But new money isn’t exactly chasing the fund’s performance.
The IQ Hedge Multi-Strategy Tracker ETF (QAI | C-65), the first-to-market hedge-fund-style ETF launched by IndexIQ in March 2009, this week surpassed $500 million, representing a growth rate in excess of 50 percent year-to-date, according to the firm.
The ETF tracks the IQ Hedge Multi-Strategy Index, which replicates hedge fund returns by betting on various alternative investment strategies, including long/short equity, global macro, market-neutral, event-driven, fixed-income arbitrage and emerging markets, via other ETFs.
Year-to-date, QAI’s returns aren’t anything to get too excited about—the fund is up 2.40 percent through Sept. 30, versus a 16.35 percent gain for the S&P 500. Yet the fund has netted $190.45 million in new money this year, according to data compiled by IndexUniverse. It now has about $512 million in assets under management.
QAI’s top three holdings as of Oct. 8 are:
- Vanguard Total Bond Market (BND | A-96)
- iShares Core Total US Bond (AGG | A-97)
- iShares Russell 1000 Growth ETF (IWF | A-89)
So what gives?
“It’s an easy pitch for advisors to convey to their clients,” said Matt Hougan, IndexUniverse’s global head of content. “It makes them look good in that they’re giving clients access to hedge-fund-type exposure at a cheap price. It’s well sold.”
The fund’s management fee is 0.75 percent, or $75 for every $10,000 invested. However, its total operating expenses amount to 0.94 percent, or $94 for every $10,000 invested after adding acquired fund fees, the costs of owning other ETFs.
Adam Patti, IndexIQ’s chief executive officer, echoed Hougan’s sentiments.
“We are seeing tremendous interest in QAI from the financial advisor community, who increasingly are using the fund as their core hedge fund portfolio holding, while QAI also is being added to ETF model portfolios throughout the industry,” Patti said in a press release.
“Using QAI as a fixed-income alternative has resonated strongly with investors since QAI is designed to seek strong performance in rising rate environments with a similar volatility profile to the aggregate bond market, while providing a competitive yield,” he added.
The Federal Reserve was expected to begin a tapering of its bond buying at the end of its last meeting but held off because of its concerns over the relative weakness in the latest employment figures and over the current federal budget impasse.