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IndexIQ launches US-listed hedge fund replication ETF


Alternative investment exchange-traded fund provider IndexIQ has launched what it says is the first-ever US-listed hedge fund replication ETF.

Alternative investment exchange-traded fund provider IndexIQ has launched what it says is the first-ever US-listed hedge fund replication ETF.

The IQ Hedge Multi-Strategy Tracker ETF seeks to replicate, before fees and expenses, the returns of the IQ Hedge Multi-Strategy Index.

The index is designed to capture the risk-adjusted return characteristics of the collective hedge fund universe using multiple hedge fund investment styles, including long/short equity, global macro, market neutral, event-driven, fixed income arbitrage, and emerging markets.

IndexIQ says the ETF-based approach to hedge fund replication offers a number of advantages to investors, including intra-day liquidity, portfolio transparency, lower fees than the typical hedge fund, the elimination of manager-specific risk, and real-time pricing.

The IQ Hedge Multi-Strategy Tracker ETF uses a variety of liquid ETFs currently in the market to build the underlying portfolio and does not invest in hedge funds.

‘The IQ Hedge Multi-Strategy Tracker 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 Adam Patti, chief executive officer at IndexIQ.

‘Our hedge fund replication strategies have continued to represent a strong investment alternative in this period constituting one of the worst market environments in history. From the start, our goal has been to help democratize access to the alternative investment asset class by making these products broadly available to all investors with full liquidity, transparency and low cost. Today’s rollout is another giant step along that road.’

IndexIQ uses its Rules-Based Alph philosophy to design and build investment products, combining the benefits of traditional indexing with the risk-adjusted return potential sought by the best active managers.

The IQ Hedge Multi-Strategy Tracker ETF is the first in a planned series of alternative investment ETFs that are to be based on proprietary indexes developed by IndexIQ.

Unlike traditional market indexes, which track the performance of publicly-traded issuers representing a market or industry sector, the IndexIQ indexes provide exposure to alternative investment asset classes, including the IQ Hedge family of indexes, which track the returns of distinct hedge fund investing styles.

The constituents of the IQ Hedge Multi-Strategy Tracker ETF are existing ETFs currently available in the marketplace, essentially making the ETF a ‘fund of funds.’

The ETF and underlying index are rules-based and the portfolio weights of the underlying components are rebalanced monthly. The fund’s expense ratio will be 0.75 per cent.

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