Big-Name Hedges Fund Bought This ETF Last Quarter. It’s Crushing the SPY in 2026

The smart money doesn’t typically go after ETFs. Why bother with passive investment products that charge an expense ratio in the ballpark of a fraction of a percentage point every year when you can just pick up some individual names? While ETFs make it convenient to bet on a broad batch of stocks focused on a particular index, sector, theme, factor, or something else, the convenience factor is not typically why a big-name hedge fund would punch its ticket to such a security.

Of course, the only way to know with certainty why a fund bought an ETF would be to ask. It might be just a “parking spot” alternative to cash, or perhaps it’s just the most cost-effective way to bet on a certain type of stock. At the end of the day, an ETF is only as good as the holdings that make it up.

So, if you’re a fan of everything underneath the hood, perhaps it’s just the most cost-effective move to gain broad exposure to ample names that fit the theme or trend that one is bullish on. Either way, going down the ETF route stands out as more of a tactical way to gain exposure to a certain corner of the market without having to pick up shares of tens of individual names—something that costs time and money.

iShares S&P 500 Value ETF

Last quarter (Q4 2025), some big-name hedge funds picked up shares of the iShares S&P 500 Value ETF (NYSEARCA:IVE), which, as the name suggests, is a value factor ETF and a great way to play a market that many consider to be on the expensive side. Stop me if you’ve heard someone complaining about the broad S&P 500 being overvalued or frothy this past week!

Most notable among the hedge funds has to be Christopher Davis’ Davis Advisors. Davis’ fund has more than $22 billion under management. And while the fund is well-diversified itself, I do find the recent iShares S&P 500 Value ETF buy to be intriguing. While it’s not really a needle-mover for the fund, given it’s a relatively tiny (less than 0.2% of holdings) position, I still find it a wise move and one that investors should pay careful attention to, especially for those who are overweight pricier tech stocks or the broad market, which itself has gotten quite pricey.

In any case, the iShares S&P 500 Value ETF certainly does stand out as a cure for the S&P’s frothiness. Best of all, it has a reasonable price of admission (0.18% expense ratio), as to be expected from a domestic index-focused ETF. Over the past five years, shares of the value-focused S&P ETF are up just north of 65%—not at all impressive since the S&P has soared more than 76% over the span.

Value is outpacing the S&P

What’s more interesting, though, is that the value-focused S&P is starting to pick up the pace relative to the S&P 500, especially so far in 2026. Year to date, the iShares S&P 500 Value ETF is up just shy of 5% compared to the mere 1% delivered by the S&P. I’ll also add that the latter has been far more volatile in the first month and a half of the year.

So, if you wish there were a cheaper S&P, the iShares S&P 500 Value ETF really does stand out as a better relative bet, at least until the relative valuation gap closes, perhaps after a tech correction has a chance to hit. The ETF has a four-star rating from Morningstar and invests in many of the same “growthy” darlings as the S&P. Of course, you won’t get a huge weighting in Nvidia (NASDAQ:NVDA | NVDA Price Prediction), so that alone would drive the price-to-earnings (P/E) of the ETF down (it’s hovering around 24 times trailing P/E) quite a bit.

Also, the top holdings are Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), with 7.1% and 3.3% weightings, respectively. At the time of this writing, the two Mag Seven stocks go for 32.3 times forward P/E and 25.4 times forward P/E, respectively, which is not too high a price to pay for durable AI growth.

Apart from the two tech giants, you’ll also gain considerable exposure to the big oil firms, which have helped drive outperformance this year. Any way you look at it, the value-flavored S&P looks better than the vanilla S&P. And investors would be wise to follow the lead of major hedge funds.