Tailing a hedge fund strategy like event-driven investing is one way to extract gains in any market, and it’s all available in the convenience of an exchange-traded fund (ETF) wrapper in the IQ Hedge Event-Driven Tracker ETF (QED).
“An event-driven strategy is a type of investment strategy that attempts to take advantage of temporary stock mispricing, which can occur before or after a corporate event takes place,” an Investopedia article said. “It is most often used by private equity or hedge funds because it requires necessary expertise to analyze corporate events for successful execution.”
“Examples of corporate events include restructurings, mergers/acquisitions, bankruptcy, spinoffs, takeovers, and others,” the article added. “An event-driven strategy exploits the tendency of a company’s stock price to suffer during a period of change.”
The fund seeks investment results that track, before fees and expenses, the price and yield performance of the IQ Hedge Event-Driven Index. The IQ Hedge Event-Driven Index seeks to replicate the risk-adjusted return characteristics of hedge funds pursuing an event-driven strategy.
The Fund does not invest in hedge funds, and the Index does not include hedge funds as components. The Fund is not suitable for all investors.
- Event-driven exposure: Transparent, low-cost ETF exposure to the universe of event-driven hedge funds.
- Low correlation to equities: Invests in a combination of credit opportunities, such as high yield, leveraged loans, capital structure arbitrage, and event-driven equities.
- Portfolio diversifier: Provides diversification benefits and low correlation to other asset classes, which may improve a portfolio’s risk/return profile.
Convenience of an ETF
The beauty of ETFs are their ability to capture strategies in one dynamic, tradable asset. In the case of QED, getting a hedge fund strategy that requires deep analysis is bypassed by simply investing in the fund.
“Investors who use an event-driven strategy employ teams of specialists who are experts in analyzing corporate actions and determining the effect of the action on a company’s stock price,” the Investopedia article noted. “This analysis includes, among other things, a look at the current regulatory environment, possible synergies from mergers or acquisitions, and a new price target after the action has taken place.”
“A decision is then made about how to invest, based on the current stock price versus the likely price of the stock after the action takes place,” the article added. “If the analysis is correct, the strategy will likely make money. If the analysis is incorrect, the strategy may cost money.”
For more news, information, and strategy, visit the Alternative ETFs Channel.