Just when you though that maybe ETF’s were perhaps starting to lose a bit of their “in” factor, a new class of ETF’s has been unveiled that could restart the whole trend. In Canada, “Betapro” ETF’s are high volume ETF’s that are usually leveraged and track known indexes such as commodities or stock indexes. Now, the company behind those is launching “alphapro”, a class of ETF’s that would track the trades done by “guru’s” of finance. Of course, the idea behind it is to be able to generate alpha.

The first launch will be an ETF that will trade according to Dennis Gartman’s trades. Gartman is well known across the markets for his daily newsletter that is sent out and does commentary about the markets in general as well as specific comments about most asset classes. He then gives out specific trades that could in theory be replicated. Of couse, doing so through this new ETF has many advantages, mainly the time saved, not having to look every day for the trades and also of course saving the cost of the newsletter which is very expensive.

The question of course is how well such guru’s will be able to perform. Much has been said about the inability of investors to beat the market consistently. It will be very interesting to see if these ETF’s that will track the best of the best, will be able to do so.

As well, there will probably be many investors that will try to arbitrage between the ETF’s return and the underlying trades. For example, when Dennis Gartman will be sending out his newsletter and for example saying that he wants to buy Gold. If the ETF becomes important, you will have a great number of investors that will know that the ETF needs to buy this position, which could make the price go upward. It could create a drag in returns and will be interesting to follow. Of course, this effect already exists because his newsletter is so spread out that the market knows many investors are following these trades. But having an ETF track these trades could make the effect greater.

In the end though, I am impressed with this new idea, which has the potential of creating a great deal of new interest and activity in the ETF field. There are surely many more great ideas to come…

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