Hedge Fund ETFs on the Way

By Carl Delfeld of Chartwell ETF and ETFfolios

New hedge fund ETFs are on the way and not a moment too soon.

IndexIQ has filed to launch the first family of ETFs designed to emulate the performance of hedge fund strategies. The funds, branded "IQShares," will use portfolios of other existing ETFs to synthetically replicate the return characteristics of five different hedge fund strategies:

IQ Hedge Multi-Strategy Composite
IQ Hedge Global Macro
IQ Hedge Long/Short Equity
IQ Hedge Event-Driven
IQ Hedge Market Neutral

Index Universe notes that the funds will hold a changing portfolio of other ETFs, including equity, fixed income, commodities and leveraged/inverse ETFs. Together, the portfolios will aim to "generate total return and volatility results … that are substantially similar" to the publicly reported returns of hedge funds following a particular investment approach. The prospectus warns that the funds will try to deliver these returns on a long-term basis; short-term results may vary.

It will be interesting to see what kind of fees these ETFs will have given their fund of funds approach. ETFfolio will build a Hedge Fund ETFfolio weighting these ETFs in a basket.

The prospectus for the hedge fund ETFs is here.

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