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Six Hedge Fund ETFs For Average Investors

July 19th, 2011

This weekend’s Barron’s has an article Hedge-Fund Strategies for the Masses that discussed the following ETFs:

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WisdomTree Managed Futures Strategy    (WDTI)
Credit Suisse Merger Arbitrage Liquid Index ETN  (CSMA)
Cambria Global Tactical ETF  (GTAA)
Credit Suisse Long/Short Liquid ETN  (CSLS)

Regular readers might be familiar with our report published on SeekingAlpha 5 Hedge Fund ETFs to Watch. These ETFs are monitored weekly on our ETFs in asset classes page.The following shows the performance table:

As of 07/15/2011

Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe
IQ Hedge Multi-Strategy QAI 5.2% NA NA 30 130.52%
Credit Suisse Merger Arbitrage CSMA NA NA NA 28 NA
Mars Hill Global Relative Value GRV -13.38% NA NA 10 -101.0%
PowerShares S&P 500 BuyWrite PBP 4.27% -1.32% NA 31 74.32%
ProShares Credit Suisse 130/30 CSM 20.51% NA NA 19 146.25%
Cambria Global Tactical ETF GTAA NA NA NA 53 NA

Cambria Global Tactical ETF (NYSE:GTAA) was just recently added to the table. This ETF is managed by Mebane Faber and Eric Richardson, authors of The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

Mebane Faber is no stranger to MyPlanIQ’s strategies. Our tactical asset allocation strategy bears some similarity with some ideas proposed in his articles. It is thus interesting to undestand more on this ETF.

Based on Barron’s, GTAA’s neutral allocation is 20% in five categories: real estate, commodities, bonds, U.S. stocks and foreign stocks. These five assets are part of our six core asset classes (other than emerging market stocks). The fund holds about 80 ETFs. Let’s compare it with our simplest Six Core Asset ETFs Tactical Asset Allocation Moderate Portfolio.

Portfolio Performance Comparison

Portfolio/Fund Name 2010 2011 2011 Sharpe 2011 Drawdown
GTAA 1.96% 2.19% 0.46    6.1%
Six Core Asset ETFs Tactical Asset Allocation Moderate 9.27% 4.25% 0.49    4.6%
S&P 500 (SPY, SPX) 14.58% 5.7% 0.84   6.9%

Since GTAA was started on 10/26/2010, the comparison in 2010 is not meaningful. Furthermore, with the fund’s $184 million asset size, it is understandable that it tries to invest in many ETFs for diversification purpose.

Since all of these hedge funds are very new, investors need to monitor these for a while to fully understand how they behave. However, with its simplicity and long history of practice in wealth management, we have confidence on GTAA’s future.

Written By The Staff Of MyPlanIQ.com

LTI Systems, Inc. is the operator of MyPlanIQ.com and ValidFi.com. The founders of LTI Systems have extensive technology and business background in computer and semiconductor industries. They have been using the strategies provided by MyPlanIQ for their own personal retirement and taxable investments. The mission of LTI Systems is to make wealth management investment strategies that are used to be only accessible to institutions and high net worth individuals available to private investors with a fraction of flat cost and ease of use. The founders of LTI Systems, investors themselves, take pride in creating such a system and service for investors by taking the perspective from the investor side. They are using the system and the strategies for their own investment and align their interests with their customers.  

MyPlanIQ’s blog provides periodical articles to discuss issues related to retirement plans (401(k), 403(b) and IRAs), deferred compensation plans (457), college savings plans (529), taxable brokerage investment accounts, variable annuities and universal life insurance plans. It also covers investment strategies, specifically strategic and tactical asset allocation and investment products such as ETFs and mutual funds. In addition, it syndicates daily articles that are related to retirement planning, personal finance, investment strategies, annuities, insurance, college savings and market/economic outlooks. It provides a comment and discussion community for readers.


NYSE:CSLS, NYSE:CSMA, NYSE:GTAA, NYSE:WDTI


 

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