From the December 2012 issue of Research Magazine • Subscribe!

Market Neutral ETF Debuts

IndexIQ introduced the the IQ Hedge Market Neutral Tracker ETF (QMN) in October. QMN is designed to offer investors liquid, transparent market neutral hedge fund exposure.

QMN will seek to track, before fees and expenses, the performance characteristics of the IQ Hedge Market Neutral Index (IQHGMN), part of IndexIQ’s proprietary IQ Hedge family of benchmark hedge fund replication indexes. The IQ Market Neutral Index (IQHGMN) has live performance dating from September 2008. 

“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,” said Adam Patti, IndexIQ CEO. “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. 

QMN is linked to the IQ Hedge Market Neutral Index and holds other ETFs within its portfolio. The top three holdings are the Vanguard Short-Term Bond ETF (BSV), iShares Barclays 1-3 Yr Treasury Bond Fund (SHY) and the Vanguard Total Bond Market ETF (BND). 

QMN’s market neutral approach means that it can invest in both long and short positions in various asset classes. 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 neutralize the market exposure are not impacted by directional moves in the market.

According to IndexIQ’s prospectus, QMN will charge annual expenses of 0.99%, which include the expenses of the underlying funds held within the portfolio.

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