Bloomberg – In the investment world there are two kinds of people — those who want to beat the market, and those who want to be the market. Hedge fund managers are the former, while index fund managers are the latter. But what happens when an indexer wants to track the hedge fund market? You end up with funds bearing wonky, impenetrable-sounding names like the AdvisorShares QAM Equity Hedge (QEH) and AlphaClone Alternative Alpha (ALFA).
If you can make it past the jargony horror of the fund names and their strategies, they’re a pretty interesting bunch. The AdvisorShares QAM ETF, started last August, uses what’s known as a (you were warned) “beta replication” strategy to mimic the HFRI Equity Hedge Total Index of 1,000 hedge funds. “Attempts” is the key word because unlike a Standard & Poor’s 500-stock index fund, which can buy each stock in its benchmark, ETFs aren’t legally allowed to invest in illiquid hedge funds.
