Hedge Fund ETFs, Worth A Look? (QAI, MCRO)

Within the past several months 2 new ETFs have emerged that try and replicate general Hedge Fund performance. For both ETFs, IQ Hedge Multi Strategy (NYSE: QAI) and IQ Hedge Macro Tracker (NYSE: MCRO) this performance is based on the IQ Hedge Multi-Strategy Index.

QAI and the newer MCRO don’t directly invest in hedge funds. Instead, they invest in other investments like bond ETFs, equities, currency ETFs, commodities, etc. that try to replicate hedge fund performance.

Their track record is too short to establish if they are truly useful diversifiers or to calculate what their tracking error is. Over the next 1-2 years, once both ETFs have been exposed to a more diversified market environment, investors will know what use these new Hedge like ETFs will have.

Since July 14th (when MCRO was introduced) QAI is up 3%, MCRO is up 4.5%, while the S&P 500 is up 13%. The volatility of both ETFs has been much less than the S&P 500 over the same period. Both ETFs have a 0.75% expense ratio.