Why Hedge Fund Replication ETFs Are Catching On

Hedge funds and their strategies are no longer just for the elite - exchange traded funds (ETFs) are now offering them, too, to the excitement of investors who have long dreamed of having access.

Index IQ has just expanded its lineup with a second ETF using a hedge fund replication strategy in addition to filing for several more. The two ETFs offered now are:

• Hedge Fund Macro Strategy Tracker ETF (MCRO), launched this week
• IQ Hedge Multi Strategy Tracker ETF (QAI) up 17% since March inception

According to Steve Orlofsky for Reuters both funds have an expense ratio of 0.75% and invest in a variety of ETFs. Computers generate the hedge fund mix. The new fund tracks an index that covers both global and macro emerging markets strategies.

QAI has seen plenty of investor interest, gathering $22 million in assets since its launch.

IndexIQ in April told the Securities and Exchange Commission that it plans to launch as many as 15 exchange-traded funds emphasizing different hedge fund strategies. Next up is a natural resources-based ETF, as well as commodities mixed with equities to hedge inflation.

Last year’s hedge fund performance and the angry investors who lost big are ready for this opening within the markets, which will give them access to hedge fund strategies while utilizing all the benefits of ETFs.

Meanwhile, WisdomTree is planning three hedge fund ETFs. One will follow a long/short strategy, while another managed futures. The third will invest in a portforlio of inflation-linked securities with a focus on commodities and commodity strategies.

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