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Extreme Market Volatility In August Highlights Track-Record Of Hedge Fund Replication Funds

As the global markets experienced one of their most volatile months in recent memory in August, several funds from IndexIQ, a leader in developing index-based liquid alternative investment products designed to “democratize” the alternative investment landscape, including absolute return, commodity and international investment solutions, outperformed the broad equity markets and the global hedge fund universe with less volatility, according to data released today.

“During periods of extreme volatility like the one we saw in August, investors tend to react out of fear and move out of the markets at exactly the wrong time,” said Adam Patti, CEO of IndexIQ. “By using our hedged products, or absolute return vehicles, investors may be able to dampen volatility, thus allowing them to maintain a consistent strategy of portfolio diversification.”

Among the funds Patti points to are the IQ Hedge Multi-Strategy Tracker ETF (QAI), the IQ Hedge Macro Tracker ETF (MCRO), the IQ Alpha Hedge Strategy Fund (IQHIX), and the IQ Real Return ETF (CPI), all of which are first-of-their-kind funds from IndexIQ designed to help mitigate volatility for investor portfolios, while retaining upside potential. The funds track either the broad performance characteristics of the hedge fund industry (for instance in the case of MCRO, global macro and emerging markets exposure), or provide a hedge against inflation risk (as in the case of the IQ Real Return ETF (CPI)). Following the celebration of its third anniversary, IQHIX was recently awarded a 5-Star overall Morningstar Rating TM and a #3 absolute ranking (and top 3% overall) out of 75 funds in the Multi-alternative category based on risk-adjusted performance.

The following table, showing the year-to-date and month-to-date performance of 4 IndexIQ alternative investment strategies as of August 31st is illustrative, particularly as compared to the performance of the S&P 500, which exhibited month-to-date returns of -5.43% (with 8.32% standard deviation) and year-to-date returns of -1.77% (with 10.44% standard deviation):

    MTD     YTD     1 Year    

Since Inception
IQ Hedge Multi-Strategy Tracker ETF (QAI)
NAV -0.83% 0.47% 2.87% 5.00%
Share Price -0.65% 0.51% 3.01% 5.07%
Standard Deviation 4.17% 3.69% 4.24% 5.26%
 
IQ Hedge Macro Tracker ETF (MCRO)
NAV -1.21% 1.31% 4.25% 5.67%
Share Price -1.24% 1.27% 4.16% 5.72%
Standard Deviation 6.75% 5.57% 5.91% 6.16%
 
IQ Real Return ETF (CPI)
NAV 1.33% 1.45% 2.15% 1.79%
Share Price 1.49% 1.37% 2.39% 1.79%
Standard Deviation 1.43% 2.48% 2.03% 2.10%
 
IQ Alpha Hedge Strategy Fund (IQHIX)
Returns -1.63% -1.63% -0.84% 2.61%
Standard Deviation 5.41% 6.76% 6.52% 10.15%
 

As of June 30, 2011, (i) one-year and since inception returns for IQHIX were 6.27% and 3.13%, respectively; (ii) one-year returns for QAI were 5.48% (NAV) and 5.86% (share price), (iii) since inception returns for QAI were 5.37% (NAV) and 5.44% (share price); (iv) one-year returns for MCRO were 7.59% (NAV) and 7.46% (share price), (v) since inception returns for MCRO were 5.99% (NAV) and 6.06% (share price), (vi) one-year returns for CPI were 0.49% (NAV) and 0.77% (share price), and (vii) since inception returns for CPI were 0.72% (NAV) and 0.79% (share price).

Performance greater than 1 year is annualized. Performance data shown represents past performance and is not a guarantee of future results. Current performance may be lower or higher than performance data quoted. Fund returns reflect dividends and capital gains distributions. Investment return and value of the Fund shares will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Fund performance current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.IndexIQ.com . The management fee and total fund operating expenses are, respectively: 0.48% and 0.66% (CPI); 0.75% and 1.06% (QAI); 0.75% and 1.09% (MCRO); 0.95% and 1.58% (IQHIX); and 0.95% and 2.18% (IQHOX).

“While August was certainly a bumpy ride for investors and advisors, it provided yet another legitimate ‘real world’ test for our hedge fund replication strategies,” continued Patti. “We’re very pleased with how they performed versus the broad equity markets and the active hedge fund universe. We believe they delivered exactly as they were designed.”

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