Activist conquests will soon be tracked by the new Global X Guru Activist Index ETF (ACTX), which aims to ride the coattails of 50 of the largest and most successful activist investors. launches on April 29.
Activist investors typically try to buy a big chunk of shares in a company so they can get enough voting power to swing company proxy votes and get seats on the board. If activists can get board seats for candidates, they often push for such things as instituting a dividend, doing share buybacks, or pursuing mergers and acquisitions and spinoffs. That can unlock value for all shareholders—and spark criticism from the likes of Warren Buffett for encouraging a short-term focus driven by investors who aren't in the stock for the long haul.
So how does an ETF track the Icahns of the investing world?
ACTX first comes up with a list of the 50 top activist investors in the U.S., based on criteria that include their size, success rate, and the frequency of their 13D filings. 13D filings are forms that must be filed with the Securities and Exchange Commission within 10 days of an investor coming to own more than 5 percent of a company.
Then the ETF pores over activist quarterly 13F filings, which list the stock holdings of money managers with more than $100 million in equity positions, as well as 13D filings. After aggregating the equity holdings into one big list, it ranks the list by the dollar amount invested by activists. The 50 largest positions go into the ETF. It repeats this every quarter.
Global X doesn’t publicly disclose the identities of the 50 investors. Judging from the holdings, Icahn and Ackman are included. Six of Icahn Enterprises’ top 10 positions are included, such as Apple and EBay. As for Bill Ackman’s Pershing Square Capital Management, more than half its holdings are in there, including Zoetis and Canadian Pacific Railway.
An important note about ACTX: Rather than weighting stocks by market capitalization, which is how 80 per cent of equity ETF assets are invested, it equal-weights a portfolio that includes some mid- and small-cap stocks. By giving an equal voice to smaller names, the ETF will have a little more zip on the way up and a bit more zip on the way down. Sometimes that will make it look as though the theme is working when—at least partially—the tilt toward smaller-cap stocks underlies the outperformance.
Finally, in a thematic ETF such as ACTX, you definitely see overlap with other popular mainstream ETFs and funds. For example, ACTX holds such widely held companies as Apple, Microsoft, and McDonalds. Apple alone is held by more than 250 ETFs and 1,800 mutual funds, including most of the biggest ones.
ACTX is the first activist ETF, but an existing mutual fund called the 13D Activist Fund (DDDAX) has had a return of 17 percent in the past year. On the downside, it's almost as expensive as an actual hedge fund, with an annual fee of 1.75 percent and an initial load of 5.75 percent. If that's not enough, the fund also charges shareholders 1 percent if they sell after a year—and 2 percent if they sell within a year. ACTX charges a flat 0.75 percent on assets annually.
In the end, ACTX is for those who like following activist investors but aren't rich enough to afford a hedge fund, are too busy to do it themselves, and are too smart to use an expensive mutual fund.
Eric Balchunas is an exchange-traded-fund analyst at Bloomberg.
Global X GuruTM Activist Index ETF ACTX Fund Inception Ticker CUSIP Stock Exchange Total Expenses Bloomberg IOPV Ticker ACTX.IV Distribution Frequency Annual Top Constituents* Industry Breakdown Index Characteristics Number of Holdings 50 Bloomberg Ticker ACTX Index *Constituents subject to change.
GLOBAL X FUNDS Innovative ETFs Fund Details Fund Description April 28, 2015 Innovative ETFs ACTX 37950Y608 NASDAQ 0.75% GLOBAL X FUNDS Index Description The Global X Guru™ Activist Index ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Guru Activist Index.
The Solactive Guru Activist Index is comprised of U.S. listed equity positions reported on Form 13F and Schedule 13D by a select group of entities characterized as premier activist investors, as defined by Solactive AG, the index provider. Activist investors are selected from a universe of investors that aim to buy securities to put public pressure on management to increase shareholder value.
Once the pool of activist investors has been determined, the Index Provider utilizes Form 13F filings and Schedule 13D filings to compile the top 50 aggregate stock holdings held by the pool of activist investors, after screening for certain liquidity and market capitalization requirements.
