Liquid alternatives from IndexIQ are continuing to prove attractive to financial advisors and investors looking to generate income but concerned about the impact of rising interest rates on their portfolios, according to IndexIQ, a leading developer of innovative Exchange-Traded Funds (ETFs).
“Concerns about the end of the Fed’s tapering continue to hang over both fixed income and equity investors”
“Investors and their advisors are faced with the challenge of trying to generate income while preserving capital in the face of an anticipated rise in interest rates,” said Adam Patti, chief executive officer at IndexIQ. “After the historic rise of fixed income prices due to historically low interest rates, investors are wondering what to do to diversify their fixed income exposure, which in the face of rising rates may result in significant losses on those fixed income securities. Liquid alternatives offer one potential way to address this issue since a rising rate environment historically has resulted in rising prices for this investment category. In addition to the yield, our alternative ETFs have generally demonstrated two other features likely to appeal to income-oriented investors: low volatility and a low correlation with both 10-year Treasuries and the overall equity market.”
The IQ Hedge Multi-Strategy Tracker ETF (QAI) was the first liquid alternative ETF to enter the market and is IndexIQ’s flagship fund with approximately $568 million in assets, a figure which has more than doubled over the course of 2013.
“Concerns about the end of the Fed’s tapering continue to hang over both fixed income and equity investors,” Patti said. “Our liquid alternatives provide a way to maintain exposure to the market while generating income, retaining the historical diversification benefits of fixed income, and mitigating against downside risk.”
Patti also noted that each of IndexIQ’s funds was designed to provide tax efficiency. “While the liquid alternatives space has exploded in popularity in recent years, not all funds are created equally from a tax efficiency perspective,” he said. “For example, none of our funds come with a K-1, which can be a time consuming and expensive burden for investors come tax time.”
IndexIQ has celebrated a number of milestones in 2013, including the fifth anniversary of IQHIX, the fourth anniversary of QAI, and the firm’s passing the $1 billion asset mark.
Other ETFs in the company’s liquid alternative family include IQ Hedge Macro Tracker ETF (NYSE Arca: MCRO), the first Global Macro/Emerging Markets hedge fund replication ETF; IQ Hedge Market Neutral Tracker (NYSE Arca: QMN), designed to provide Market Neutral hedge fund exposure; IQ Merger Arbitrage ETF (NYSE Arca: MNA), the first merger arbitrage ETF; and IQ Global Resources ETF (NYSE Arca: GRES), the first hedged global natural resources ETF.
The IQ Hedge Indexes are used as the basis for investment products worldwide, and as benchmarks for advisors to determine how well actively managed hedge funds and alternative mutual funds are performing. The indexes underlie a variety of investment products in addition to ETFs, including mutual funds, separately managed accounts, model portfolios, and institutional accounts.
In addition to the alternative products, other IndexIQ funds include:
- IQ Alpha Hedge Strategy Fund (IQHIX – Institutional Share Class; IQHOX – Investor Share Class), the first open-end, no-load hedge fund replication mutual fund;
- IQ Real Return ETF (NYSE Arca: CPI), the first US-listed “real return” ETF, which seeks to generate a real return above the rate of inflation as measured by changes in the Consumer Price Index;
- IQ US Real Estate Small Cap ETF (NYSE Arca: ROOF), the first US Real Estate Small Cap ETF;
- IQ Global Agribusiness Small Cap ETF (NYSE Arca: CROP), the first agribusiness small cap ETF;
- IQ Global Oil Small Cap ETF (NYSE Arca: IOIL), the first global oil small cap ETF;
- IQ Canada Small Cap ETF (NYSE Arca: CNDA), the first Canada small cap ETF; and,
- IQ Australia Small Cap ETF (NYSE Arca: KROO), the first Australia small cap ETF.
IndexIQ is a leading issuer of index-based liquid alternative solutions focused on absolute return, real asset and international strategies. IndexIQ solutions are offered as ETFs, Mutual Funds, Separate Accounts and Model Portfolios.