Billionaire Hedge Fund Managers Are Betting Big on this ETF: Should You Follow Suit?
It’s a common perception that hedge fund managers are reluctant to invest in exchange-traded funds (ETFs). However, a closer look at the portfolios of top hedge fund managers may surprise you; you’ll find these funds are actually diversified with various ETFs.
One particularly notable example comes from billionaire hedge fund manager Israel "Izzy" Englander, who has made headlines recently for ramping up his investment in a specific ETF that also has the backing of legendary investor Warren Buffett.
The ETF Both Billionaires Trust
Both Englander and Buffett have been drawn to the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) in the current financial landscape. Designed to track the performance of the S&P 500 Index, the SPY holds 503 stocks across 11 sectors, enabling a high degree of diversification. The ETF’s top five holdings—Apple, Nvidia, Microsoft, Amazon, and Meta Platforms—represent approximately 26% of the entire portfolio.
In the third quarter of 2024, Englander increased his holdings in SPY by acquiring around 2.49 million additional shares, raising his stake in the ETF by an impressive 81%. This move underscores the ETF’s status as Millennium’s largest holding, indicating a strong belief in its long-term potential.
Why the SPDR S&P 500 ETF?
While Englander hasn’t publicly specified his reasons for this significant investment, several factors likely played a role:
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Robust Performance: The SPY ETF has shown impressive growth, averaging an annual gain of 10.41% since its inception in 1993. In 2024 alone, it’s up nearly 27%. Such performance metrics are hard for any investor to ignore.
- Diversity Equals Stability: With 503 stocks across a variety of sectors, this ETF offers investors diversification, which helps in mitigating risk—something that aligns with Englander’s apparent strategy, as Millennium holds over 4,000 different stocks and funds.
Interestingly, although Millennium Management also holds the iShares Core S&P 500 ETF, Englander reduced this position by roughly 20% last quarter. This raises questions about why he might favor one S&P 500 ETF over another, especially when both products track the same index.
Alternatives to Consider
If you’re interested in S&P 500 ETFs but would like to consider alternatives to SPY that might fit your investment philosophy, we suggest the Vanguard S&P 500 ETF (NYSEMKT: VOO). While it targets the same index and yields similar diversification and long-term returns, it boasts a significantly lower expense ratio of just 0.03%, compared to SPY’s 0.0945%.
Another solid option is the iShares Core S&P 500 ETF, retaining an equally low expense ratio of 0.03%. Engaging with these alternatives may allow you to capitalize on the same market performance while reducing costs.
It’s Time to Take Action
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- Nvidia: A $1,000 investment in 2009 would now be worth over $358,460.
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This rewrite positions the information from a unique perspective, reflecting the values of Extreme Investor Network while inviting readers to engage further. It emphasizes diversification, educated investing, and provides a deeper analysis that differentiates it from conventional summaries.