The iBillionaire ETF has gone live on the NYSE Arca in what is perhaps the most eagerly anticipated exchange-traded fund launch of the year so far.
The much anticipated iBillionaire ETF (IBLN) provides exposure to the top stock picks of billionaire investors such as Warren Buffett. (© Mark Hirschey)
Launched in partnership with Direxion Investments, the Direxion iBillionaire Index ETF (IBLN) enables ordinary, everyday investors to invest alongside some of the United States’ best known billionaire investors.
The ETF is linked to the iBillionaire Index, an equity benchmark unveiled in November 2013 with a mission to democratize Wall Street by tapping into the investment strategies of billionaire investors.
The index tracks the top stock picks of ten leading billionaire investors from a group, including, among others, Warren Buffett, George Soros, Carl Icahn, John Paulson, Ray Dalio, David Tepper, Edward Lampert and David Einhorn.
The index is composed of the top 30 stocks listed in the S&P 500 in which these select ten billionaire investors have allocated the most funds in aggregate, as identified by 13F filings. The 13F filing is an SEC-mandated report detailing the quarterly holdings of institutional investment managers with discretion over assets in excess of $100 million.
By identifying the top holdings of these super-successful investors and providing access by way of an ETF, ordinary investors are essentially able to piggy back on some of the best investment brains in the industry but at a fraction of the cost. The ETF has a net expense ratio of 0.65% compared to “two and twenty” – the management fee and performance fee, respectively, in percent – for most hedge funds.
The index is equally weighted and, as of May 16, 2014 rebalance, includes well-known names such as Apple, 21st Century Fox, Dollar General, AIG, eBay, Dow Chemical, MasterCard, Coca Cola, FedEx, Microsoft, Gap and Google. Technology makes up the largest chunk of the index, with a weight of 33.33%, followed by consumer discretionary and energy. In total, these top three sectors account for two-thirds of the index.
Brian Jacobs, President of Direxion Investments, said: “This strategic beta ETF allows investors to have unprecedented access to the strategies successfully deployed by well-known billionaires, in a way that’s transparent, liquid and cost-efficient. We look forward to continuing to harness our index-replication expertise to further democratize Wall Street—providing greater access to opportunities and data previously only available to the wealthiest and most sophisticated investors.”
Raul Moreno, co-founder and CEO of iBillionaire, added: “This launch marks a major milestone for iBillionaire, which has gone from a mobile app to the New York Stock Exchange in record time. We are excited to be the first index in the world with such an extensive mobile community.”
Whilst the new ETF has certainly made a splash (in part due to the success of the hugely popular iBillionaire app), it is not the first to exploit the 13F filing to identify the holdings of major investors. Two ETFs already in existence do much the same thing – the Global X Guru Index ETF (GURU) and the AlphaClone Alternative Alpha ETF (ALFA). These funds were listed in June 2012 and have accumulated assets of $490 million and $77 million respectively.
In terms of fees, IBLN’s annual expense of 0.65% undercuts both GURU and ALFA, which charge 0.75% and 0.95% respectively.