire investors in order to discern their top holdings. The ETFs then subsequently allocate a portion of the underlying portfolio assets according to index constraints.
As a result of the newest changes to 13F filings, these ETFs will likely be undergoing several changes in the coming months to reconstitute their basket of stocks. GURU currently holds just over 60 individual holdings, while IBLN contains 30 U.S. large-cap stocks.
Both of these ETFs fall into the “smart beta” or “enhanced index” category based on their screening and rebalancing criteria. In addition, they offer significantly higher expense ratios than more traditional passive ETFs in accordance with a higher level of investment activity.
These concentrated portfolio structures can be either a positive or negative depending on the success of the hand-picked stocks. Each underlying holding will have a far greater impact on the total return of the fund than a more diversified index such as the SPDR S&P 500 ETF (SPDR S&P 500 (ARCA:SPY)). This can lead to periods of significant over or underperformance depending on the prevailing market environment.
Alpha-seeking ETFs of this nature can provide enhanced growth under favorable circumstances. However, it’s wise to keep a close eye on their holdings and note any changes on a regular basis to ensure the fund is staying in step with your overall investment thesis.