Following the smart money is becoming a popular trend in the world of funds, and the trend got a boost with today’s launch of the Global X Guru Activist Index ETF (ACTX).

This new product from New York-based Global X Funds is based on the Solactive Guru Activist Index that tracks the U.S.-listed equity holdings of a select group of activist shareholders based on their 13D and 13F filings with the U.S. Securities and Exchange Commission.

Institutional investment managers with more than $100 million in qualifying assets––generally U.S. equity securities––must file a Form 13F with the SEC within 45 days of the end of each quarter. These filings publicly disclose the qualifying holdings of investment managers and provide a window into their portfolios.

Schedule 13D statements are filed with the SEC by investors who acquire more than 5% of a company’s common stock. In some cases, an investment manager who buys such a large stake in a particular company is an activist investor who seeks a board seat or two to put the heat on management to make changes the activist believes can make the targeted company more profitable.

The new Global X fund looks at both filings because it gives it more flexibility in building its portfolio.

“13Ds can be very useful in a more concentrated portfolio of companies that have been targeted by activists," says Jay Jacobs, research analyst at Global X Funds. “But when trying to build a broader portfolio and include more large-cap companies as well, 13Fs are critical to that process.”

That’s because as wealthy as some of these activist investors are, they generally aren’t able to build a 5 percent stake in a single large company––that’s usually the domain of larger institutional investors such as pension funds or mutual fund companies.

“Carl Icahn doesn’t own 5 percent of Apple, but he’s certainly an activist investor and he’s certainly made a huge push in Apple,” Jacobs says. “So if you only use 13Ds you’re missing out of some of those high-profile, large-cap activist campaigns.

“We see a lot of activist investors are going after bigger names,” he adds. “A lot of their strategy revolves around the publicity they generate around their action.”

The Global X Guru Activist Index ETF has 50 holdings known to be in the crosshairs of activist investors. Among them, and the activist investor associated with them, are Apple, eBay and Chesapeake Energy (Carl Icahn); Zoetis and Valeant Pharmaceuticals (Bill Ackman); DuPont (Nelson Peltz); Amgen (Dan Loeb) and Juniper Networks (Paul Singer).

Rearview Mirror

One of the perceived knocks against following activist investors––or even trying to ape the holdings of successful hedge fund managers gleaned from their public filings––is that it’s a rearview tool that can be dated by the time the filings are made public.

“There’s value in 13Ds and in 13Fs, even if you account for some of the time delays,” Jacobs says. “If a major activist comes out and announces a position in a company, you will see some activity that day because people are excited about it. But the long-term returns are driven by what that activist is able to accomplish, and those campaigns can take a long time.”

Even so, critics accuse activist investors of “pump-and-dump” tactics designed to make a quick buck with little regard for whether they potentially weaken companies over the long term.

But a study released two years ago by professors at Harvard, Duke and Columbia universities analyzed more than 2,000 activist hedge fund interventions between 1994 and 2007. It concluded that activist events, on average, produced a 6% bump in share price in the first month and the stock maintained those gains during the next five years. The study also found a boost in a company’s return on assets and operating performance during that five-year period.

Guru Family

The new ACTX fund joins Global X’s existing suite of three “guru” ETFs. The granddaddy of the bunch, the Global X Guru Index ETF (GURU), launched in June 2012 and has been successful both in terms of assets ($306 million) and performance (annualized gains since inception of nearly 25 percent).

In March 2014, the company on the same day rolled out both the Global X Guru Small Cap Index ETF (GURX) and Global X Guru International Index ETF (GURI). To date, the funds have slightly more than $2 million in assets each, and GURI is up roughly 5 percent while GURX is down about 5 percent.

All three funds carry expense ratios of 0.75 percent.

Two other ETFs––the AlphaClone Alternative Alpha Exchange-Traded Fund (ALFA) and  the Direxion iBillionaire Index ETF (IBLN)––employ 13F filings that track hedge fund managers and other large investors as the basis of their respective strategies.

Another fund, the Validea Market Legends ETF (VALX), ignores 13F filings and relies on its own investment model that plays off the strategies of legendary Wall Street investors.

Jacobs says he believes the new Global X activist fund is the first ETF devoted to following activist investors. But it’s not the first ’40 Act fund focused on this space.

The 13D Activist Fund, which bills itself as the only mutual fund using shareholder activism as an investment strategy, has attracted $442 million in assets since it began trading in December 2011, according to fund research company Morningstar Inc.

The fund consists of three share classes, and each has produced annualized returns of nearly 24 percent (as of March 31). Expense ratios for the fund’s various share classes range from 1.50 percent to 2.50 percent.

Investors intrigued by activist-tracking funds now have two choices––the 13D Activist Fund with its impressive three-year-plus track record, and the newbie Global X Guru Activist Index ETF whose expense ratio of 0.75 percent is significantly cheaper than its mutual fund counterpart.