Hedge Fund Wants More Global ETFs

February 04, 2014

Filling the ETF void in emerging and frontier markets.

The ETF universe currently comprises some 1,500 funds covering markets around the world ranging from China A-shares equities to emerging market debt. But one fledgling hedge fund manager who mostly uses ETFs thinks the ETF space can use even more funds.

That matters for smaller hedge fund managers, such as Gezinus Hidding, portfolio manager of the $2.5 million Dial Fund L.P. Hidding’s hedge fund is made up almost entirely of regional ETFs, and speaking with ETF.com staff writer Hung Tran on the sidelines of the Inside ETFs conference last week, Hidding said he’s keen on seeing new ETFs for him to use, such as a fund focusing on small-cap Mexico stocks.

ETF.com: Would you give us a bit of background on yourself and your fund?

Hidding: I’m also a professor at Loyola University Chicago and have been investing my own account for 25 years. A few years ago, people approached me and asked if I could implement my strategy for them too. I developed a strategy that I called a global macro value-oriented strategy.

It’s global and very diversified in equities as well as bonds. What I try to do is invest in regions of the world, including Europe, U.S. and Latin America. I don’t invest in individual stocks at all, so I mostly invest in ETFs that invest in regions.

Ideally, I’d like to equal-weight across the regions. The fund is called DIAl Fund 1 and I manage $2.5 million, just starting out a year and a half ago. I am probably 90-95 percent invested in ETFs these days, with a few mutual funds mixed in.

ETF.com: What particular ETFs are you currently invested in?

Hidding: I have roughly 25 percent invested in the U.S., and I am in the WisdomTree SmallCap Earnings Fund (EES | A-81). In Latin America, I’m in the First Trust Latin America AlphaDex ETF (FLN | F-39), and in China, I’m in the Guggenheim China Small-Cap ETF (HAO | C-24).

I’m finding pockets of the world where I don’t find many ETFs, such as Mexico small-cap ETFs. There is big potential for Mexico because it’s close to the U.S. and because of the sweeping new energy policy. I like small-caps, because over time, small-caps outperform large-caps.

Latin American bonds is another area that is lacking. From Mexico down to the southernmost point in South America, there is one ETF, the Market Vectors Emerging Markets Aggregate Bond (EMAG), which has changed strategy to be an emerging market bond fund. I’m trying to cover a broad market of bonds.



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