Boutique ETF manager IndexIQ is filling out its product line as it prepares to be absorbed by New York Life Insurance Co., a launch that will mark the
maiden voyage into the ETF space for New York Life's Mainstay Investments unit.
With just months to go before the
acquisition that was announced in December is finalized, IndexIQ is introducing two more alternative-strategy exchange-traded funds to be pushed out by New York Life's massive salesforce.
IQ Hedge Long/Short Tracker ETF (QLS) and IQ Hedge Event-Driven Tracker ETF (QED) will launch Tuesday, joining three existing alternative-strategy ETFs, the $23 million IQ Hedge Macro Tracker ETF (MCRO), the $15 million IQ Hedge Market Neutral Tracker ETF (QMN), and the $954 million IQ Hedge Multi-Strategy Tracker ETF (QAI).
While the multi-strategy fund is designed to give investors broad alternative exposure, the four specific ETFs are designed to enable investors and advisers to build their own customized exposure to alternatives, according to Adam Patti, IndexIQ chief executive officer.
“They're all different hedge fund styles that will do different things in different environments,” he said. “By managing the weightings of the strategies we offer, an investor or adviser can create a portfolio with a wide range of risk-return characteristics, from conservative to moderate to aggressive.”
The indexes on which the two newest ETFs are based were launched in 2008 along with the indexes for the three existing ETFs, so the new funds essentially have track records.
The event-driven index has a three-year annualized return through December of 6.4%, which compares to a 7.4% three-year annualized return for the HFRI Event Driven Index.
The long/short index over the same period had an annualized gain of 8.2%, which compares to 7.7% for the HFRI Equity Hedge Index.
Once the acquisition of IndexIQ is complete, Mr. Patti said he will continue to manage the alternative ETF unit. The main difference, he said, will be New York Life's distribution potential.
“They've got like 150 or 200 sales and marketing people,” he said. “Right now, we've got seven.”
The mutual fund universe has already seen what a big distribution force can do to an alternative-strategy investment product.
The Mainstay Marketfield Fund (MFLDX), which was absorbed by New York Life's Mainstay Investments fund family in October 2012 has been on an
assets-under-management roller coaster ride ever since.
From $3.3 billion at the time it became part of Mainstay, the fund's assets ballooned to a high of $21.4 billion in February 2014,
and are now at $7.3 billion following some disappointing performance.
Both Mainstay representatives and Morningstar Inc. analysts have maintained that the flood of new money was not the reason the fund underperformed. But it would be difficult to argue that the underperformance wasn't a cause of the assets moving out of the Marketfield fund.
Mr. Patti, who is banking on New York Life's salesforce driving assets into his alternative ETFs, said there is no risk of asset levels tilting the strategies out of whack.
“These ETFs are very different products than the Marketfield fund,” he said. “The ETFs are market exposure products, not alpha products.”
