ProShares has introduced an exchange traded fund that tries to duplicate the performance of a basket of hedge funds through an index designed by Merrill Lynch.
ProShares Hedge Replication ETF (NYSEArca: HDG) attempts to provide the risk and return profile of more than 2,000 hedge funds in the benchmark.
“Many portfolios could benefit from the risk/return characteristics of hedge funds, but investors often either can’t or don’t invest in hedge funds because of a variety of challenges,” said Michael Sapir, the ETF manager’s chief executive. “We are pleased to offer an ETF that addresses challenges of hedge fund investing and may be, for many investors, an attractive alternative to hedge funds.” [4 Exotic Type ETFs And How They Work.]
ProShares is best known for its leveraged and inverse ETFs and mutual funds. Its latest ETF will give investors exposure to the Merrill index of hedge funds. Hedge funds are the domain of big investors and high net worth individuals. They have high fees and lock-up periods, so investors may not always be able to withdraw their capital.
Some ETFs seek to give investors exposure to the performance characteristics of hedge funds through an index. They haven’t been a big hit with investors, at least yet.
The new ProShares ETF joins Index IQ Hedge Multi Strategy Tracker ETF (NYSEArca: QAI) and Index IQ Hedge Macro Tracker ETF (NYSEArca: MCRO) — QAI is the larger offering in terms of assets with more than $100 million. [ETF Manager Profile: Index IQ]
ProShares said the hedge fund replication ETF is the third in its Alpha ProShares lineup, along with ProShares RAFI Long/Short (NYSEArca: RALS) and ProShares Credit Suisse 130/30 (NYSEArca: CSM).
“Alpha ProShares are designed to provide advanced investment strategies in an ETF and represent ProShares’ further expansion within the alternative ETF space,” the firm said in a press release.
Tisha Guerrero contributed to this article.
(Article updated to correct asset figures for Index IQ ETFs.)