Arthur: A True Hedge Fund In An ETF

January 15, 2014

Hedge funds look expensive and illiquid, unless you look at an ETF like QEH, Main Management's Kim Arthur says.

This is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today's article is by Kim Arthur, chief executive officer and founding partner of San Francisco-based Main Management.

Hedge funds are a $2.5 trillion asset class, before counting the leverage they employ. They have been around for decades and were originally available only to high net worth individuals.

More recently, their growth has exploded as institutions have increased their allocations. According to Preqin research, larger endowments, foundations and family offices—aka "smart money"—are allocating between 15 and 20 percent into this asset class.

1_Hedge Fund Allocations by Investor Type

A few fundamental issues dog hedge funds, including high costs; tax inefficiency; lack of liquidity; and lack of transparency.

We'll look at those shortcomings, but first, let's look at what we think is a better solution.


2_Historical Performance of HFRI Indices

There is a better solution: the exchange-traded fund, AdvisorShares QAM Equity Hedge ETF (QEH).

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