Today we are looking at the “Alternatives” category and see a rather wide gap in assets under management across the top funds in the space. QAI (IQ Hedge Multi-Strategy Tracker ETF, Expense Ratio 0.75%) is by far the largest fund here, having debuted nearly six years ago in March of 2009 and having gathered more than $997 million since inception.
To be more specific about what this strategy does, fund literature states that “The IQ Hedge Multi-Strategy Index attempts to replicate the risk-adjusted return characteristics of hedge funds using multiple hedge fund investment styles, including long/short equity, global macro, market neutral, event-driven, fixed income arbitrage, and emerging markets.”
Holdings inside of this fund are all ETFs, and at the moment we see the heaviest exposure to names such as BND (Vanguard Total Bond Market, Expense Ratio 0.08%), BKLN (PowerShares Senior Loan, Expense Ratio 0.65%), and BSV (Vanguard Short Term Bond, Expense Ratio 0.10%), with smaller positions in equity oriented ETFs.
QAI is substantially larger than the second largest fund in this space WDTI (WisdomTree Managed Futures Strategy Fund, Expense Ratio 0.95%) which comparatively has $210 million in assets under management.
WDTI is followed by RLY (SPDR Multi-Asset Real Return ETF, Expense Ratio 0.70%) which has gathered about $178 million since inception. We see thirty two separate ETFs in the Alternatives category with a variety of
strategies represented ranging from Merger Arbitrage, to Market Neutral, Managed Futures, as well as Long-Short, but most of these funds remain very small in terms of their asset sizes.
Judging by the number of alternatives available to ETF investors across this broad category, the industry clearly believes that there is a robust future for Alternatives based ETFs which we would agree with, but there are clearly challenges in raising awareness about any one given strategy and why it may make sense, judging by the slow momentum or no momentum that many of the smaller funds in the category have shown over time.