2 New ETFs Going After Hedge Funds

The leading developer of liquid alternative investment products, IndexIQ, launched two new ETFs Tuesday. The IQ Hedge Long/Short Tracker ETF QLS and the IQ Hedge Event-Driven Tracker ETF QED, are the fifth and sixth additions to IndexIQ's hedge fund replication product portfolio.

Hedge Fund Replication Product Portfolio

With the addition of the two new ETFs, IndexIQ has covered the four major hedge fund categories (equity hedge or long/short, event-driven, market neutral and global macro).

The new ETFs aim to provide investment results similar to that of a hedge fund; however, they offer high liquidity. This is a luxury that is not usually afforded in the alternative investment world, as investors' money is typically locked up for a period of time.

Related Link: 2 New Super-Dividend ETFs

Both ETFs use a series of short and long positions to take a position on one side, while hedging on the other side to hedge in the event of a market move in an unexpected direction. The new ETFs, along with IndexIQ's existing products, allow investors to create a hedge fund style portfolio with lower costs and more liquid ETFs.

IQ Hedge Long/Short Tracker ETF

QLS is made up of 18 long and 21 short ETFs, for a total of 39 positions. The ETF seeks to provide performance similar to a long/short hedge fund with low correlation to the equity market.

The top individual holdings include:

• PowerShares Exchange-Traded Fund Trust II BKLN with a 29.7 percent holding
• iShares IBoxx $ Invest Grade Corp Bd Fd LQD making up 12.9 percent of the ETF
• iShares Russell 2000 Growth Index (ETF) IWO coming in at 10.9 percent

The largest short position is the iShares MSCI Emerging Markets Indx (ETF) EEM at 9.8 percent allocation.

QLS began trading Tuesday at $20 and has an expense ratio of 1.10 percent.

IQ Hedge Event-Driven Tracker ETF

QED is made up of 20 ETFs with nine long positions and 11 short positions. The ETF seeks to provide investment results similar to hedge funds that use an event-driven strategy.

The top individual holding include:

• SPDR Barclays Convertible SecETF CWB making up 42 percent of the ETF
• Vanguard Total Bond Market ETF BND at 21.4 percent
• iShares Barclays Aggregate Bond Fund AGG totaling 19.8 percent

The largest short position is the iShares S&P 500 Growth Index (ETF) IVW with a 7.6 percent holding.

The new ETF began trading Tuesday at $20 and has an expense ratio of 1.00 percent.