Inside The A+ Hedge Fund ETF

by on August 22, 2012 | ETFs Mentioned:

The proliferation of ETFs has opened up the investable universe to virtually anyone with a brokerage account; novice investors can trade alongside seasoned money managers in any number of asset classes that were previously simply out-of-reach for most, with everything from emerging markets bonds to commodities and in between. With innovation comes complexity, however, and with over 1,400 ETPs to choose from, some investors are undoubtedly intimidated by the sheer product lineup [see also How To Buy The Right ETF Every Time]. 

Luckily, the ETF Database offers investors an easy, clear cut way to sort through products that fall in the same corner of the market. ETFdb Realtime Ratings ease the product-selection burden by offering a transparent, rules-based framework for evaluating the efficiency of exchange-traded funds in the same category. Take for example hedge fund ETFs; with over a dozen offerings in this ETFdb Category, it’s no wonder that many can themselves struggling when it comes time to distinguish between all of these similar funds [try also Free ETF Analyzer].

ETFdb Realtime Ratings make it easier to narrow down your list of potential investments by assigning an objective score to each product. Each ETP is assigned a Realtime Rating, ranging from A+ to C, on each of six different metrics including Liquidity, Expenses, Performance, Volatility, Dividends and Concentration; then the fund with the highest average score across all of the metrics is awarded an A+ rating within its respective ETFdb Category.

IQ Hedge Multi-Strategy Tracker ETF (QAI, A+)

Investors looking to diversify their portfolio with an uncorrelated source of returns ought to consider IndexIQ’s QAI as this ETF holds the highest overall score possible in the Hedge Fund ETFdb Category. Investors should note that funds in this category are not awarded dividend or concentration scores given the more dynamic nature of their portfolios. QAI is linked to the IQ Hedge Multi-Strategy Index, which offers broad exposure to a number of hedge fund investment styles, including: long/short equity, global macro, market neutral, event-driven, as well as fixed income arbitrage.

QAI presents itself as a viable tool for investors looking to diversify beyond traditional, passive indexing strategies. The underlying strategies employed by QAI should not be expected to generate stellar gains however, instead this ETF may offer a way to improve risk-adjusted returns for buy-and-hold investors over the long-haul [see also Cheapskate Hedge Fund ETFdb Portfolio]. 

Cost-conscious investors may wish to consider the Credit Suisse Long/Short Liquid Index ETN (CSLS, A-) as this is the cheapest offering in the space. On the other hand, those who prefer relative stability should take a closer look at the IndexIQ Real Return ETF (CPI, A-) as this offering holds the highest possible volatility score in the hedge fund category; in other words, CPI boasts the lowest volatility among competitors in the space.  

ETFdb Pro members have access to Realtime Ratings for all 1,400+ U.S. listed ETPs as well as unlimited data download capabilities across all of the toolstypes and category pages.

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Disclosure: No positions at time of writing.