This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

How to Invest Like the Super-Rich

Stocks in this article: GURU AAPL MSFT GOOG ALFA JPM AIG

While there is no official minimum investment for hedge funds, very, very few accept anything less than $100,000. Many hedge funds require a minimum of $1 million, and a few demand a minimum investment of $25 million. Obviously, these minimums really eliminate everyone but the very rich from investing in hedge funds. Not only are the minimums high, but most hedge funds require lock-up periods for your investment ranging from six months to several years. Although there are ways to get your money out, despite the lockup, it can be very costly.

As you can see, hedge funds are only investments for those with a substantial tolerance for risk -- not to mention a fat bank account.

How It's Done

But it is possible for investors like you and me to mirror their performance. A new exchange-traded fund has just been launched that tries to replicate equity hedge fund performance. The ETF is the Global X Top Guru Holdings Index ETF (GURU).

GURU has just launched, so it has very limited history. However, back testing reveals the GURU ETF would have climbed roughly 30% annually during the past three years, beating the Standard & Poor's 500's 22% average yearly gain.

The ETF invests in the single largest holdings of 68 top hedge funds, including John Paulson's Paulson & Co., Bill Ackman's Pershing Square Capital Management, David Tepper's Appaloosa Management, David Einhorn's Greenlight Capital and Daniel Loeb's Third Point.

As you can guess, there is much duplication in the holdings of the top hedge funds. Therefore, the fund consists of just 51 stocks, all equally weighted at 1.96%. Technology, financial and industrial stocks comprise nearly 55% of the fund, with holdings including Apple (AAPL), Microsoft (MSFT), Google (GOOG), J.P. Morgan Chase (JPM), American International Group (AIG) and Sallie Mae owner SLM Corp.

GURU charges a fee of 0.75% of assets to cover expenses. It's important to note that most hedge funds charge a 2% management fee and 20% of profits on an annual basis.

So what secretive method does GURU use to determine what are the top holdings of hedge funds? Well, it's really no secret at all.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs