IndexIQ launches ETF that replicates hedge funds

FWR Staff

1 April 2009

IQ Hedge Multi-Strategy Tracker ETF mimics broad multi-strategy HF returns. Indexed-investment maker IndexIQ is out with an ETF that replicates the returns -- before fees and expenses -- of the hedge-fund universe. The IQ Hedge Multi-Strategy Tracker ETF follows IndexIQ's Hedge Multi-Strategy Index, which is meant to capture the risk-adjusted return characteristics of the collective hedge-fund universe using a variety of investing styles including long-short equity, global macro, market neutral, event-driven, fixed-income arbitrage and emerging markets.

The new ETF "brings together two of the most significant developments in the investment business over the last several years: the growing importance of alternative investments and the convenience, low cost, liquidity and transparency of ETFs," says IndexIQ's CEO Adam Oatti.

Workaround

Investing in an ETF that mimics the hedge-fund space offers a couple of advantages over direct ownership, according to IndexIQ: transparency (at least at the portfolio level), intra-day liquidity, lower fees and a lack of manager-specific risk.

Rye Brook, N.Y.-based IndexIQ builds its Hedge Multi-Strategy Tracker ETF by investing in liquid ETFs that mimic hedge-fund styles; it doesn't put a cent in actual hedge funds.

"Hedge funds remain an excellent source of diversification, as evidenced by the fact that, while they were down for 2008, in aggregate they still managed to outperform the broad equity market benchmarks, such as the S&P," says Robert Whitelaw, IndexIQ's chief investment strategist and chairman of the Finance Department at New York University's Stern School of Business. "Gaining access to that diversification without having to meet traditional hedge fund thresholds, such as long lock-ups on investor capital and lack of portfolio transparency, or pay the exorbitant hedge fund fees, is an important advance for investors, whether large institutions or retail investors." -FWR

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