Daniel Moser

The Problems with Hedge Fund ETF QAI

I am extremely confident this new index fund will do little more than completely screw investors who think they are getting a good deal. This portfolio might very well go up, but I sincerely doubt it will replicate anything resembling the components of the broad hedge fund indexes. Someone smarter than me should explain how exactly they can replicate a merger arb strategy using a bunch of fixed income etf's and a few other etf's? Yes, I am well aware that they can curve fit a combo of the etf's to arrive as some factor exposure to any individual strategy, but inherently they are capturing returns based on very different factor exposures. As a result investors who buy this etf are very likely to see performance numbers that are not related to the hedge fund indexes at all.

If you are an investor taking a look at a passive multi strategy vehicle, take a look at AQR's new mutual fund. They at least invest in the actual strategies which is far more likely to yield results that replicate the broad hedge fund indexes.

This new etf is for foolish investors.