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IndexIQ launches hedge fund replication separately managed account portfolios


IndexIQ, a Rye Brook, New York-based developer of index-based alternative investment solutions, has launched three new index-based separately managed account products, offering exposure bo

IndexIQ, a Rye Brook, New York-based developer of index-based alternative investment solutions, has launched three new index-based separately managed account products, offering exposure both positively and negatively to hedge fund industry performance as well as to commodities.

The IQ Alternative Beta Portfolio uses multiple hedge fund investing styles including long/short equity, global macro, market neutral, event-driven, fixed-income arbitrage and emerging markets to replicate as closely as possible the returns of the hedge fund universe as measured by such broad-based indexes as the CS/Tremont Blue Chip Index and the HFRX Global Hedge Fund Index. It seeks to deliver returns with low correlation to the equity markets.

The IQ Inverse Alternative Beta Portfolio seeks to replicate the inverse of the risk-adjusted return characteristics of the same collective hedge fund universe, providing the opportunity to hedge against the performance of the funds that comprise the CS/Tremont Blue Chip and the HFRX indices, while also seeking low correlation with the broader equity markets.

The IQ Commodity Rotation Portfolio seeks to achieve long-term capital appreciation by rotating exposure to various commodities. Exposures are determined by rules-based price momentum methodology that rotates through seven commodity exchange-traded funds. The portfolio is always 100 percent invested, and seeks low correlation with the Standard & Poor’s 500.

Each IndexIQ portfolio is constructed using a proprietary methodology and uses publicly-traded ETFs, with no hedge funds included as components. The firm says the benefits of this approach include significantly lower costs than traditional hedge funds, greater transparency, and the avoidance of manager- and style-specific risk.

‘IndexIQ is focused on developing sophisticated products to address the needs of our clients,’ says chief executive Adam S. Patti. ‘We are agnostic regarding the packaging of our strategies. While we plan to offer our innovative strategies as mutual funds, ETFs and managed accounts, the latter allow the greatest flexibility and customisation for clients.’

The firm specialises in products that seek to combine the benefits of traditional index investing with the risk-adjusted performance potential sought by active managers. IndexIQ launched a range of investible index-based solutions early last year. It says its philosophy is to democratise investment management by making institutional class strategies available to all investors in a low-cost, liquid, transparent and tax-efficient manner, both through proprietary investment products and partnerships with international financial institutions.

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