The Goldman Sachs Hedge Industry VIP ETF (GVIP) is one of a handful of funds that tries to imitate the stock picks of top hedge fund managers. GVIP screens publicly-available data of fundamentally-driven hedge fund managers and identifies the stocks that appear most often in their top 10 holdings, i.e., their “very-important positions.” The universe of hedge funds is limited to those that hold $100 million or more in U.S.-listed stocks, and 10 to 200 distinct equity positions. GVIP typically owns about 50 stocks and is rebalanced quarterly. Top holdings include Sea Ltd., Raytheon, Change Healthcare, Citigroup, and Booking Holdings.
There’s an appealing irony in a relatively inexpensive index fund that tries to swipe the best investment ideas of expensive stock pickers, especially since passive stock funds have consistently trounced their actively-managed competition. Given the consistent under-performance of active management, investors might wonder if there’s any point in trying to imitate them. Does it work? Sometimes. The answer, of course, depends on the time frame and the fund you compare it to.
GVIP isn’t the only fund out there that tries to pull investment ideas from stock pickers. Competitors include The Motley Fool 100 Index ETF (TMFC), Direxion All Cap Insider Sentiment Shares (KNOW), or the Global X Guru Index ETF (GURU).