The IndexIQ IQ Alpha Hedge Strategy Fund (IQHIX – Institutional Class; IQHOX – Investor Class), the no-load, open-end mutual fund that launched the “liquid alternatives” revolution, marked its 5-year anniversary on June 30, 2013, it was announced today. At its introduction, the IndexIQ fund was the first open-end hedge fund replication mutual fund in the market. Total assets in U.S. alternative mutual funds and Exchange-Traded Funds (ETFs) are now approximately $550 billion, according to a recent report from SEI.1
“The advisor community has been critical in helping their clients understand how alternatives can navigate the markets in times of heightened volatility and uncertainty. This education process is critical to the continued growth of the asset class.”
“Since we launched the IQ Alpha Hedge Strategy Fund, both retail and institutional investors and their advisors have come to embrace ‘liquid alternatives’ as an asset class, recognizing that these funds can bring diversification, liquidity, and other desirable characteristics to an investment portfolio,” said Adam Patti, chief executive officer at IndexIQ. “We are confident that this trend is still in its infancy.”
The IQ Alpha Hedge Strategy Fund is designed as a core holding for investors, providing broad market exposure and also acting as a replacement for more costly traditional hedge funds. It uses a proprietary investment process to synthesize the risk and return profiles of a broad range of hedge fund investing strategies, seeking to deliver hedge fund-like performance in a low cost, transparent, and highly liquid investment vehicle. The rules-based investment process selects components from a wide array of ETFs that cover commodities, currencies, stocks, bonds and real estate. Since its launch, the fund has performed as follows:
|Since Fund||Since Index||Inception|
|1 Month||3 Month||YTD||1 Year||3 Year||5 Year||Inception*||Inception*||Date|
|Index – IQHGALPH||-2.81%||-2.11%||-0.70%||3.76%||4.75%||4.59%||4.63%||3.27%||10/31/2007|
*Performance greater than 1 year is annualized. The performance data quoted above represents past performance, which is not a guarantee of future results. Investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than performance data quoted. Fund returns reflect dividends and capital gains distributions. Fund performance current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. IQHIX Total Annual Fund Operating Expenses of 1.16% and Expense Ratio of 1.43%; IQHOX Total Annual Fund Operating Expenses of 1.65% and Expense Ratio of 1.92%.
Adoption by financial advisors
Growth in liquid alternatives has been driven in part by financial advisors, who may use the funds as part of an overall portfolio allocation strategy. Nearly three-quarters of financial advisors currently use alternative strategies, according to a study by Financial Advisor Magazine, and they continue to expand their allocations.2
“Many individuals are just beginning to learn the role alternatives can play in a portfolio,” said Patti. “The advisor community has been critical in helping their clients understand how alternatives can navigate the markets in times of heightened volatility and uncertainty. This education process is critical to the continued growth of the asset class.”
IndexIQ’s leadership in liquid alternatives extends beyond open-end mutual funds to the ETF marketplace as well. The firm introduced the IQ Hedge Multi-Strategy Tracker ETF (NYSE Arca: QAI), the first liquid alternatives ETF in 2009. Its family of liquid alternative ETFs now also includes 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; 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; and IQ Global Resources ETF (NYSE Arca: GRES), the first hedged global natural resources ETF.
IndexIQ’s Rules-Based Alpha solutions combine the benefits of traditional index investing — rules-based methodologies, low turnover, tax efficiency, low cost, systematic rebalancing and no manager selection risk — with the alpha potential sought by active managers. They increasingly 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 firm’s indexes underlie a variety of investment products including ETFs, mutual funds, separately managed accounts, model portfolios, and institutional accounts.
Other IndexIQ funds include:
- 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.
1) SEI, “The Retail Alternatives Phenomenon,” May 13, 2013.
2) Financial Advisor, “Ready or Not, Alternative Investments Are Going Mainstream,” December 6, 2012.
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.