On Tuesday, Unlimited, a new investment firm formed by former Bridgewater Associates executive Bob Elliott, announced the launch of its first product, the Unlimited HFND Multi-Strategy Return Tracker ETF (NYSE Arca: HFND). Trading on the NYSE Arca, HFND uses a machine learning engine to track the gross-of-fee returns across several hedge fund indices.
Investors facing a period of high volatility and uncertainty are increasingly looking for investments that will diversify their portfolios to help weather varied market conditions. While hedge fund strategies have historically generated significant alpha, that alpha is typically eaten away by high fees and inefficient tax structures. HFND is designed to mitigate those costs, bringing a more sophisticated approach to hedge fund replication than has been typically employed in an ETF.
HFND is an actively managed ETF that will allocate toward a basket of ETFs and exchange-listed futures contracts to replicate the returns of those underlying hedge funds. Rather than rely on public filings, which can often provide information that’s too delayed or misleading to mirror investment positioning accurately, HFND instead uses an ensemble of machine learning algorithms that analyze real-time investment returns of a diversified set of hedge fund styles.
“After spending many years in the hedge fund industry, we’ve identified that investors are either ill-served by exorbitant fees in the asset class or are unable to access such exclusive strategies,” said Elliott in a news release. “With HFND, we are bridging what we see as a crucial gap in the market by bringing together the best parts of the hedge fund industry with the democratizing structure of an ETF. Ultimately, we believe every investor should have access to institutional quality return potential.”
The fund will typically hold long and short positions in 30-50 ETFs and exchange-listed futures contracts across asset classes. And with a management fee of 0.95%, its costs are well below the standard 2 and 20 cost of a typical hedge fund. The strategy will be managed by Elliott and Bruce McNevin, co-founder and chief data scientist at Unlimited.
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