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First Trust Plans Hedge-Fund-Related ETF

Related ETFs: QAI | FDN | HDG
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First Trust, the Wheaton, Ill.-based fund manager behind the $533 million Dow Jones Internet Index Fund (NYSEArca: FDN), filed paperwork April 4 with the Securities and Exchange Commission to market an ETF that will own what hedge fund managers are holding. It’s the latest fund in a growing segment.

The First Trust Hedge Fund Manager Holdings Index will be based on an index that measures the performance of the 100 largest publicly traded positions in equities and equity-related securities reported in Form 13F filings that hedge fund managers file with the SEC 45 days after the end of each quarter.

The proposed fund bears some resemblance to a quartet of hedge-fundlike index ETFs Global X put into registration about two weeks ago. Global X also mentioned reliance on 13F filings. Also, a number of hedge-fundlike ETF strategies are already on the market, including the ProShares Hedge Replication ETF (NYSEArca: HDG) and the IndexIQ Hedge Multi-Strategy Tracker (NYSEArca: QAI)

ProShares’ HDG has an annual expense ratio of 0.95 percent, while IndexIQ’s QAI costs 1.06 percent, which includes 0.38 percent in acquired fund fees and expenses. First Trust’s latest paperwork didn’t detail the fund’s expense ratio or trading symbol.

First Trust said its proposed fund will be organized around the Wells Fargo Hedge Fund Manager Holdings Index. The benchmark will include securities listed on the New York Stock Exchange, the NYSE’s electronic trading platform Arca and on Nasdaq.

The securities in the index can be voting common stock—though not shares subject to super-voting rights—equity options and warrants, shares of closed-end funds, ETFs and convertible debt. The index won’t, however, include mutual fund shares.

The index uses a modified market-capitalization weighting methodology, First Trust’s paperwork said.

The SEC requires institutional investment managers with more than $100 million under management to make 13F filings each quarter detailing their holdings.

 

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