Hedge Fund Managers Trim Nvidia Positions, Invest in High-Growth Index Funds

In a surprising move during the fourth quarter, several wealthy hedge fund managers made significant adjustments to their investment portfolios, particularly in relation to chipmaker Nvidia (NVDA). Despite Nvidia’s impressive growth in recent years, these hedge fund billionaires decided to trim their positions in the company and instead reallocated capital to two high-growth index funds, the Invesco QQQ Trust (QQQ) and the iShares U.S. Technology ETF (IYW).

Israel Englander of Millennium Management notably sold 1.7 million shares of Nvidia, reducing his stake by 45%. Simultaneously, he increased his position in the Invesco QQQ Trust by 53% and initiated a new position in the iShares U.S. Technology ETF. Similarly, John Overdeck and David Siegel of Two Sigma Investments sold 30,663 shares of Nvidia, reducing their stake by 5%, while significantly increasing their positions in both the Invesco QQQ Trust and the iShares U.S. Technology ETF.

The decision to invest in these index funds was influenced by their impressive performance compared to the S&P 500 over the past decade. The Invesco QQQ Trust returned 440%, while the iShares U.S. Technology ETF soared by 528% during the same period, outperforming the S&P 500’s 228% growth.

The Invesco QQQ Trust tracks the Nasdaq-100, which consists of the 100 largest companies on the Nasdaq Stock Exchange. With a heavy weighting towards the information technology and consumer discretionary sectors, the fund’s top holdings include Microsoft, Apple, Nvidia, Alphabet, and Amazon. Despite its volatility, the Invesco QQQ Trust has delivered impressive returns over the years, compounding at an annual rate of 14.3%.

On the other hand, the iShares U.S. Technology ETF focuses on 131 stocks in the information technology sector, offering exposure to various subsectors within the tech industry. With top holdings such as Microsoft, Apple, Nvidia, and Alphabet, the fund has consistently outperformed the S&P 500, compounding at an annual rate of 13.8%.

While the iShares U.S. Technology ETF has a higher expense ratio compared to the Invesco QQQ Trust, some investors prefer the Vanguard Information Technology ETF (VGT) for its superior performance and lower expense ratio of 0.1%. With a focus on the high-growth information technology sector, the Vanguard ETF has delivered strong returns over the years, compounding at an annual rate of 14.1%.

Overall, the decision by these hedge fund managers to trim their Nvidia positions and invest in supercharged index funds reflects their confidence in the long-term growth potential of the technology sector. As these funds continue to outperform traditional benchmarks, investors may consider following suit to capitalize on the sector’s growth opportunities.