Jeffrey N. Vinik has invested nearly half of its portfolio of U.S. equities in passive index funds After stocks gain

Jeffrey N. Vinik has invested nearly half of its portfolio of U.S. equities in passive index funds , Of the $ 3390000000 Vinik oversaw in action September 30, about 48 percent was composed of exchange-traded funds that track industries and global markets, according to a regulatory submission in November. His Boston-based company had more shares than any other hedge fund in 11 of the 13 ETFs on its property.



jeffrey is consider manager of investment funds whose shares teams have beaten the markets during the better part of two decades.



It is described as "bottom-up investors, Vinik is known for making big moves that challenge the conventional wisdom, including an untimely decision to sell tech stocks and buy U.S. Treasury bonds at the head of Fidelity Magellan mutual fund in 1996. ETFs are passive index funds most used by managers who invest on the basis of broad economic trends which consider the different companies that bid for or against.

"I do not know of any hedge fund stock selection using ETFs in the long side," Eric Weinstein, chief investment officer at fund of funds firms in New York, Neuberger Berman Group LLC, said in an interview directly. "The macro managers to use ETFs as part of their ordinary day to day business of portfolio management -. betting that markets will go up or down"

Mark Hostetter, chief operating officer of Vinik Asset Management LP, declined comment.

ETF Trading

Unlike shares of traditional mutual funds indefinite can only be sold at the end of each day the net asset value, ETFs traded on stock exchanges, allowing investors to trade when markets are open . Most ETFs are passive, holding the stocks that are market benchmarks, as 500 of Standard & Poor's of major U.S. companies and the S & P Energy Select Sector Index, a benchmark for oil and gas.

Managers use ETFs to speculate in the markets for stocks, bonds and commodities, or to reduce the risks of investing in these assets. Some money in the park fund, and that research specific stocks within an industry or index.

"There are plenty of people who use ETFs as a simple, cheaper way to make a portfolio," said Peter Shea, a lawyer at the New York office of Katten Muchin Rosenman LLP who works with money exchange and commodities. "It may be a way to get quickly in case of not having a lot of gibberish."

Beating the S & P

In 1996, Vinik made investment decisions in 25 companies a day during the execution of Vinik Overseas Fund Ltd., according to the website of his alma mater, Duke University Pratt School of Engineering in Durham, North Carolina. The fund has about 76 percent, 45 percent and 29 percent after fees in 1997, 1998 and 1999, respectively, exceeding the S & P 500 earnings 33 percent, 29 percent and 21 percent.

Vinik current vehicle, NID Overseas Fund Ltd., rose 50 percent in 2007 compared with 5.5 percent return for the S & P 500 including dividends, according to foundation tax records by Michael Gordon , another manager of Vinik Asset Management. The following year, NIDs abroad fell 3 percent as the benchmark fell 37 percent, tax records show.

Vinik not publicly disclose the fees charged, and releases little information on the NIDs overseas, which he established in November 2004 after taking a break from the administration of government money to spend more time with his family. NID created overseas primarily to invest their own cash along your friends, family and a few customers outside including billionaire George Soros, said two people briefed on the matter who declined to be identified because the fund is not public.

Long-Short Equity

The strength of Duke University, where Vinik received a degree in civil engineering in 1981 include a $ 50 million in overseas NIDs in 2006 financial statements. Other shareholders include Permal Asset Management Inc. in New York and financial Hunt Ventures LP of Dallas, which describe NID reports overseas investors as a capital fund long-short. That means it takes "time" position by purchasing shares while betting against each other through short selling, or borrowing and then selling shares in anticipation of a price decline.

Late last year, held Vinik ETFs worth 555.6 million U.S. dollars, equivalent to 17 percent of the $ 3.2 billion in stocks listed on Form 13F filed with the U.S. Securities and Exchange Commission. The value nearly tripled to 1.64 billion U.S. dollars at the end of the third quarter after additional purchases and the market's gains.

