With housing markets in a tailspin, ongoing concerns over the fiscal health of developed markets, and no signs of meaningful job creation in the U.S., these are uncertain times. Conflicting data reports have clouded the outlook for the U.S. economy, while investors remain divided over the prospects for fast-growing emerging markets.
Few know more about turning a profit in tumultuous environments than the Man Who Broke The Bank of England. Legendary investor George Soros made a big chunk of his fortune in uncertain economic environments, once reportedly pocketing close to $1 billion on a single day by shorting the British pound. Over the years, Soros has accumulated a fortune of approximately $14 billion, making him the 35th richest person in the world according to Forbes. Even with this massive fortune in hand, Soros has remained active in the investment business, making some major acquisitions in recent years [see also Three ETFs To Play Jim Rogers’ Advice].
Determining where the legendary investor has his personal fortune invested is obviously a bit tricky, but public filings shed some light on where Soros is betting. Below, we profile several ETFs that may not be owned directly by Soros, but seem to line up well with investments made in recent months [for more ETF insights, sign up for our free ETF newsletter]:
At the end of the second quarter, funds run by Soros reportedly had a major position in the SPDR Gold Trust (GLD). The ETF accounted for almost 20% of portfolio assets according to a 13F filing made in August, suggesting that Soros is concerned about the outlook for equity markets and believes gold still has room to run higher after teasing record highs in recent weeks. So far, this call has payed off big, as GLD is up close to 30% over the last year and more than 10% in 2010.
For investors looking for cheaper gold exposure, there is also the COMEX Gold Trust (IAU), which iShares has competitively priced at 0.25% (GLD charges an expense ratio of 0.40%). This ETF is nearly identical to GLD except that one share of of IAU represents approximately 1/100th of an ounce of gold, while one share of GLD represents close to 1/10th an ounce of the valuable metal [see also Hedge Funds Are Buying Up Gold ETFs, Should You?].
In the foreword to Soros’ book The Alchemy of Finance, Paul Volcker noted that Soros has taken an interest in emerging markets. “The bulk of his enormous winnings is now devoted to encouraging transitional and emerging nations to become ‘open societies,’ open not only in the sense of freedom of commerce but—more important—tolerant of new ideas and different modes of thinking and behavior,” wrote the former Fed Chairman.
Soros’ Quantum hedge fund recently bought a 4% stake in the Bombay Stock Exchange (BSE) in India, a deal that valued Asia’s oldest exchange at more than $800 million. The acquisition comes as India continues to modernize its capital markets, by opening new exchanges and listing new products. With U.S. investors becoming more comfortable with more significant allocations to emerging markets, India has become a popular investment destination.
Soros’ stake in the BSE seems to be a bet on continued advancements in India’s financial industry, developments that could make Indian equities more attractive to international investors. There are a number of ETFs offering exposure to India’s stock markets, including small cap funds (SCIN, SCIF), large cap ETFs (INDY, EPI), ETNs (INP), and even a sector-specific infrastructure play [see India ETFs: Five Ways To Play or use the new Country Lookup Tool to find all ETFs with exposure to India].
After GLD, the largest position maintained by Soros Fund Management at the end of Q2 was in Monsanto, the agricultural biotechnology company that makes everything from Roundup to genetically engineered seeds. MON is a major holding in funds focusing on the agribusiness sector, including the Market Vectors Agribusiness ETF (MOO) and PowerShares Global Agriculture Portfolio (PAGG).
The agribusiness sector has been in focus in recent weeks as mining giant BHP Billiton has waged a campaign to purchase Canada’s Potash Corp. That sparked speculation of a wave of consolidation in the space, boosting the outlook for the entire sector [use the Stock Lookup Tool to see all ETFs with exposure to MON].
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Disclosure: Photo courtesy of World Economic Forum. No positions at time of writing.