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AdvisorShares Plans Hedge-Fund-Like ETF

AdvisorShares, the Bethesda, Md.-based firm known for its actively managed ETFs, filed paperwork with U.S. regulators to market it second hedge-fund play with an actively managed fund-of-funds ETF that would take both long and short positions to track long/short hedge funds.

The QAM Equity Hedge ETF (NYSEArca:QEH) would aim to outperform risk-adjusted returns of about 50 percent of the long/short equity hedge fund universe—as defined by the securities included in the HFRI Equity Hedge Fund Index, AdvisorShares said in the filing.

Hedge funds typically seek out a variety of assets and investment vehicles, such as stocks, ETFs, ETNs and currencies that they believe will appreciate in value, and sell those positions they expect to depreciate, obtaining a hedged market exposure.

Companies like ProShares and Index IQ also offer hedge-fundlike ETFs. Such funds have resonated with investors because they bypass some of the challenges often associated with hedge funds, such as liquidity, fees and lack of transparency. Unlike mutual funds and ETFs, hedge funds aren’t required to be registered under the Investment Company Act of 1940, making their strategies notoriously opaque.

Earlier this year, AdvisorShares launched the Active Bear ETF (NYSEArca:HDGE), which, as the name suggests, short-sells equities. It has gathered more than $65 million in assets.

QEH Strategy

QEH will hold about 50 long and short positions in underlying ETFs and ETNs that tap into various segments and styles, the company said in the filing. Commerce Asset Management—QEH’s subadvisor—will look into about 50 market factors, such as exposure to country, sector, industry and currency, to determine the fund’s holdings.

The portfolio might also include derivatives such as swap contracts, and up to 60 percent of it could be tied to money market instruments or equivalents at any given time. No single position will exceed 10 percent of the total basket, the filing said.

AdvisorShares didn’t specify an expense ratio for QEH.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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