If you’re interested in following risk-adjusted returns of the collective hedge fund universe via one ETF, take a look at “IndexIQ’s IQ Hedge Multi-Strategy Tracker ETF (QAI):”
IndexIQ’s IQ Hedge Multi-Strategy Tracker ETF (NYSE Arca: QAI) has been named the Most Innovative ETF by Capital Link, it was announced today. The IQ Hedge Multi-Strategy Index, the index underlying QAI, also was recognized by Capital Link as the Most Innovative Index, marking the first time a single firm has been awarded this distinction in both the ETF and Index categories.
…
IndexIQ is a leading developer of index-based alternative investment solutions, offering Exchange-Traded Funds (ETFs), mutual funds and separately managed accounts. The IQ Hedge Multi-Strategy Tracker ETF was introduced on March 25, 2009, and was the first U.S.-listed hedge fund replication ETF. It 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 products are designed to be liquid, transparent, low cost, and accessible to a broad range of investors.* QAI, MCRO and IQ ALPHA Hedge Strategy Fund are not hedge funds and do not invest in hedge funds.
The ETFs should be considered a speculative investment entailing a high degree of risk and are not suitable for all investors. An investment in the ETFs does not represent a complete investment program.
Past performance is not a guarantee of future results. Since QAI has been only on the market for a little over a year, it’s not possible to determine how this ETF would have performed in a bear market, such as 2008. On the bullish side, it’s been disappointing when you look at it on a year chart and compare it to the Total Stock Market ETF (VTI):
[Emphasis added]
Of course, this may not be bad at all, if QAI either avoided the crash of 2008 or actually produced a positive return. When evaluating a fund or a strategy, you always need to combine bullish and bearish periods to arrive at a fair conclusion. In this case, we’ll have to wait and revisit this ETF when the next bear market strikes.
The volume is still pretty low with an average of $1 million per day traded, while the bid/ask spread sports a somewhat high 2 cents.
While the concept sounds intriguing, more data is needed to arrive at a conclusion as to whether QAI has merit. Just because it’s considered one of the most innovative ETFs, does not mean it’s appropriate at this time.
Disclosure: We have holdings in VTI but not QAI.