The change coincided with a movement away from retailers and other consumer discretionary stocks, as Vinik company to reduce its holdings in companies such as Ross Stores Inc. and Amazon.com Inc. to $ 802,000,000 at September 30 de 2080000000 mid-year dollars.

Emerging Markets

Vinik simultaneously bought shares worth $ 446 million in a couple of ETFs that track the S & P 500 and Russell 2000, two benchmarks for U.S. stocks, the latest sign the document. It also acquired a $ 146 million in the iShares MSCI Emerging Markets Index, lifted shares in a fund traded iShares Brazil and compared their bets on iShares funds to Australia, Canada and China.

The manager said a share of U.S. $ 292 million in the Energy Select Sector SPDR Fund, composed of oil and gas companies such as Irving, Texas, Exxon Mobil Corp. and Chevron Corp. in San Ramon, California, during the quarter . He bought $ 105 million of shares in the Industrial Select Sector SPDR Fund, whose largest holding is General Electric Co., Fairfield, Connecticut, while the sale of half of the 20 million shares it held in the Financial Select Sector SPDR late June.

'Down to Earth'

"ETFs is clearly where it is difficult to get their feet on the floor and do the analysis, as in emerging markets, said James Lowell, chief investment strategist of Adviser Investment Management Inc., a Newton, Massachusetts, which has about $ 1.3 billion in mutual funds and publicly traded. "If he goes in the oil and gas and construction of large emerging markets, which has a correlation with how energy plays," Lowell said, noting that crude oil and natural gas are the main exports from countries like Mexico and Venezuela.

Other hedge funds have reported 13Fs have ETFs in their form, a document used by money managers to show their holdings in shares listed on U.S. exchanges the end of each quarter. The forms do not include short-selling stocks. Most hedge fund investments in ETFs listed in one or two.

In 2004, the fund of Louis Moore Bacon of ownership of shares of the SPDR S & P 500 ETF valued at $ 922 million, or more than half of its units. Eton Park Capital Management LP held 4,600,000 SPDR Gold Trust shares worth 585 million U.S. dollars to 30 September.

Hedge funds accounted for 9 percent of the 154 billion in ETF assets held by U.S. money managers in late 2008, the latest data available from BlackRock Inc., the New York-based firm that runs the iShares funds.

Increased Correlation

Hedge funds have increased their use of ETFs when they want to protect against declining markets, "said Weinstein of Neuberger Berman. Shorting individual companies has become more risk because it will increase this year in the correlation between action means there is a greater likelihood that even the weakest companies could increase if the market does.

"Many of the movements in the market have been macro-based and not based on individual company news," said Duncan Hennes, a partner at Atrevida Partners LLC, a hedge fund multi-strategy based in Rye, New York , director and former chief executive of the Soros money management. "It's harder to make money by being long undervalued companies and societies that overrated when all stocks tend to move in the same direction."

Magellan Bold Bet

It was a huge bet, macro call that marked the end of the race is Vinik at Fidelity Magellan, which monitored from July 1992 until May 1996 when it ranked as the largest investment fund in the world, with more than $ 56 billion in assets. Reports of the shareholders of the fund, Vinik said that the management of Magellan, a "stock for shares" basis, looking for companies that could produce the best growth of long-term gains while selling at valuations reasonable.

During the fourth quarter of 1995 and first quarter of 1996, Fidelity Magellan Vinik cutting technology holdings to 3.5 percent of the net assets of 40 percent, indicating that revenue growth is slowing in business. At the same time and plowed 21 percent of funds in U.S. Treasury bonds.

The move sparked an outcry from shareholders who complained that Fidelity Magellan, a growth fund formerly run by Peter Lynch's mentor Vinik, you should not invest in bonds. Vinik, who beat the market with average annual returns of 18 percent until 1995, left Boston-based Fidelity next May and Magellan ended the year with a total return of 12 percent, about half of 23 percent gain registered by the S & P 500.

"He is most famous, for better or worse, to place a bet of asset allocation at the end of his mandate," said Christopher Davis, a research analyst at Morningstar Inc. Chicago "The investment in bonds at the end of 1990 not going to ingratiate himself with anyone. "