Hedge funds from our database also like to diversify into small-cap stocks and in this situation, one of the best ETFs to invest in is iShares Russell 2000 Index (ETF) (NYSEARCA:IWM), in which 38 investors disclosed holdings with an aggregate value of $2.51 billion, significantly higher than $1.20 billion held by 34 funds at the end of March. One of the attractive features of this ETF is a low expense ratio of only 0.20% and it allows the exposure to stocks from Russell 2000 Index, which is highly diversified across sectors. The Russell 2000 ETF declined by less than 1.50% in the last year, almost in line with the SPY. Two investors that bet against the small-cap space are Ken Griffin and Jeff Smith of Starboard Value, whose funds disclosed holding ‘Put’ options underlying 10.94 million shares and 8.60 million shares of the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) respectively. Moreover, Starboard’s holding is equal to more than 24% of its equity portfolio as of the end of June.
SPDR Gold Trust (ETF) (NYSEARCA:GLD) is another gold-related ETF, which hedge funds are bullish on, as gold represents a good insurance against market turmoil. Investing in a gold ETF offers a higher liquidity than buying the actual commodity, hence the popularity of the ETF, which was included in the equity portfolios of 53 funds from our database. During the second quarter the number of investors with long positions slightly increased from 48, but the value of their holdings surged to $5.50 billion from $3.76 billion, which shows that hedge funds are cautious regarding the market and want to protect their portfolios in case of a market drop. Among the investors that hold long positions in SPDR Gold Trust as of the end of June are John Paulson’s Paulson & Co. and First Eagle Investment Management, which own 9.23 million shares and 4.68 million shares, although both positions represent small portions of their equity portfolios. On the other hand, John W. Moon’s Moon Capital Management disclosed ownership of 324,000 shares of the ETF valued at $36.41 million in its latest 13F, which amasses more than 20% of its equity portfolio.
Finally, as expected, on the first spot is SPDR S&P 500 ETF Trust (NYSEARCA:SPY), which was included in the equity portfolios of 96 funds from our database at the end of June, while the aggregate value of their holdings amassed $25.61 billion. This was higher than 90 investors holding $13.69 billion worth of ETF’s shares at the end of March. The ETF remained almost flat during the second quarter, but lost more than 6% year-to-date, as the S&P 500 Index slumped in the last several days amid a massive sell-off triggered by fears about the growth in China. As stated at the beginning of the article, holding options underlying shares of this ETF is a very good hedging strategy against unexpected events, regardless of the investor’s bullish or bearish sentiment. We can assume that large money managers, some of which have been mentioned earlier as holders of large positions in ‘Put’ options, have made a boatload of money if they executed their options, which could have a positive effect on their returns. On the other hand, Tiger Cub’s Kris Kristynik’s Longhorn Capital will be negatively affected as it holds 100% of its $180 million equity portfolio in shares of SPDR S&P 500 ETF Trust (NYSEARCA:SPY). Ray Dalio’s Bridgewater Associates also disclosed a $2.15 billion position in the ETF that contains 10.47 million shares, equal to almost 20% of its 13F portfolio.
Disclosure: none
