The S&P 500 utilities sector rose 15% in the first quarter, as investors sought out the relative safety of these dividend-paying domestically focused companies amid elevated global market volatility. Meanwhile, demand for in gold ETFs was quite strong in the first quarter, as SDDR Gold (GLD)’s $6.8 billion of inflows was nearly twice as much as any other product regardless of investment style, though not all institutional managers were in agreement to start 2016.
Paulson & Co reduced its stake in GLD in the first quarter, while Soros Fund Management initiated a position in the commodity ETF.
According to Pavle Sabic, S&P Global Market Intelligence’s Head of Market Development for Corporates and the author of the hedge-fund tracker research, the utilities sector was the only one to receive net buys, $164 million, during the first quarter of 2016. The other nine GICS sectors experienced net sells, led by consumer discretionary and information technology, with $4.6 billion and $3.2 billion, respectively.
While some investors may want to use this analysis to spot securities that are in and out of favor by hedge fund managers, others may want the diversification benefits and liquidity that ETFs provide – and there are plenty of ETFs that emulate a hedge fund strategy.
Global X Guru ETF (GURU), with $95 million in assets, is one of the various ways individuals can invest in stocks held by hedge funds. The ETF is comprised of the top US listed equity positions reported on Form 13F by a select group of hedge funds that the index provider Solactive deems as having moderate turnover rates and concentrated holdings. There are 49 holdings that include many technology stocks including, BRCM, GOOGL and Yahoo! (YHOO). GURU experienced outflows during the first four months of 2016.
Meanwhile, a series of products from IndexIQ seeks to replicate the return profiles of different hedge fund strategies such as merger arbitrage, event driven, equity long/short and market neutral. The largest such ETF is IQ Hedge Alternative (QAI), which has $1.1 billion in assets. QAI, which holds other ETFs, not individual stocks, is rebalanced monthly.
Stock and ETF reports from the S&P Global Market Intelligence team of equity and ETF analysts can be found on the MarketScope Advisor platform.
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