Hedge Fund ETFs Head-To-Head: QAI vs. MCRO

by on April 19, 2013 | ETFs Mentioned:

While passive, index-based funds continue to reign supreme in terms of assets under management, investors have also started to tap into alternative asset classes available within the ETF universe in search of uncorrelated returns. With nearly half a dozen Hedge Fund ETFs to choose from, some might be left wondering which product is right for them. For starters, many investors have some misconceptions about hedge funds.

Despite financial media headlines, hedge funds don’t necessarily strive to generate eye-popping absolute returns; instead, most hedge funds are designed to hedge, dampening volatility and providing diversification benefits to traditional stock-bond portfolios [see Cheapskate Hedge Fund ETFdb Portfolio].

Among the hedge fund ETFs available, the IQ Hedge Multi-Strategy Tracker ETF (QAI, A-) and the IQ Hedge Macro Tracker ETF (MCRO, A-) separate themselves by being the biggest funds in the space, boasting $375 million and $62 million in total assets, respectively, under management [try our Free ETF Head-To-Head Comparison Tool].

Meet the Competitors: QAI vs. MCRO

Despite offering exposure to very similar strategies and even charging the same expense fee, QAI and MCRO are far from identical. Both funds launched in 2009, which makes historical returns analysis a bit of a challenge; however, the comparison chart below does offer some valuable insights:

The Bottom Line

The chart above reveals that QAI has a tendency to underperform MCRO when returns are positive; however, QAI is also more resilient since it manages to hold its ground better than MCRO when their respective strategies head south. All in all, hedge fund ETFs present an intriguing opportunity for investors looking to reduce the overall volatility of their portfolios, as they typically maintain relatively low correlations to stocks and bonds.

Follow me on Twitter @SBojinov

[For more ETF analysis, make sure to sign up for our free ETF newsletter]

Disclosure: No positions at time of writing.