Since the introduction of the first exchange-traded fund in the US in 1993, investment vehicles have become more popular and narrower in scope. Now, a new ETF allows everyday investors to own a basket of shares in companies whose success has created significant wealth for their founders.
That’s the vision of the Billionaires Club ETF (CLUB), which debuted on the New York Stock Exchange on May 6. “It invests primarily in the securities of companies founded, largely owned or purposefully developed by entrepreneurs or families with a net worth of more than $1 billion,” according to its website.
Here’s everything investors need to know about the title ETF and the role it can play in their portfolios.
What is the Billionaires Club ETF?
The CLUB ETF is not a tracker fund that simply copies what individual billionaires have in their portfolios, according to Andrew Skatoff, chief investment officer at Bancreek Capital Strategies.
Partially advised by Bancreek Capital Strategies, the Billionaires Club ETF is an actively managed fund that uses proprietary research to identify companies that align with its strategies, resulting in a portfolio that holds between 25 and 50 stocks.
“While most people don’t have the ability to sit at the table with the founders who built these companies, they can own shares of the companies they built. That’s what CLUB is designed to deliver,” Skateff wrote in an email to Money.
However, that wealth ratio alone is not a determining factor for inclusion in the fund.
“The billion-dollar threshold is a tangible level of wealth that most people see as very successful,” Skatoff said. “[But] The investment thesis is about alignment and track record, not exact net worth.”
What stocks are in the Billionaires Club ETF?
According to the fund’s prospectus, no one participant in the Billionaires Club ETF portfolio should make up more than 10% weighting at the time of purchase. With its focus on large stocks, that strategy helps investors “avoid the concentration risks that can come from balancing positions by value…personal value,” Skateff wrote.
At only 3.84% of the total portfolio, the ETF’s current largest position is Warner Music Group, one of the “Big Three” record companies and the third largest in the global music industry.
Other holdings include Walmart, Elon Musk’s Tesla and other members of the Magnificent Seven, including Jeff Bezos’ Amazon, Mark Zuckerberg’s Meta and Nvidia, the world’s largest publicly traded company.
Meanwhile, luxury car maker BMW; luxury goods LVMH Moët Hennessy Louis Vuitton; and Kering, owner of Gucci, Yves Saint Laurent and Balenciaga, adding a layer of luxury often associated with the billionaire label. The fund also owns Oracle, founded by Larry Ellison, and Berkshire Hathaway, of Warren Buffett fame.
In total, the founders and families of the 14 richest people in the world, according to Forbes’ real-time billionaires list, are represented in the CLUB ETF.
Skatoff notes that the financial success stories of those founders serve as a powerful signal to identify companies with structural advantages, adding that their stocks form the basis of an “investable environment” where managers use a systematic approach.
CLUB is another example of the growing demand for thematic ETFs
The Billionaires Club ETF is the latest example of how fund issuers are looking to satisfy investors’ appetite for equity ETFs. From mutual funds that track the performance of a single stock to others that provide exposure to trading space, the influx of specialty ETFs and trend-driven ETFs reflects a structural shift in the stock market.
There are more than 4,700 ETFs listed on US exchanges today compared to 4,200 individual stocks.
“Almost any investment narrative can be packaged into a rules-based or actionable strategy that can be delivered to investors using an ETF wrapper,” said Aga Kuplinska, senior vice president of product development at Tidal Financial Group.
According to Kuplinska, while broad-based funds – those that track indexes such as the S&P 500, Nasdaq and the Dow Jones Industrial Average – should still comprise the core of most portfolios, smart investors include more niche products in their investment strategies.
Accelerating that trend is how quickly new funds can be brought to market. The ETF ecosystem has become so efficient that investors can gain exposure to timely themes in as little as 75 days (registration period mandated by the US Securities and Exchange Commission).
The fledgling Billionaires Club ETF — available through most major brokerages — has just under $3.27 million in assets under management. But the small sizes of thematic ETFs make them useful as supplements to core investments, allowing you to smartly trade in and out of themes depending on which opportunity is best at the time.
“Investors want targeted exposure,” Kuplinska said. “Not every headline ETF is going to survive because it’s too busy. But I think the broader trend… will always be there.”
