Billionaire Ken Griffin Buys an Index Fund That's Crushing Bitcoin, Nvidia, and the S&P 500 in 2025

Billionaire Ken Griffin runs Citadel Advisors, a hedge fund that outperformed the S&P 500 (SNPINDEX: ^GSPC) by 7 percentage points over the last three years. Even more impressive, he is the most successful hedge fund manager in history as measured by net gains (after fees) since inception, according to LCH Investments.

One of Griffin's more noteworthy trades in the third quarter was starting a position in the SPDR Gold Shares ETF (NYSEMKT: GLD), an index fund that has returned 60% year to date. Comparatively, Nvidia has returned 32%, Bitcoin has declined 2%, and the S&P 500 has gained 16%.

Importantly, while Citadel's position in the SPDR Gold Shares ETF is rather small, the hedge fund also owns call options on the fund. Those contracts, which afford Citadel the right but not the obligation to buy shares at a predetermined price, are collectively the fourth-largest position in the portfolio.

Also important, Griffin is not the only hedge fund billionaire to increase his exposure to gold during the third quarter. Israel Englander of Millennium Management and Paul Tudor Jones of Tudor Investment also added to their positions. Should you follow their lead?

Image source: Getty Images.

The SPDR Gold Shares ETF is a convenient way for investors to participate in the gold market

The SPDR Gold Shares ETF is an exchange-traded fund managed by State Street. It tracks gold prices by holding physical bullion in vaults and issuing shares. The primary benefit for investors is the ability to participate in the gold market without the inconvenience (and extra costs) associated with buying, transporting, and storing gold bullion.

State Street says, "Gold has demonstrated a low and negative correlation to many financial asset indexes over time and has a track record of providing a hedge during periods of large market drawdowns, systemic risk, and geopolitical volatility." Indeed, the S&P 500 fell by an average of 39% during the last three bear markets, but the SPDR Gold Shares ETF added an average of 4% during those events.

Investors buy gold in times of economic distress, and Goldman Sachs anticipates more upside

Gold prices depend on supply and demand. The annual growth in the above-ground gold supply has been 1.5% to 2.5% for decades, meaning the available supply changes very little in any given year. That makes demand the most consequential variable, and demand increases during times of economic distress.

Specifically, investors often buy gold when they are worried about inflation or a recession. President Donald Trump has stoked those concerns by imposing tariffs and attempting to influence the Federal Reserve's monetary policy, as detailed below:

• Trump on several occasions has contemplated firing Fed Chair Jerome Powell. Doing so would undermine the central bank's independence, which would erode confidence in future monetary policy decisions and the U.S. dollar.
• Trump imposed severe tariffs that have raised the average tax on U.S. imports to its highest level since the 1930s. The president claims tariffs will make America richer, but empirical evidence says they will ultimately hurt economic growth.

The bullet points above explain why demand for gold has skyrocketed this year. Investors must now ask themselves whether demand will keep climbing, or whether the market has already priced in concerns about Trump's trade policies and attempts to undermine the independence of the Federal Reserve.

No one truly knows the answer to that question, but Goldman Sachs estimates the price of gold will reach $4,745 per troy ounce in the next 12 months. That implies 13% upside from the current price of $4,200 per troy ounce. But J.P. Morgan analysts think demand for gold is currently driven (in part) by momentum, and those trades "eventually run out of steam."

Personally, I think investors can buy a small position in the SPDR Gold Shares ETF today, but I worry the significant price appreciation seen this year sets the stage for a drawdown at some point in the not-too-distant future.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Bitcoin, Goldman Sachs Group, JPMorgan Chase, and Nvidia. The Motley Fool has a disclosure policy.