ETF Chart of the Day: Multi-Strategy Style

Although with modest daily trading volume (about 115,000 shares), QAI (IQ Hedge Multi-Strategy Tracker ETF, Expense Ratio 0.75%) has attracted attention over time in the “Alternatives” ETP category.

Behind the very popular VXX (iPath S&P 500 VIX Short Term Futures ETN, Expense Ratio 0.89%) and coming in as the second largest “Alternatives” based ETP in the marketplace with about $799 million now in assets under management, we have highlighted QAI from time to time in this piece since its 2009 inception.

Based on the steady asset growth over time (>$166 million in net inflows year to date), it looks to us that QAI is being utilized as an asset allocation vehicle, more like a buy and hold, as opposed to a trading instrument, and this makes logical sense given its makeup.

According to fund literature, the index that QAI follows “attempts to replicate the risk-adjusted return characteristics of hedge funds using various hedge fund investment styles, including long/short equity, global macro, market neutral, event-driven, fixed income arbitrage and emerging markets.”

As we have mentioned in the past, QAI invests in ETFs to achieve these means, and when we look at the fund’s current holdings we see BSV (13.38%), BND (9.96%), BKLN (8.66%), and AGG (8.52%).

Clearly the index favors a fixed income bent currently, at least on the top end of the portfolio. Indexes that are cited as appropriate benchmarks for QAI are not only the Barclays Capital U.S. Aggregate Index and the S&P 500 Index, but the HFRI Fund of Funds Composite Index.