Any thoughts on QAI? It’s a fund of funds consisting of 6 strategies: long-short (-16.7%) global macro (13.8%), market neutral (33.3%), event driven (33.3%), fixed-income arbitrage (33.3%), and emerging markets (33.3%). It is similar to the HFRX in that it’s created through synthetic exposures instead of the buy-hold-rebalance like the HFRI. I wonder what’s the mechanics behind the implementation though. This will definitely change the landscape in which active hedge funds charge their clients: the usual 2/20 structure seems to be unjustifiable given the creative ease it is these days to create these synthetic beta exposure. Any thoughts? Seems like a cheap way for the average investor to diversify. Surely I’m thinking about adding this to my long-term portfolio.
My wheels are spinning about it too. 75 basis points is not too bad for a management fee either. Do you have more information?
ETFs usually are kept close to NAV by arbitrage mechanisms. I would think it would be difficult to keep the prices in line because the hedge funds are typically much less liquid than other assets. This strategy would presumably work better as a closed end fund. Not sure how they do it as an ETF. EDIT: sorry, I missed that it uses hedge fund replication with liquid indices. It all depends on whether the replication model is stationary or not, I’d think. And in the hedge fund world, assuming stationarity tends to get you sh@t on by black swans.
http://www.indexiq.com/etfs/etfsiqh/etfsiqhmultistrat.html The holds are: iShares Lehman Aggregate Bond 23.95 iShares Lehman 1-3 Year Treasu 18.29 ISHARES MSCI EMERGING MARKETS INDEX ETF 10.94 Vanguard Total Bond Market ETF 8.4 POWERSHARES DB G10 CURRENCY 8.01 iShares iBoxx $ High Yield Cor 7.24 iShares Lehman Short Treasury 3.91 SPDR Lehman High Yield Bond ET 3.23 Vanguard Short-Term Bond ETF 3.1 SPDR Lehman 1-3 Month T-Bill E 2.35 VANGUARD EMERGING MARKETS ETF 2.18 UltraShort Russell2000 ProShar 2.04 iShares Lehman Treasury Inflat 1.81 PROSHARES ULTRASHORT MSCI EA 1.68 PowerShares DB Commodity Index 1.55 UltraShort Real Estate ProShar 0.47 SPDR BARCLAYS CAPITAL AGGREG 0.46 PROSHARES ULTRASHORT EURO 0.41
I’m feeling speculative. Perhaps I’ll throw $500 at this fund since I’m still contributing to my Roth. Does anyone see a serious downside? This will equate to 3-5% of my Roth holdings.
I don’t like the idea of leveraged ETFS in the fund’s holdings. Bad idea unless they are investing ultra s/t. I think we’ve all seen the long term holdings effects of leveraged etfs. For a multistrat fund there is virtually no equity exposure. Why would the fund be long emerging mkts yet ultra short the msci eafe?
I don’t like it. Looking at the holdings, it is full of traditional asset classes and on the fact sheet, the correlation with the S&P is 0.73 so not a great diversification play. I doubt the returns are going to be anything great given its 0.75% expense ratio plus the underlying expense ratios. I don’t trust their index composite returns either.
This is one of the sillier ideas I’ve seen in a while.
I think Goldman launched a similar mutual fund recently.
After sleeping on this idea, it seems rather silly. The holdings are traditional asset ETF’s (which also have mgmt fees) and they are simply long/short in a portfolio context. It is unlikely that at 75 basis points the fund manager will be motivated to perform exceptionally well. Hedge fund fees are set in order to provide an incentive for exceptional performance. This fund appears to lack that concept. I’ll keep an eye on the fund, but I’ll need more convincing before I allocate some funds to it. Perhaps this fund will set a precedent for other hedge fund ETFs to emerge?