Goldman research becomes an ETF

Is Wall Street research the next frontier for ETFs?

Goldman Sachs Group Inc. has just filed for a new ETF called the Goldman Sachs Hedge Fund VIP ETF, which is based its popular “Hedge Fund Trend Monitor” research report put out by Ben Snider, David Kostin and other analysts f r om Goldman’s Global Investment Research division.

The research report — and the ETF — tracks the 50 companies that matter most to fundamentally driven hedge funds as found in their 13F filings. A 13F is a quarterly holdings report required for any hedge fund company with over US$ 100 million i nvested in U. S. equities.

The ETF would mark the first time a Wall Street bank uses its own research report as the basis for an ETF. While this isn’t Goldman’s own investment calls per se, it does show the company is looking to leverage one of its greatest strengths in an ETF and differentiate itself from a crowded field of over 1,800 ETFs issued by more than 50 different compani es. If these ETFs gather assets, this could turn into a trend for big Wall Street banks, some of whom are new to the ETF market.

It should be noted that Goldman’s ETF wouldn’t be the first to track hedge funds’ stock holdings. There are a few ETFs that already do this, the most popular being the US$ 120- million Global X Guru Index ETF ( GURU). But all of them do it in different ways.

The filing from Goldman also included another new ETF born out of its global investment research group called the Goldman Sachs High Sharpe Ratio ETF, which will equal- weight 50 large- capitalization stocks that show the highest riskadjusted return. This ETF is based on Goldman’s U. S. Weekly Kickstart strategy report, which showed how a portfolio of stocks based on high Sharpe ratios had outperformed most mutual funds and the S& P 500 index.

While Sharpe ratio is a widely used metric, there has never been an ETF built solely around it.

One question now is how long until Goldman — and possibly other Wall Street banks — start packaging their much- publicized market calls and stock picks into an ETF? This would make it easy for investors to skip all the middlemen — not to mention their fees — in an effort to put their money where Goldman’s mouth is.

However, given t hat Goldman has abandoned five out of its top six trades for 2016, perhaps the timi ng on that concept is a little less than perfect this year.

MAKING IT EASY FOR INVESTORS TO SKIP ALL THE MIDDLEMEN.