In a bid to attract retail investors who want access to the institutional hedge fund universe, AdvisorShares announced that the QAM Equity Hedge ETF (QEH) opened for trading Wednesday on the New York Stock Exchange.
The exchange-traded fund, which is subadvised by Memphis-based Commerce Asset Management (CAM), employs an actively managed long/short strategy that uses the HFRI Equity Hedge (Total) Index as its benchmark. The net expense ratio for QEH is 1.64%.
With the markets remaining virtually unchanged on the fund’s first day, the price of QEH remained unchanged, opening and then also closing at $25 per share. However, the NAV, which shows the actual value of QEH’s underlying holdings, closed at $24.99. Opening NAV was at $24.90.
Bethesda, Md.-based AdvisorShares, which offers 15 other actively managed ETFs totaling about $670 million, reports QEH’s top long holding, at a weight of 35%, as the iShares Barclays Short TR (SHV). Cash is weighted at 3.30% and the fund’s largest short holding, at -0.88%, is CurrencyShares Japanese Y (FXY).
“We clearly define our benchmark upfront,” said CAM Chief Operating Officer and QEH Co-Portfolio Manager Kurt Voldeng, in an interview in New York on the day of the launch. “Over time, a buy-and-hold investor should be able to achieve equity-like returns on the strategy with less volatility than the S&P 500.”
Before the ETF’s launch, advisors told Voldeng that they were looking for alternative investments that offer a lower barrier to entry. The advantage of QEH, he said, is its ETF structure that offers liquidity, transparency and tax advantages along with its lower cost.
“We’ve got a low minimum to get in. It’s $25 [per share], not $1 million,” he said, adding that the HFRI index has outperformed the market for the last 12 of 22 years versus only 10 of 22 years for the S&P 500 Index.
CAM Chief Investment Officer and QEH Co-Portfolio Manager Akos Beleznay said the ETF’s investment objective is to achieve results that exceed the risk-adjusted performance of approximately 50% of the long/short equity hedge fund universe as defined by the HFRI index’s constituents.
Beleznay, a former quantitative “rocket scientist” with a PhD in physics and a background of serving as CIO to the $300 million Equitas Evergreen fund of hedge funds, said he considers a review of the fundamentals to be an essential part of his monthly rebalancing of QEH.
Prior to the ETF launch, Beleznay ran the globally diversified QEH strategy live for two years as part of CAM’s fund of funds. He is the president of QAM, a majority-owned subsidiary of CAM, which is a registered investment advisor and a subsidiary of Commerce Holdings.
Along with its exposure to the HFRI Equity Hedge (Total) Index, CAM uses its own proprietary research with Markov Processes International’s Dynamic Style Analysis hedge fund analysis software.
“In utilizing CAM’s extensive network and knowledge within the hedge fund universe, we feel QEH offers a core alternative solution that investors could use to further diversify their portfolio, with a 20% to 30% allocation to core alternatives can help bring true diversification to investors’ asset allocation,” said AdvisorShares CEO Noah Hamman in a statement.
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