Goldman Sachs Asset Management (GSAM) has unveiled an exchange-traded fund which tracks the 50 US equities that are most recurring in the top 10 positions across a wide range of US-based hedge funds. The ETF thereby provides investors with a cost efficient means of accessing the highest-conviction ideas of some of the best managers in the hedge fund industry.
The Goldman Sachs Hedge Industry VIP ETF tracks the equal-weighted performance of the 50 US-listed stocks most prevalent in the top 10 positions of some of the largest hedge funds in America.
The Goldman Sachs Hedge Industry VIP ETF (NYSE: GVIP) tracks an in-house index of “Very-Important-Positions” – US-listed stocks that most often appear in the top 10 holdings of over 650 hedge fund managers, representing over $700bn in assets under management.
GSAM has a long history of providing a Hedge Fund Industry VIP list for their clients; however, GVIP represents the firm’s first endeavour to package the list into a rules-based investment strategy.
Michael Crinieri, Head of ETF Strategies at GSAM, commented: “We’re thrilled to be able to package these high conviction investment ideas from a broad array of professional investors into a cost effective, tax-efficient and convenient ETF wrapper.”
Calculated by index provider Solactive AG, the Goldman Sachs Hedge Fund VIP Index only includes stocks owned by hedge fund managers with between 10 and 200 distinct equity positions as reported in their most recent Form 13F filings. A Form 13F filing is a quarterly report required for any hedge fund manager with over $100m invested in US equities.
These include the portfolios of well known hedge fund giants such as Viking Global, Millennium Management, Appaloosa, ValueAct, Paulson & Co., Maverick Capital, Coatue Management, Trian Fund Management and Icahn Associates.
The 50 constituents are equal dollar-weighted at each selection date, and the index is rebalanced quarterly as of the close on the sixth NYSE trading day following the SEC-mandated 45-day deadline for 13F filings.
The ETF has a total expense ratio (TER) of 0.45%.
As of 3 November 2016, the largest sector exposures are information technology (28.2%), consumer discretionary (18.1%), financials (13.0%), health care (12.5%) and industrials (11.3%). The weighted average market cap of the underlying constituents is $96.5bn
A potential drawback of the index’s strategy is that public filings, like 13-Fs, may represent an outdated snapshot of the funds’ portfolio positions. By the time the filing is made, and this information has been transferred into the ETF’s strategy, the fund may have changed its position. Additionally, funds are only required to disclose their US-listed holdings and, as such, do not report their international or synthetic short positions.
The fund will compete with several alternative ETFs in the US targeting hedge fund exposure. The largest of these is the IQ Hedge Multi-Strategy Tracker ETF (NYSE: QAI), which diversifies its exposure across numerous types of strategies including long/short equity, global macro, market neutral, event-driven, fixed income arbitrage and emerging markets. The fund tracks the IQ Hedge Multi-Strategy Index, has over $1.1bn in assets under management (AUM), and a TER of 0.96%.
European investors looking for a hedge fund ETF have two options available to them: The £190m db x-trackers Hedge Fund Index UCITS ETF (LON: XHFD), which tracks an in-house index of hedge fund strategies including equity long/short, event-driven, global macro and credit (TER 0.90%), or the $91m UBS ETF HFRX Global Hedge Fund Index UCITS ETF (LON: UC19), which tracks the HFRX Global Hedge fund Index, representing the performance of 39 hedge funds covering a variety of strategies (TER is 0.60%).
GSAM started offering ETFs in September 2015 with the launch of the Goldman Sachs ActiveBeta US Large Cap Equity ETF (NYSE: GSLC). As of 30 September 2016, GSAM offers seven ETFs with $2.5bn billion in AUM.