QAI is tries to reflect the performance of a customized index that tracks the risk-adjusted return characteristics of hedge funds, writes Corey Hoffstein of Newfound Research for Forbes. The fund uses an ETF of ETFs approach as its marque holdings are other ETFs, including well-known products such as the Vanguard Total Bond Market ETF (NYSEArca: BND) and the PowerShares Senior Loan Portfolio (NYSEArca: BKLN). [Advantages of Alternative ETFs]

Between 2008 and 2014, the alternative mutual funds and ETFs space expanded from 482 products to 1,569, with assets growing to $309 billion from $42.6 billion. QAI is participating in that growth, having topped $1 billion in assets under management earlier this year as the ETF closes in on its sixth anniversary.

Due to the multitude of alternative investment strategies available, advisors and clients should take the time to understand the products before adding them into a diversified portfolio, especially as usage is on the rise. About 60% of advisors allocate between 6% and 20% of assets into these products, pointing to factors like diversification, low correlation, enhanced risk-adjusted profile, absolute returns, poor bond market outlook, investments that clients wouldn’t find themselves and enhanced yield, according to Morningstar.

IQ Hedge Multi-Strategy Tracker ETF

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