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These ETFs Mimic Hedge Funds

Both are reasonably diversified at the sector level. ALFA currently allocates 19% each to technology and consumer discretionary and 15% to health care. GURU has 24% in tech, 19% in discretionary but only 10% in health care. Both funds have modest exposure to energy, telecom and materials and no exposure to utilities.

ALFA and GURU are primarily intended to be used as core holdings along the lines of the SPDR S&P 500 (SPY) or the iShares Core S&P Total US Stock Market ETF (ITOT).

The reality with ALFA and GURU, in spite of industry boilerplate warnings against the practice, the funds buy based on past performance, with the faith that what has worked before will continue to work.

The research supporting the funds sets an expectation of outperformance, and the funds have delivered good returns so far. But there can be no certainty with future results, and it's up to the buyer to decide whether chasing a hedge fund will pay off more than another investing strategy.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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