Hedge Fund Replication Mutual Fund Marks One-Year Anniversary

One of the first no-load, open-end mutual funds designed to replicate broad-based hedge fund performance characteristics, the 'IQ ALPHA Hedge Strategy Fund' (IQHIX) has marked its one-year anniversary on June 30th, 2009.

For the trailing 12-month period, the fund was down -2.58 percent, compared to a loss of -26.21 percent for the S&P 500.

“The performance over the past year can be attributed to a number of factors, including the ability of the fund to hold both long and short positions, and the liquidity of the ETFs used to represent asset class exposures,” said Adam Patti, IndexIQ’s Chief Executive Officer. “As a result, we were able to continuously execute our strategy during the period, something not all hedge funds could do.”

The fund works by optimizing the relative index weights among six hedge fund strategies, Equity Long/Short; Global Macro; Emerging Markets; Fixed Income Arbitrage; Equity Market Neutral; and Event Driven.

The funds do not invest in hedge funds, but use ETFs and a variety of other highly liquid financial instruments to provide exposure to the components of the index in approximately the same weighting. It employs leverage totaling 25 percent of the portfolio to magnify returns.