Hedge Funds ETF Overview

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 42 ETFs traded in the U.S. markets, Hedge Funds ETFs gather total assets under management of $3.55B. The average expense ratio is 1.07%. Hedge Funds ETFs can be found in the following asset classes:

  • Alternatives
  • Equity

The largest Hedge Funds ETF is the IQ Merger Arbitrage ETF MNA with $964.19M in assets. In the last trailing year, the best performing Hedge Funds ETF was the DFND at 17.45%. The most-recent ETF launched in the Hedge Funds space was the First Trust Merger Arbitrage ETF MARB in 02/04/20.

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