IndexIQ, the Rye Brook, New York-based fund provider known for
its niche strategies, is expected to roll out next week another
hedge fund replication ETF, an equities fund with a market-neutral
strategy.
The IQ Hedge Market Neutral ETF (NYSEArca:QMN) is a
fund-of-funds portfolio that's designed to replicate the returns of
a group of hedge funds employing a market-neutral strategy.
To do so, the fund can own both long and short positions in
equities while minimizing exposure to the "systematic components"
of risk. Indeed, at the end of August, the proprietary index
underlying the strategy tracked a varied basket of assets that
included short-term bonds, broad bonds, international equity and
currencies.
QMN, which is set to have a total annual fee of 0.99 percent,
including a 0.75 percent expense ratio, could be launched as soon
as Oct. 4, according to a company representative. However, that
date is tentative and could be changed.
Market-Neutral Strategies
Market-neutral strategies strive for zero beta-or
market-exposure by focusing on assets that show low correlation to
the broad stock market and other risk factors such as economic
sectors or industries, market capitalization and country exposure,
the company said in a filing submitted to U.S. regulators detailing
the fund.
"Market neutral strategies that effectively neutralize the
market exposure are not impacted by directional moves in the
market," it said.
This type of methodology isn't necessarily about downside
protection or even outsized returns, but "it aims for modest but
steady returns over time regardless of market conditions,"
IndexUniverse ETF analyst Paul Britt said.
"Another way to describe its goal is portable alpha (alpha
without beta)-a slight bit of outperformance without the market
exposure," said Britt.
QMN is the last of a trio of hedge fund replication strategies
IndexIQ filed for back in 2008. The IQ Hedge Multi-Strategy Tracker
ETF (NYSEArca:QAI) and the IQ Hedge Macro Tracker ETF
(NYSEArca:MCRO) were launched in 2009.
The fund will also join a roster of seven QuantShares
market-neutral ETFs that isolate different factors such as
momentum, size and value.
The latest filing, dated Aug. 27, was posted on IndexIQ's
website. The company first filed to market the fund in 2008.
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