Additionally, Hoffstein suggests building out the portfolio with satellite positions, or smaller tilts, toward Index IQ Merger Arbitrage ETF (NYSEArca: MNA), ProShares RAFI Long/Short ETF (NYSEArca: RALS) and WisdomTree Managed Futures Strategy Fund (NYSEArca: WDTI). Combined, he argues that the different ETF strategies can add a diversified absolute return profile over time, which would help diversify away from traditional equity and fixed-income allocations.

Lastly, the QuantShares U.S. Market Neutral Anti-Beta Fund (NYSEArca: BTAL) may be used to further hedge equity correlation, which would help a portfolio during significant downturns.

Consequently, the suggested alternative ETF portfolio looks something like a 25% HDG, 25%, LALT, 25%, BTAL, 8.3% WDTI, 8.3% and 8.3% RALS. Hoffstein argues that using these alternative ETFs helps investors invest like a hedge fund would while diminishing the idiosyncratic risks of investing in a single hedge fund.

For more information on hedge-fund-esque strategies, visit our hedge fund category.

Max Chen contributed to this article.