IndexIQ Files For IQ Short Alpha ETF

IndexIQ has filed paperwork with the SEC for a “IQ Short Alpha ETF.” The IQ Short Alpha ETF (the “Fund”) seeks capital appreciation through short sales of primarily U.S. listed equity securities. They did not specify a trading symbol or expense ratio in the initial filing.


Investment Philosophy

According to conventional equity investing, whereby an investor “goes long,” the investor profits from an increase in the price of the stock. In contrast, “short selling” involves selling stock that has been borrowed from a third party with the intention of buying identical stock back at a later date to return to that third party. The basic principle of short selling is that selling stock now at a high price, to buy later at a lower price, is profitable. The short seller hopes to profit from a decline in the price of the assets between the sale and the repurchase, as the seller will pay less to buy the assets than it received on selling them. By identifying certain characteristics that make particular stocks likely to decline in value, a strategist can generate positive returns from short selling.

Investment Process

The portfolio management team uses equity recommendations from a leading investment research firm serving leading hedge funds, institutions, and other investors as the basis for the Fund’s positions. Each day, the research firm produces and delivers to the portfolio manager a group of equity security recommendations that the research firm deems to have the greatest potential for capital depreciation. These equities comprise the Fund’s portfolio. The recommendations may include exchange-traded funds (“ETFs”) registered pursuant to the Investment Company Act of 1940 (the “1940 Act”), exchange-traded notes (“ETNs”) and other exchange-traded products (“ETPs”).

The research firm uses a combination of fundamental macro and sector research along with quantitative models to generate investment ideas. The portfolio management team then takes the individual equity recommendations that come from the research firm and assigns them a volatility-adjusted weight. Accordingly, the equities with the lowest volatility are given the largest weights and the equities with the highest volatility are given the smallest weights.

For the complete filing click: HERE

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