VIP Status With This New ETF

There are plenty of exchange-traded funds offering investors access to hedge fund strategies and exposure to stocks widely held among hedge funds. Count the Goldman Sachs Hedge Industry VIP ETF GVIP as the latest entrant to that fray.

VIPs Among 'Holdings Held By Hedgers' ETFs

GVIP, which debuted last week, follows the Goldman Sachs Hedge Fund VIP Index. The new ETF, the seventh launched by Goldman Sachs Asset Management (GSAM) since late 2015, holds the 50 stocks that appear most frequently in 13F filing as top hedge fund holdings.

Other, established ETFs use similar methodologies. For example, the AlphaClone Alternative Alpha ETF (ETF Series Solutions ALFA), which debuted in 2012, follows an index that “tracks the performance of US-traded equity securities to which hedge funds and institutional investors have disclosed significant exposure,” according to the issuer.

The Global X Guru Index ETF (Global X Funds GURU), which also debuted in 2012, follows the Solactive Guru Index. GURU holds stocks that are deemed to be “high conviction” hedge fund ideas.

But, Does It Work?

These strategies can have mixed results. For example, the average return generated by ALFA and GURU over the past three years is -4.6 percent, while the S&P 500 is higher by almost 26 percent over the same stretch.

Goldman's “new ETF is based on a popular research report put out by Goldman analysts Ben Snider and David Kostin in the Wall Street bank's research division. As of August, holdings in the VIP index included Amazon.com, Inc. AMZN, LinkedIn Corp LNKD and Citigroup Inc C, according to the bank's research,” reported CNBC.

GVIP's underlying index allocates over 46 percent of its combined weight to technology and consumer discretionary stocks. The ETF's top 10 holdings combine for 23.4 percent of the fund's weight. That group includes three airlines and two financial services names.

GVIP charges 0.45 percent a year, or $45 on a $10,000 investment. That is reasonable compared to rival ETFs.