Hedge funds are always buying and selling stocks and exchange-traded funds (ETFs), and while it might not always be a great idea to replicate their moves, it doesn’t hurt to keep a watch on what they’re eyeing. Despite the recent volatility, hedge funds have made several buy and sell transactions in the third quarter, and they’re loading up on SPDR S&P 500 ETF (NYSEARCA:SPY), Invesco QQQ Trust (NASDAQ:QQQ) and Vanguard High Dividend Yield ETF (NYSEARCA:VYM).
Whether you’ve allotted a large amount to stocks and are looking to rotate some of it into more defensive assets or are simply looking to diversify your portfolio, it isn’t a bad idea to take a look at these ETFs.
SPDR S&P 500 ETF Trust
A favorite of many hedge funds, SPDR S&P 500 ETF attracts investors each quarter. In Q3, several notable investors bought the ETF, which holds about 500 large-cap U.S. stocks. It tracks the S&P 500 index and has an expense ratio of 0.09%.
The fund has a yield of 1.04% and invests heavily in the technology sector (35.35%), followed by financials (13.07%) and consumer discretionary (10.24%). It holds the Magnificent Seven, such as Nvidia, Apple, Microsoft, Amazon, Meta, and Tesla. The top 10 holdings form 46% of the portfolio. SPY has gained 14% in 2025 and 89% in five years.
The ETF has generated cumulative returns of 21.37% in a year and 22.51% in 3 years.
- Tudor Investment Corp, run by Paul Tudor Jones, increased its position in SPY by 4.13% in the quarter.
- Farallon Capital Management, run by billionaire Tom Steyer, increased its position in the quarter by 9.27%.
- Point72 Asset Management increased its stake by 3.3% in the quarter, taking the total investment in SPY to 5.89%.
SPY offers ultimate portfolio diversification and is the best way to invest in the largest U.S. companies. It has an average annual rate of return of about 10%.
Invesco QQQ Trust
The Invesco QQQ Trust offers exposure to the largest U.S. companies and is tech-focused. The fund invests in growth stocks and tracks the Nasdaq 100 index. It holds 100 stocks and has generated a cumulative 10-year return of 500%. About 64% of QQQ’s portfolio is invested in the technology sector, followed by consumer discretionary (18.29%) and healthcare (4.21%).
Driven by the recent rally in tech stocks, QQQ has shown significant upside and gained 18% in the year. The ETF has a yield of 0.47% and an expense ratio of 0.20%. Its largest positions are in Nvidia, Apple, and Microsoft. The top 10 holdings form 53% of the portfolio and are the largest U.S. tech companies.
Hedge funds increased their stake in the ETF during the third quarter.
- Point72 Asset Management increased its stake by 1.56% in the quarter.
- Citadel Advisors increased its stake in the ETF by 0.59%, taking the total portfolio holding to 4.04%.
- Elliott Investment Management increased its stake by 3.3%, taking the total stake to 5.28%.
QQQ has generated a cumulative 1-year return of 30.65% and a 3-year return of 130%. It has an ideal fund for those seeking exposure to the biggest tech companies at low cost and with little risk.
Vanguard High Dividend Yield Index Fund ETF
The Vanguard High Dividend Yield Index Fund ETF is a dividend ETF that tracks the performance of the FTSE High Dividend Yield Index. The passively managed fund invests in stocks that have a high yield and holds over 500 stocks. Several hedge funds have bought VYM in the third quarter.
- Cornerstone Planning Group bought 525,740 shares in the quarter.
- Act Wealth Management LLC added 11,404 shares, increasing its stake by 4.51%.
- Payne Capital LLC opened a new position in VYM with 41,991 shares.
The passively managed fund has a yield of 2.47% and an expense ratio of 0.06%. It invests heavily in the financial sector (21.10%), followed by technology (14.10%) and industrials (13.50%). The top 10 holdings of the fund include Broadcom, Exxon Mobil, Johnson & Johnson, Home Depot, Procter & Gamble, and Walmart. These are industry stalwarts with many years of dividend increases and the ability to sustain them.
Vanguard High Dividend Yield Index Fund has gained 9.41% this year and is exchanging hands for $139.54. While you might not be able to outperform the S&P 500 with this ETF, it is a great way to build passive income at low cost. The fund has generated a cumulative 3-year return of 44.38%, and a 5-year return of 105.33%.
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