Five ETFs that Hedge Funds Like in 2016

When it comes to investing, it’s often hard to beat the market by picking a portfolio of individual investments, which is why everyday investors often choose index funds or ETFs. Lately, ETFs have gained more popularity due to several reasons, including lower fees, exposure to a larger basket of investments and the fact that they are traded like stocks, which allows to sell or buy them quickly or even short them. Smart money investors also like to buy shares of ETFs and in this article we are going to look at five ETFs that ranked as the most popular among some 800 funds from our database as of the end of last year. Surprisingly, despite the market volatility, the funds in our database opted to invest less in a gold ETF and turned their attention to a high-yield bonds ETF.

Another strategy that can help a retail investor to beat the market is our small-cap strategy, which can generate returns around 1.0 points above the market per month (see more details here). Through extensive research, we determined that one of the best ways to emulate hedge funds is to follow them into their 15 most popular small-cap stocks.

With the drop in oil prices, many investors cut their exposure to oil stocks. However, they opted to invest in oil-related ETFs, one of which is SPDR S&P Oil & Gas Explore & Prod. (ETF) (NYSEARCA:XOP), which ranks as the fifth most-popular ETF among the funds we track. XOP provides exposure to Oil & Gas Exploration and Production companies and tracks the S&P Oil & Gas Exploration & Production Select Industry Index. Among the funds we track, the number of investors with shares of SPDR S&P Oil & Gas Explore & Prod. (ETF) (NYSEARCA:XOP) went up to 34 from 24 during the fourth quarter of 2015, while the total value of their positions jumped to $789.29 million from $252.68 million. Over the last year, XOP has lost 39% amid a slid in oil prices. XOP has $1.96 billion in assets, sports a yield of 2.71% and has around two-thirds invested in small- and medium-cap companies. Brian Taylor‘s Pine River Capital Management holds 3.36 million shares of SPDR S&P Oil & Gas Explore & Prod. (ETF) (NYSEARCA:XOP), as well as ‘Put’ options underlying 3.90 million shares.