With yields on Treasuries ticking higher, investors who are concerned about higher interest rates can utilize a multi-strategy exchange traded fund as a fixed-income alternative.
For instance, the IQ Hedge Multi-Strategy ETF (NYSEArca: QAI) provides a diversified mix of alternative strategies, including multiple hedge fund investment styles, such as long/short equity, global macro, market neutral, event-driven, fixed income arbitrage and emerging markets.
“QAI may also serve as a hedge for your portfolio during rising rate environments as the Fund’s historical low correlation to bonds has resulted in outperformance during rising rate environments,” according to an Index IQ note.
Looking at back-tested historical data during 11 different rising rate periods, QAI’s strategy has outperformed the Barclays U.S. Aggregate Bond Index in all of those periods. The ETF is able to rebalance its exposure across the broad hedge fund strategies in response to the changing market conditions.
This type of ETF provides retail investors with hedge fund-esque strategies, without the costs associated with hedge funds. QAI, for instance, tries to reflect the performance of a customized index that tracks the risk-adjusted return characteristics of hedge funds and comes with a 0.91% expense ratio. The ETF also recently crossed over $1.0 billion in assets under management. [Hire Your Own Hedge Fund With This ETF]