Billionaire tracker: investment choices revealed

A new exchange-traded fund iBillionaire Index ETF opened for trading on August 1, which uses publicly available information about the United States’s most successful billionaires.

Direxion, which has its headquarters in New York, launched the iBillionaire Index ETF with a clear focus on the cream of the crop when it comes to investing, allowing investors to dive into the holdings of billionaires such as Warren Buffett, Carl Icahn and George Soros.  

“[This] allows investors to identify and participate in stocks that the most successful investment billionaires are accumulating”, Direxion explained.

How does the new ETF work?

Anyone interested in investment funds and the broader world of investment may be intrigued by this latest development on the EFT front.

According to Direxion, the iBillionaire Index ETF observe pre-expenses investment results of the best investment billionaires who are US-based. 

An “equal-weighted approach” aims to achieve diversity in the ETF strategy. The strategy itself is Alpha Generation, as part of the Strategic Beta ETFs group. Other strategies within this group include Equal Weight / Diversification (Direxion NASDAQ-100® Equal Weighted Index Shares), Risk Management (Direxion S&P 500 Volatility Response Shares) and Income Generation (Direxion Zacks MLP High Income Shares).

The iBillionaire Index ETF focuses on alpha-generation as part of large-cap equity allocation of investors’ portfolios. Investors can get access to a strategic-index approach to investing in equities, too.

Which securities are included?

The iBillionaire Index is made up of 30 mid- and large-cap securities that are US-based. Its New York Stock Exchange trading name is BILLION.

Using publicly available information on billionaire investors and institutional money managers, iBillionaire Incorporated produces a list of securities that make the cut. 

The criteria to get onto the list is nothing short of specific. For one, institutional money managers must have a personal net worth $1 billion or more, which has been confirmed by industry publications. Secondly, financial investments and markets must be such managers’ primary wealth source, according to the index’s prospectus and statement of additional information of June 25.

Institutional money managers’ public portfolios must be valued at at least $1 billion, and their portfolios must hold 10 securities or more. Portfolio turnover must be less than 50 per cent, while equity allocations must have a three-year return that place institutional money managers in the top 15 list of financial billionaires.

Companies in the index must be US-based and issue equity securities and be included in a portfolio of at least one institutional money manager who has made it onto the iBillionaire Index. 

Could this inspire Australian investors?

Whether or not a similar ETF product makes headway on the ASX remains to be seen, although some interesting trends are emerging locally. 

For instance, it appears that Australians are directing their attention to offshore investments, according to Guy Debelle, Reserve Bank of Australia Assistant Governor (Financial Markets).

“Australians now own more equity investments offshore than foreigners own equity in Australia,” Debelle explained.

Investment in the national economy has historically outrun domestic saving, with the gap funded by offshore investment. Australians considering their future finances may wish to investigate the range of domestic and offshore options open to them – from investment funds to SMSFs.