IndexIQ has launched several funds in this space including the IQ Hedge Multi Strategy Tracker ETF (QAI), IQ Hedge Macro Tracker ETF (MCRO) and the IQ Merger Arbitrage ETF (MNA). All three funds have done a good job in terms of a low correlation to domestic equities but this also sets some reasonable expectations too. Year to date, all three funds have been close to flat either way while the S&P 500 is up 11%. If the market had been down a lot then these results would look very good but in this environment where markets are up a little the hedge replicators have been laggards. Had markets been up a lot this year they would have lagged too.
Private equity is targeted at 10% of the allocation. There are a couple of ways into this space including the PowerShares Global Listed Private Equity Portfolio (PSP), a mix of companies that operate funds and actual investment companies. The fund has a decent global footprint with exposures to many countries including Sweden, Canada and South Korea. Buying this fund is buying volatility that correlates very closely to the financial sector. At its worst, PSP was down 80% from its 2007 peak in a very similar fashion to the Financial Sector SPDR (XLF).
Another 10% goes to real estate. Just about every large ETF provider has a domestic large-cap REIT fund and not surprisingly they cover the same ground. iShares does offer some other funds that while not as popular might offer some differentiation including the iShares FTSE EPRA/NAREIT Developed Real Estate ex-US Fund (IFGL) which provides exposure to Hong Kong, Japan and Australia among other destinations, and the iShares FTSE NAREIT Residential Plus Capped Index Fund (REZ) which offers exposure to apartments and storage which might make sense if homebuying trends continue to flag.
Wien is partial to U.S. multinationals including companies like Procter & Gamble (PG), Johnson & Johnson (JNJ) and Coca-Cola (KO) which are all featured prominently in the iShares Morningstar Large Core Index Fund (JKL). Wien suggests 10% for this segment of the market.The final 10% is split between gold at 5% and a more generic "commodities." There are several gold ETFs with the most recent being the ETF Securities Gold Trust (SGOL). For the other commodities portion investors could consider something broad like the PowerShares DB Commodities Index Tracking Fund (DBC), a slightly narrower product like the iPath DJ UBS Agriculture Total Return ETN (JJA) or a single commodity tracker like the iPath DJ UBS Coffee Subindex Total Return ETN (JO) .
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