Another Hedge Fund ETF Launches (MCRO, QAI)

NYSE Euronext has begun trading the IQ Hedge Macro Tracker ETF (NYSE: MCRO), sponsored by IndexIQ Advisors LLC.  This marks the second product by IndexIQ Advisors to list on NYSE Arca after its IQ Hedge Multi-Strategy Tracker ETF (NYSE: QAI) launched on March 25.

The ETF’s investment objective is to seek investment results that correspond to the price and yield performance of the IQ Hedge Macro Index, its underlying index.  The underlying index also has a particular focus on emerging markets.

Where this gets interesting, and perhaps where it gets complicated, is that the stated investment objective is not fundamental and may be changed without shareholder approval.  In short, the ETF will be managed just like hedge fund where essentially investors find out what has been done after the fact.

The strategy uses a top-down macro analysis to identify dislocations in equity, fixed-income, currency and commodity markets that are expected to lead to large price movements.  It ‘generally’ gives exposure to U.S. small-cap equities, as well as emerging market equity, debt and sovereign debt.  More exposure is in U.S. and foreign investment grade debt, short and intermediate term U.S. government debt, foreign sovereign debt, Foreign currencies and underlying futures, real estate investment trusts, and commodities.

When this IQ Hedge Multi-Strategy Tracker ETF (NYSE: QAI) launched in March, we thought that the single biggest challenge to acceptance here was not just the rotating strategies.  The liquidity and volume was where we had the largest concerns.  The good news is that the forst hedge fund ETF does trade every day.   Volume is still under 50,000 shares but it does trade every day and its price is up.  It has not kept up with the stock market as a whole by any means, but it has significant bond exposure and is not really a stock fund so to speak.  All things being equal, and in a world where investors want more and more immediate transparency, we will score the first IndexIQ hedge fund ETF a success.  The proof in the pudding will of course come through time, but if Index IQ was not happy with its results of its first hedge fund ETF then it would likely not be unloading another one into a market crowded full of ETFs.

More detailed information can be found at the new ETF’s own website at IndexIQ.com.

Jon C. Ogg
June 9, 2009