##  [# When Hedge Funds Milk ETF Investors](/sections/features/when-hedge-funds-milk-etf-investors) 

 

# When Hedge Funds Milk ETF Investors

 

 

Front-running index inclusions give hedge funds an opportunity.



 

 

 

 

 

[By Joachim Klement](/authors/joachim-klement)

 Jun 29, 2023

 Edited by: Lisa Barr

 

 

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**LONDON** − ETFs are great investments. They are low-cost and easy to understand. Yet, they are not without their drawbacks.

One well-known drawback is that hedge funds replicate indices and this means that if the index changes and drops a company from its membership while admitting another, ETFs become forced sellers of the dropped stocks and forced buyers of the newly included stocks.

This gives hedge funds an opportunity to front-run the ETF trades.

*This article first appeared in ETF Insider, ETF Stream's monthly ETF magazine for professional investors in Europe. To read the full article,* [*click here*](https://joom.ag/CcPd/p40)*.*

*\[This article originally appeared on* [*ETF Stream*](https://www.etfstream.com/)*.\]*



 

 

 [ Joachim Klement ](/authors/joachim-klement) 

 

 

  Joachim Klement is an investment strategist based in London working at Liberum Capital. Throughout his career, he has focused on asset allocation,…   [View Bio](/authors/joachim-klement)

 



 

 


 Related Topics  [Hedge Funds](http://www.etf.com/topics/hedge-funds)