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IndexIQ launches global macro and emerging markets ETF

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IndexIQ has launched what it says is the first exchange-traded fund designed to replicate the risk and return characteristics of global macro and emerging markets hedge funds.

IndexIQ has launched what it says is the first exchange-traded fund designed to replicate the risk and return characteristics of global macro and emerging markets hedge funds.

The IQ Hedge Macro Tracker ETF seeks to replicate, before fees and expenses, the returns of the IQ Hedge Macro Index, combining both global macro and emerging markets strategies.

Global macro hedge fund strategies generally span the globe in search of investment opportunities, employing a top-down approach to identifying market inefficiencies and dislocations, and typically invest in a range of instruments and asset classes including stocks, bonds, commodities, and currencies.

Emerging markets strategies generally attempt to identify investment opportunities in the more rapidly growing emerging market countries, including the BRIC nations of Brazil, Russia, India and China.

By combining the two strategies in a single ETF, IndexIQ seeks to provide broad asset class exposure with an emphasis of emerging markets, while reducing the overall volatility of the portfolio. While emerging markets equities have performed well in 2008, they have historically exhibited higher volatility.

‘MCRO offers access to two strategies that historically have performed well after significant market dislocations,’ says Anthony B. Davidow, executive vice president and head of distribution at IndexIQ. ‘Investors have been seeking an efficient way of accessing the two strategies. Following the launch of QAI, we received a lot of interest in offering the individual hedge fund strategies underlying QAI on a standalone basis.’

IndexIQ uses a proprietary rules-based methodology to construct the IQ Hedge Macro Index, with the relative weightings of the macro and emerging markets components increasing or decreasing over time based on the rules that govern the index. While the index is built using data on hedge fund strategy returns, the IQ Hedge Macro Strategy Tracker ETF does not invest directly in hedge funds. Instead, it uses factor and quantitative analysis to replicate the returns and common risk factors of hedge fund investing strategies, using existing ETFs as the building blocks of the portfolio.

‘The goal with the IQ Hedge Macro Tracker ETF is to provide investors with exposure to the high-growth segments of global markets and asset classes, emphasizing the importance of emerging markets, while managing overall portfolio volatility,’ says Adam S. Patti, chief executive officer at IndexIQ. ‘The fund is designed to play a role in the portfolio of investors interested in both alternative asset classes and traditional emerging markets.’

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