Want to Invest in Billionaires' Companies? This New ETF Makes It Easy
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Since the launch of the first U.S. exchange-traded fund in 1993, the investment vehicles have become both increasingly popular and narrower in scope. Now, a new ETF allows everyday investors to own a basket of stocks in companies whose success has created significant wealth for their founders.
That's the idea behind the Billionaires Club ETF (CLUB), which debuted on the New York Stock Exchange on May 6. It "invests primarily in equity securities of companies founded by, substantially owned by or meaningfully developed by entrepreneurs or families with a net worth in excess of $1 billion," according to its website.
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Here's everything investors need to know about the thematic ETF and the role it can play in their portfolios.
What is the Billionaires Club ETF?
The CLUB ETF isn't a tracking fund that simply copies what individual billionaires own in their personal portfolios, according to Andrew Skatoff, chief investment officer at Bancreek Capital Strategies.
Sub-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 strategy, resulting in a portfolio that holds between 25 to 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 is what CLUB is designed to deliver," Skatoff writes in an email to Money.
However, that wealth benchmark alone is not the determining factor for inclusion in the fund.
"The billion-dollar threshold is a recognizable level of wealth that most people identify with significant success," Skatoff says. "[But] the investment thesis is about the alignment and the track record, not the specific net worth."
What stocks are in the Billionaires Club ETF?
According to the fund's prospectus, no single holding in the Billionaires Club ETF's portfolio should account for more than a 10% weighting at the time of purchase. With its focus on large-cap stocks, that strategy helps investors "avoid concentration risk that would come from sizing positions by... an individual's net worth," Skatoff writes.
At just 3.84% of the total portfolio, the ETF's largest current position is Warner Music Group, one of the "Big Three" recording companies and the third-largest in the global music industry.
Other holdings include Walmart, Elon Musk-led Tesla and the other members of the Magnificent Seven, including Jeff Bezos' Amazon, Mark Zuckerberg's Meta and Nvidia, the world's largest publicly traded company.
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Meanwhile, luxury automobile maker BMW; luxury goods conglomerate LVMH Moët Hennessy Louis Vuitton; and Kering, the owner of Gucci, Yves Saint Laurent and Balenciaga, add a layer of opulence often associated with the billionaire label. The fund also holds Oracle, which was founded by Larry Ellison, and Berkshire Hathaway, of Warren Buffett fame.
In total, the founders and families of the 14 richest people on Earth, according to Forbes' real-time billionaires list, are represented in the CLUB ETF.
Skatoff notes that those founders' financial success stories serve as a powerful signal for identifying companies with structural advantages, adding that their stocks form the basis for an "investable universe" to which managers apply a systemic ranking.
CLUB is another example of the surging demand for thematic ETFs
The Billionaires Club ETF is the latest example of how fund issuers are looking to satisfy investors' appetite for thematic ETFs. From leveraged funds that track single-stock performances to others that provide exposure to space commercialization, an influx of specialty and trend-driven ETFs is demonstrating a structural shift in the equities market.
There are more than 4,700 ETFs listed on U.S. exchanges today compared to 4,200 individual stocks.
"Almost any investable narrative can be packaged into a rules-based or active strategy that can be delivered to investors via the ETF wrapper," says Aga Kuplinska, senior vice president of product development at Tidal Financial Group.
According to Kuplinska, while broad-based funds — ones that track indices like the S&P 500, Nasdaq and Dow Jones Industrial Average — should still compose the core of most portfolios, savvy investors are incorporating more niche products into 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 (the registration period mandated by the U.S. Securities and Exchange Commission).
The nascent Billionaires Club ETF — which is available through most major brokerages — has just $3.27 million in assets under management. But thematic ETFs' smaller sizes make them useful as supplements to core investments, allowing you to tactically trade in and out of themes depending on what the best opportunity is at that moment.
"Investors are looking for more targeted exposure," Kuplinska says. "Not every thematic ETF will survive because they are so niche. But I think the broader trend... is certainly here to stay."