IndexIQ Launches U.S. Hedge Fund Replication ETF

Mar 26 2009 | 2:24am ET

Just two weeks after Deutsche Bank launched the first-ever hedge fund index-linked exchange-traded fund in Germany, the U.S. is getting one of its own.

IndexIQ, which specializes in alternative investment indices and hedge fund replication products, has listed its IQ Hedge Multu-Strategy Tracker ETF (Ticker: QAI) on the NYSE Arca electronic exchange. The fund is designed to track the index of the same name, which it launched in September.

While the fund is designed to replicate the performance of hedge funds, including long/short equity, global macro, market-neutral, event-driven, fixed-income arbitrage and emerging markets funds, it does not invest in hedge funds at all. Instead, it consists entirely of other ETFs, with more than half of its assets held in the iShares Leham Aggregate Bond Fund, iShares Lehman 1-3 Year Treasury Bond Fund and iShares MSCI Emerging Markets Index Fund.

“A large body of academic research shows that one need not necessarily invest directly in a hedge fund to capture much of the potential benefits of the various hedge fund strategies,” Robert Whitelaw, a finance professor at New York University and chief investment strategist at IndexIQ, said.

“IQ Hedge Multu-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,” Adam Patti, CEO, said.

“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.”

Low cost, indeed: No two and 20 here; IndexIQ’s ETF boasts an expense ratio of 0.75%.

The rollout of the ETF comes just a few months after IndexIQ added Paul Mazzilli, arguably the leading ETF analyst, as senior advisor. Mazzilli had spent the previous 33 years at Morgan Stanley.

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