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Another ETF Following Footsteps of Billionaires - ETF News And Commentary

Zacks Equity Research
Updated

Following billionaires’ investment strategy is a fad. Over the last few years, the ETF industry has seen a surge of products matching investing styles of stock market veterans like Warren Buffett, Carl Icahn and Daniel Loeb. After all, who does not dream of becoming a billionaire?

Keeping investors’ aspiration in mind, Global X has launched an ETF that seeks to replicate the investing ideas of stock market activists. The fund trades under the name of Guru Activist Index ETF (ACTX).

Investors not exactly aware of activists’ mode of operation should note that an activist investor buys a bulk of a company’s shares in order to attain adequate voting power to control corporate strategies of that organization, as per Global X investment case.

ACTX in Focus

The ETF looks to track the Solactive Guru Activist Index. This fund intends to reflect the performance of 50 U.S. large-cap stocks. Information regarding billionaire activists’ holdings is selected by the index from Form 13F and 13D filings. The fund follows an equal-weighted approach and does not carry company-specific concentration risk.

Some of the top companies in this fund include Halliburton Co, Valeant Pharmaceuticals, Juniper Networks, Baker Hughes Inc and Cbre Group Inc.  No stock accounts for more than 2.27% of the portfolio.

The fund is well-spread among sectors too. Financials (18.2%), Energy (16.3%), IT (15.1%), Consumer Discretionary (12.0%), Health Care (10.4%) and Materials (10.1%) hold double-digit weight each in the fund. ACTX charges investors 75 basis points a year in fees. Investors should note that the return from the index looks to outperform the S&P 500.

How Does it Fit in a Portfolio?

This ETF is built for investors seeking above-average market returns irrespective of broader market conditions. While the U.S. economy is gaining steam, it is yet to regain its lost ground. International economies are also reeling under pressure, muddling investors’ decision.

Notably, the activists have seen a great deal of success over the last five years having a say in a company’s management as 67.6% of their demand have been obeyed or partly obeyed, per Global X. In such a backdrop, going after the proven track record of billionaire activists might feel safe. For such investors, this ETF could be an excellent choice (read:Yet Another ETF to Follow Stock Market Legends Debuts).

Can it Succeed?

Theme wise, this product is not an extraordinary one. There are only a handful of products that can give ACTX a run for its money. Among those, Global X’s own fund Guru Holdings Index ETF (GURU) seems to be the top choice.  

The fund targets the hedge fund replication market, giving investors exposure to a broad range of hedge fund managers by replicating the 13F filing. With three years of wisdom, GURU has become a $302-million fund. GURU also charges 75 bps in fees and concentrates on multi-cap stocks.

Another ETF Direxion iBillionaire Index ETF (IBLN) revolves around the same theme and has amassed about $35 million in assets within less than one year of operation and charges 65 bps in fees(read: Invest Like Billionaire Investors with This ETF). There is yet another fund Validea Market Legends ETF (VALX) which has accumulated about $22.5 million in assets. VALX charges 79 bps in fees.

However, though competition looks tough, we do not expect the new ETF to face many hurdles as Global X has a proven track in operating ETFs in this field. Apart from GURU,  Global X also functions another product Global X Guru Small Cap Index ETF (GURX) that operates on similar fundamentals with a small-cap focus (read: Invest in Proven Hedge Fund Strategies with These ETFs).

Moreover, while many ETFs focus only on stock market gurus’ 13F filing, the newly rolled out ACTX considers both 13F and 13D filings. This should make its portfolio stand out.

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GLBL-X GURU ACT (ACTX): ETF Research Reports
 
GLBL-X GURU IDX (GURU): ETF Research Reports
 
GLBL-X GURU SC (GURX): ETF Research Reports
 
DIRX-IBILLIONR (IBLN): ETF Research Reports
 
VALID-MKT LGND (VALX): ETF Research Reports
 
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