An ETF hedge fund?

From Institutional Investor:

Calif. Firm Preps ETF Hedge Fund
May-01-2008 | Source: Alternative Investment News

Hermosa Capital Management is preparing the summer launch of a long/short hedge fund called Hermosa Capital Fund to invest in exchange-traded funds, FINalternatives reports.

The firm will use proprietary analysis and a fund ranking system to choose from the selection of global ETFs It will invest in securities that trade in enough volume to allow for speedy execution of transactions. Positions in securities may be held for very short periods, even as little as a day, said Christopher Harris, a consultant to the fund.

“I traded individual equities and mutual funds so when ETFs hit the market, I was just excited. We’re at about 600 ETFs now, which is more than enough, and we’re seeing new funds from India and other country-specific ETFs, so we’re able to capture a lot of different markets at the drop of a dime,” said Harris.

The strategy will employ a proprietary system that will rank about 300 ETFs based on relative strength, momentum and total return. The firm will then choose the top three to 10 to invest in. The existing strategy is exposed to the U.S., China and South Africa.

According to Investment Company Institute, there are about 613 ETFs with a collective AUM of $572 billion.

I wonder what the fees for this strategy will be…

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