Hedge Funds Will Make a Bundle at the Expense of Index Funds

Accenture (ACN) will replace Marshall & Ilsley in the S&P 500 index after the close on July 5th. Index funds that track S&P 500 index will buy ACN after the replacement. Unfortunately for index fund investors hedge funds and other nimble investors are already buying Accenture (ACN). The stock went up 3.74% so far today. Buyers today will sell these shares to index funds at inflated prices. Most index fund investors won’t even notice this. This is the hidden cost of investing in index funds.(See why investing in index funds is more expensive than you think)

Accenture Plc (NYSE:ACN)

The following hedge funds had $100 Million or more in Accenture at the end of first quarter:

1. Steve Heinz – Lansdowne Partners: $745 Million

2. Stephen Mandel – Lone Pine Capital: $188 Million

3. Ricky Sandler – Eminence Capital: $99 Million