Evaluating A Hot Hedge Fund Strategy ETF - April 2021

Lately, I’ve seen GVIP on several ETF strategists’ buy lists. The fund’s strategy is intended to take advantage of the highest conviction holdings of “VIP Hedge Fund Managers.” Specifically, GVIP seeks to track the GS Hedge Fund VIP Index, which is constructed in accordance with a rules-based methodology derived from concepts previously developed by Goldman Sachs’ Global Investment Research division. The Index consists of fundamentally driven hedge fund managers’ “Very-Important-Positions,” which appear most frequently among their top 10 long equity holdings. Indeed, many hedge funds use strategies that go long “smart money” holding. By “smart money”, they generally refer to the most profitable hedge funds. 

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A brief summary of GVIP’s methodology: Hedge funds included in the index must hold over $100 million in US-listed stocks and be identified by Goldman Sachs’ research team as top “fundamentally-driven” performers. The next step is to identify the 50 US-listed stocks that appear most frequently in the top 10 reported holdings of the hedge fund manager universe as reported in the most recent government-required13-F filings.

The stocks are equally weighted in the index which is reconstituted and rebalanced quarterly.

Juan de la Hoz of the Stamford Chemist CEF/ETF Income Laboratory reports that GVIP has consistently outperformed the S&P 500 Index since inception with the greatest outperformance coming in the last 9 months of 2020. Data from the ETF Fact Sheets reflect similarly robust outperformance This chart compares GVIP to IVV, the iShares S&P 500 Core Index Fund.   

ETF

Expense Ratio 

1-Year Ann. Tot. Return

as of December 31, 2020

3-Year Ann. Total Return

as of December 31, 2020

GVIP

0.45%

44.00%

20.07%

IVV

0.03%

18.35% 

14.14%

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Disclaimer: Always read the fact sheets and/or summary prospectus before buying any ETF.

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