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 43 ETFs traded in the U.S. markets, Hedge Funds ETFs gather total assets under management of $3.11B. The average expense ratio is 1.06%. Hedge Funds ETFs can be found in the following asset classes:
- Alternatives
- Equity
The largest Hedge Funds ETF is the IQ Hedge Multi-Strategy Tracker ETF QAI with $738.70M in assets. In the last trailing year, the best performing Hedge Funds ETF was the BTAL at 24.30%. The most-recent ETF launched in the Hedge Funds space was the First Trust Merger Arbitrage ETF MARB in 02/04/20.