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Tuesday, June 09, 2009

A Second Hedge Fund Replicator Hits the ETF Shelves

News summary by MFWire's editors

A new ETF offering seeks to capture the return characteristics of two hedge fund strategies. IndexIQ today revealed the launch of the IQ Hedge Macro Tracker ETF . The fund comes with an expense ratio of 75 basis points and tracks the IQ Hedge Macro Index, which seeks to replicate the risk-adjusted return characteristics of hedge funds employing a macro strategy.

The underlying index has a particular tilt towards emerging markets, and will use macro analysis as a means of identifying investment exposure. Components of the index include US small-cap equity, emerging market equity, commodities, REITs, foreign currencies and currency futures, foreign sovereign debt, US and foreign investment grade debt and sovereign debt.

Adam Patti, IndexIQ's CEO, noted the fund's aim of combining growth while minimizing volatility.

"The goal with the IQ Hedge Macro Tracker ETF is to provide investors with exposure to the high-growth segments of global markets and asset classes, emphasizing the importance of emerging markets, while managing overall portfolio volatility," Patti said.

The Macro Tracker will, as a fund of funds, invest mainly in other ETFs.

The new fund comes on the heels of the IQ Hedge Multi-Strategy ETF , which was launched this spring as the first US-listed hedge fund replication ETF (see MFWire , 3/25/09).


NEW YORK, (June 9, 2009) – The first Exchange-Traded Fund (ETF) designed to replicate the risk and return characteristics of global macro and emerging markets hedge funds was introduced today by IndexIQ (www.indexiq.com).

The IQ Hedge Macro Tracker ETF (NYSE Arca: MCRO) seeks to replicate, before fees and expenses, the returns of the IQ Hedge Macro Index, combining both Global Macro and Emerging Markets strategies. Global Macro hedge fund strategies generally span the globe in search of investment opportunities, employing a top-down approach to identifying market inefficiencies and dislocations, and typically invest in a range of instruments and asset classes including stocks, bonds, commodities, and currencies.

Emerging Markets strategies generally attempt to identify investment opportunities in the more rapidly growing emerging market countries, including the BRIC nations of Brazil, Russia, India and China. By combining the two strategies in a single ETF, IndexIQ seeks to provide broad asset class exposure with an emphasis of emerging markets, while reducing the overall volatility of the portfolio.1 While emerging markets equities have performed well in 2008, they have historically exhibited higher volatility.

“MCRO offers access to two strategies that historically have performed well after significant market dislocations,” said Anthony B. Davidow, EVP & Head of Distribution at IndexIQ. “Investors have been seeking an efficient way of accessing the two strategies. Following the launch of QAI, we received a lot of interest in offering the individual hedge fund strategies underlying QAI on a stand-alone basis.”

First Global Macro & Emerging Markets ETF Introduced by IndexIQ/Page 2 IndexIQ utilizes a proprietary rules-based methodology to construct the IQ Hedge Macro Index, with the relative weightings of the Macro and Emerging Markets components increasing or decreasing over time based on the rules that govern the index. While the index is built using data on hedge fund strategy returns, the IQ Hedge Macro Strategy Tracker ETF does not invest directly in hedge funds. Rather, it uses factor and quantitative analysis to replicate the returns and common risk factors of hedge fund investing strategies, using existing Exchange-Traded Funds as the building blocks of the portfolio.

“The goal with the IQ Hedge Macro Tracker ETF is to provide investors with exposure to the high-growth segments of global markets and asset classes, emphasizing the importance of emerging markets, while managing overall portfolio volatility,” said Adam S. Patti, chief executive officer at IndexIQ. “The fund is designed to play a role in the portfolio of investors interested in both alternative asset classes and traditional emerging markets.” IndexIQ is the sponsor of the IQ Hedge Multi-Strategy Tracker ETF (NYSE Arca: QAI), the first-ever U.S.-listed hedge fund replication Exchange-Traded Fund (ETF), and the IQ ALPHA Hedge Strategy Fund (IQHIX and IQHOX), the first no-load, open-end mutual fund to bring hedge fund style investing to a broad range of investors, from sophisticated family offices to retail investors. IndexIQ products are designed to be liquid, transparent,* tax-efficient, and low cost as compared to traditional hedge fund investments.

*IndexIQ’s ETF holdings are available daily on IndexIQ’s website. 1 Source: Factset, Bloomberg and IndexIQ; volatility is based on research showing emerging markets equities 

Edited by: Meredith Mazzilli

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