AdvisorShares, the Bethesda, Md.-based firm known for its actively managed ETFs, today rolled out a hedge-fundlike ETF that strives to outperform risk-adjusted returns of long/short hedge funds and the S'P 500 Index over time.
The QAM Equity Hedge ETF (QEH) is an actively managed long/short equity strategy designed to beat returns of about 50 percent of the long/short equity hedge fund universe—as defined by the securities included in the HFRI Equity Hedge Fund Index. QEH costs a net of 1.64 percent.
The fund, which strives to have similar global net equity exposure to those of hedge fund managers included in the HFRI index, relies on Commerce Asset Management’s proprietary research and expertise. The Memphis, Tenn.-based investment advisor oversees some $700 million in assets.
QEH is the latest to join a growing family of ETFs that set out to replicate what hedge fund managers do. These ETFs have resonated with investors because they bypass some of the challenges often associated with hedge funds, such as liquidity, fees and lack of transparency. Unlike mutual funds and ETFs, hedge funds aren’t required to be registered under the Investment Company Act of 1940, making their strategies notoriously opaque.
Hedge funds typically seek out a variety of assets and investment vehicles, such as stocks, ETFs, ETNs and currencies that they believe will appreciate in value, and sell those positions they expect to depreciate, obtaining a hedged market exposure.
“Experienced hedge fund managers, represented in this index that QEH seeks to outperform, are difficult to get access to and a challenge to deal with regarding liquidity, transparency and tax treatment,” AdvisorShares’ chief executive officer Noah Hamman said in a press release.
QEH is AdvisorShares’ second hedge-fund play. Last year, the company rolled out the AdvisorShares Active Bear ETF (HDGE) which short-sells equities to hedge equity exposure. The fund has gathered $323 million in a year and a half.
QEH will hold about 50 long and short positions in underlying ETFs and ETNs that tap into various segments and styles, the company said in its most recent prospectus. The strategy looks into about 50 market factors, such as exposure to country, sector, industry and currency, to determine the fund’s holdings.
The portfolio might also include derivatives such as swap contracts, and up to 60 percent of it could be tied to money market instruments or equivalents at any given time.
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