New Goldman ETF tracks popular hedge fund stock bets

[NEW YORK] Goldman Sachs Group Inc has launched a new exchange traded fund that mimics the most popular stock bets made by hedge funds, the bank said on Thursday.

The Goldman Sachs Hedge Industry VIP ETF (GVIP) will provide exposure to the 50 US stocks that appear most frequently as top holdings in hedge fund's quarterly 13F filings. It is the seventh ETF Goldman has launched since September 2015.

The 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, LinkedIn Corp and Citigroup Inc, according to the bank's research.

ETFs, which allow investors to gain exposure to a particular group of companies or indexes, have increased in popularity in recent years because of their low costs and transparency.

Other ETFs like the Global X GURU Index ETF and Alphaclone Alternative Alpha ETF also try to beat the market by copying hedge fund managers' stock picks.

Hedge-fund tracker ETFs are different than so-called liquid alternatives funds, which try to replicate broader trading strategies used by hedge funds. Both types of products are marketed to Main Street investors.

With its launch of new ETFs, Goldman is entering a highly competitive US$3 trillion global market in which BlackRock Inc , State Street Corp and Vanguard Group together account for about 70 per cent of total assets globally.

Goldman is trying to make inroads with lower prices.

The GS Hedge Industry VIP ETF is priced at 45 basis points, meaning investors will pay US$45 in annual fees for every US$10,000 invested. Similar funds examined by Reuters charged 65 to 95 basis points.

Goldman has also launched ETFs tied to international stocks broadly, as well as emerging markets, Europe and Japan. It had accumulated US$2.5 billion in assets as of Sept 30.

The bank is introducing new products to grow revenue because new regulations have hurt growth in traditional profit centers, like trading.

Goldman's investment management division, which houses ETFs, said its assets under supervision had grown to a record US$1.35 trillion in the third quarter. Net inflows were US$14 billion, which was notable as many active managers over the past year have seen outflows among a shift to passive investing.

REUTERS