IndexIQ, a leading US-based provider of alternative index-based exchange-traded funds (ETFs), has announced the launch of the IQ Hedge Market Neutral Tracker ETF (QMN).

IQ Hedge Market Neutral Tracker ETF is the newest addition to IndexIQ’s hedge fund replication family.

The latest addition to the firm’s hedge fund replication ETF family, QMN tracks the IQ Hedge Market Neutral Index, a proprietary index designed to offer investors liquid and transparent market neutral hedge fund exposure, by investing in a range of ETFs.

The IQ Hedge Market Neutral Index seeks to replicate the risk-adjusted return characteristics of the collective hedge funds using a market neutral hedge fund investment style. Market Neutral hedge funds typically invest in both long and short positions in asset classes while minimising exposure to systematic risk.

These strategies seek to have a zero beta (or market) exposure to one or more systematic risk factors including the overall market (as represented by the S&P 500 Index), economic sectors or industries, market cap, region and country. Market neutral strategies that effectively neutralise the market exposure are not impacted by directional moves in the market.

As of 31 August, the index had 58.7% allocated to short-term bonds, 16.2% allocated to broad bonds, 12.8% allocated to international equity, 5.1% allocated to convertible bonds and 4.3% allocated to high-yield bonds. The remainder of the index was allocated to currencies. In terms of individual index constituents, the top five were Vanguard Short-Term Bond ETF (BSV), iShares Barclays 1-3 Yr Treasury Bond ETF (SHY), Vanguard Total Bond Market ETF (BND), iShares MSCI EAFE Index ETF (EFA) and iShares Barclays Aggregate Bond ETF (AGG).

Commenting on the launch, Adam Patti, IndexIQ CEO, said: “Market Neutral is one of the largest hedge fund investment styles, both in terms of the number of funds and in the amount of assets being put to work. After incubating the index underlying QMN for four years, we felt it was an excellent time to roll out this strategy, particularly given the volatility and uncertainty inherent in today’s market environment.”

Patti added: “As we add QMN to our fund family, IndexIQ now has ETFs for investors who want to gain liquid, transparent, low cost exposure to market neutral, global macro, and hedge funds of funds. We’re very pleased to be the pioneer in yet another area of the alternative investment landscape.”

Since its founding in 2006, IndexIQ has emerged as the leader in the “hedge-style” ETF category by assets under management. Its IQ Hedge Multi-Strategy Tracker ETF, highlighted below, is the largest “hedge-style” ETF by assets.

Other ETFs launched by IndexIQ in the alternatives space include:

• IQ Hedge Multi-Strategy Tracker ETF (NYSE Arca: QAI), designed to be a core holding in the alternative category, and the first US-listed hedge fund replication ETF;
• IQ Hedge Macro Tracker ETF (NYSE Arca: MCRO), designed as an equity alternative, and the first Global Macro hedge fund replication ETF.
• IQ Merger Arbitrage ETF (NYSE Arca: MNA), designed as an equity alternative, and the first merger arbitrage ETF;
• IQ Real Return ETF (NYSE Arca: CPI), designed as a cash alternative, and the first US-listed “real return” ETF, which seeks to generate a real return above the rate of inflation as measured by changes in the Consumer Price Index.

IQ Hedge Market Neutral Tracker ETF (QMN) is listed on the NYSE Arca and has total annual fund operating expenses of 0.99%.