The stocks are equal weighted and rebalanced quarterly following the Form 13F filing timeline. On a monthly basis, securities may be added to or removed from the Underlying Index as a result of Schedule 13D filings. IOPV, or Indicative Optimized Portfolio Value, is a calculation disseminated by the stock exchange that approximates the Fund's NAV every fifteen seconds throughout the trading day.
Walgreen Boots Alliance Inc., 2.2%
CBRE Group Inc., 2.2%
Anadarko Petroleum Corp., 2.2%
Halliburton Co., 2.2%
Moodys Corp., 2.2%
Platform Specialty Products Corp., 2.2%
Baker Hughes Inc., 2.2%
Williams Cos Inc., 2.2%
Bank of New York Mellon Corp., 2.1%
Valent Pharmaceuticals Inte, 2.1%
Other, 78.2% Financials, 18.2% Energy, 16.3% Information Technology, 15.1% Consumer Discretionary, 12.0% Health Care, 10.4% Materials, 10.1% Industrials, 9.8% Consumer Staples, 6.2% Telecommunication Services, 2.0%
| Name | Number of shares |
| ACTAVIS PLC | 0.016957 |
| ADOBE SYSTEMS INC | 0.063496 |
| AGRIUM INC | 0.046309 |
| AIR PRODUCTS & CHEMICALS INC | 0.031938 |
| AMGEN INC | 0.031303 |
| ANADARKO PETROLEUM CORP | 0.058179 |
| APPLE INC | 0.037286 |
| BAKER HUGHES INC | 0.07903 |
| BANK OF NEW YORK MELLON CORP | 0.126955 |
| CANADIAN PACIFIC RAILWAY LTD | 0.026384 |
| CBRE GROUP INC | 0.142134 |
| CHESAPEAKE ENERGY CORP | 0.253083 |
| CONSOL ENERGY INC | 0.148741 |
| CVR ENERGY INC | 0.119608 |
| DIRECTV-CLASS A | 0.056902 |
| DOW CHEMICAL | 0.101109 |
| DU PONT (E.I.) DE NEMOURS | 0.064021 |
| EBAY INC | 0.085398 |
| EMC CORP/MASS | 0.17328 |
| FAMILY DOLLAR STORES | 0.06335 |
| FEDEX CORP | 0.027845 |
| FIDELITY NATIONAL FINL-A | 0.132502 |
| FRANKLIN RESOURCES INC | 0.092204 |
| HALLIBURTON CO | 0.115223 |
| HERTZ GLOBAL HOLDINGS INC | 0.215049 |
| HESS CORP | 0.065599 |
| HOLOGIC INC | 0.156338 |
| INGERSOLL-RAND PLC | 0.072565 |
| INTERCONTINENTAL EXCHANGE INC | 0.021214 |
| JUNIPER NETWORKS INC | 0.20637 |
| LEGG MASON INC | 0.084807 |
| LEVEL 3 COMMS | 0.092073 |
| LOEWS CORP | 0.117997 |
| MCDONALDS CORP | 0.053039 |
| MCGRAW-HILL FINANCIAL INC | 0.047624 |
| MICRON TECHNOLOGY INC | 0.157931 |
| MICROSOFT CORP | 0.112323 |
| MONDELEZ INTERNATIONAL INC | 0.134622 |
| MOODYS CORP | 0.051246 |
| MOTOROLA SOLUTIONS INC | 0.072636 |
| PEPSICO INC | 0.050199 |
| PHILIPS ELECTRONICS-NY SHR | 0.167535 |
| PLATFORM SPECIALTY PRODUCTS CORP | 0.199479 |
| SCRIPPS NETWORKS INTERACTIVE | 0.06696 |
| TIME WARNER CABLE | 0.033598 |
| TWENTY-FIRST CENTURY FOX INC | 0.144805 |
| VALEANT PHARMACEUTICALS INTE | 0.024951 |
| WALGREEN BOOTS ALLIANCE INC | 0.0631 |
| WILLIAMS COS INC | 0.102138 |
| ZOETIS INC | 0.108994 |
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| Data as of 04/29/2015 |
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| Total Annual Fund Operating Expense | 0.75 % | |
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| Inception Date | 04/28/2015 | |
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| Shares Outstanding | 100,000 | |
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| Distribution Frequency | Annually | |
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30-Day SEC
Yield
(as of most recent month end)  | N/A | |
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