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. IndexIQ’s philosophy is to democratize investment management by making innovative alternative investment strategies available to investors in low cost, liquid and transparent products.* IndexIQ strategies are marketed through the company’s proprietary investment products and select partnerships with leading global financial institutions. Additional information about the company and its products can be found at www.IndexIQ.com.
*IndexIQ’s ETF holdings are available daily on IndexIQ’s website. Brokerage commissions apply to ETFs. ETFs are liquid in that they are exchange-traded. There are differences between investing in bonds and investing in liquid alternative ETFs. A bond is a debt instrument in which an investor loans money to a corporate or government entity that borrows the funds for a specified period of time at a fixed interest rate. Investors typically receive interest on the bonds when they mature. Bond funds hold a portfolio of bonds and can differ widely in strategies, ranging from U.S. Treasuries to high yields, from long-term to short-term. By contract, liquid alternative ETFs typically hold many non-bond securities, but provide investors with many of the same attributes as bond investing, such as dividend yield, lower volatility, and tax efficiency in terms of reduced capital gains distributions.
Index performance does not reflect charges and expenses associated with the Funds or brokerage commissions associated with buying and selling ETF shares. One cannot invest directly in an index.
The IQ Alpha Hedge Strategy Fund (IQ Fund), the IQ Hedge Multi-Strategy Tracker ETF (IQ Multi-Strategy ETF), and the IQ Macro Tracker ETF (IQ Macro ETF) are not hedge funds and do not invest in hedge funds. The IQ Alpha Hedge Strategy Fund is a registered open-end mutual fund that invests in exchange-traded funds (ETFs) and similar securities in an attempt to replicate the performance characteristics of certain hedge fund investing styles, but with less cost, more liquidity, and greater portfolio transparency than traditional hedge funds. There can be no assurance that the Funds’ investment strategies will be successful. The investment performance of the IQ Multi-Strategy ETF, the IQ Macro ETF and the IQ Real Return ETF (collectively, the IQ ETFs), because they are funds of funds, depends on the investment performance of the underlying ETFs in which they invest. There is no guarantee that the IQ ETFs themselves, or each of the underlying ETFs in the Funds’ portfolios, will perform exactly as its underlying index. The IQ ETFs are non-diversified and susceptible to greater losses if a single portfolio investment declines than would a diversified mutual fund. The IQ ETFs’ underlying ETFs invest in: foreign securities, which subject them to risk of loss not typically associated with domestic markets, such as currency fluctuations and political uncertainty; commodities markets, which subject them to greater volatility than investments in traditional securities, such as stocks and bonds; and fixed income securities, which subject them to credit risk; the possibility that the issuer of a security will be unable to make interest payments and/or repay the principal on its debt; and interest rate risk; changes in the value of a fixed-income security resulting from changes in interest rates. Leverage, including borrowing, will cause some of the IQ ETF’s underlying ETFs to be more volatile than if the underlying ETFs had not been leveraged.
Investors are reminded that all investing involves risk, including possible loss of principal. Consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. A prospectus with this and other information about the Funds may be obtained by visiting www.indexiq.com or by calling (888) 934-0777. Read the prospectus carefully before investing.
IndexIQ ETFs and mutual funds are distributed by ALPS Distributors, Inc., which is not affiliated with IndexIQ.
Mike MacMillan/Chris Sullivan