Hedge funds are private pools of capital organized in a limited partnership. They are associated with high risk and sophisticated strategies to realize large gains.
The most common hedge fund category is absolute-returns funds. These funds aim to reach a predetermined rate of return regardless of the market environment. Their role is not to replace equity exposure but to improve the risk/return profile of a portfolio.
Recently, several ETFs have started to mimic these hedge fund strategies. Hedge fund ETFs include funds in the following categories:
- Broad-Based Hedge Fund Replication
- Long/Short ETFs
- Managed Futures ETFs
- Merger Abitrage ETFs
- Real Return Funds
With 40 ETFs traded in the U.S. markets, Hedge Funds ETFs gather total assets under management of $3.50B. The average expense ratio is 0.98%. Hedge Funds ETFs can be found in the following asset classes:
The largest Hedge Funds ETF is the IQ Hedge Multi-Strategy Tracker ETF QAI with $1.18B in assets. In the last trailing year, the best performing Hedge Funds ETF was the BTAL at 9.39%. The most-recent ETF launched in the Hedge Funds space was the Cambria Trinity ETF TRTY in 09/10/18.