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IndexIQ’s IQ Alpha Hedge Strategy Fund, First Open-End Mutual Fund Based On Hedge Fund Replication, Turns Five

The IndexIQ IQ Alpha Hedge Strategy Fund (IQHIX – Institutional Class; IQHOX – Investor Class), the no-load, open-end mutual fund that launched the “liquid alternatives” revolution, marked its 5-year anniversary on June 30, 2013, it was announced today. At its introduction, the IndexIQ fund was the first open-end hedge fund replication mutual fund in the market. Total assets in U.S. alternative mutual funds and Exchange-Traded Funds (ETFs) are now approximately $550 billion, according to a recent report from SEI. 1

“Since we launched the IQ Alpha Hedge Strategy Fund, both retail and institutional investors and their advisors have come to embrace ‘liquid alternatives’ as an asset class, recognizing that these funds can bring diversification, liquidity, and other desirable characteristics to an investment portfolio,” said Adam Patti, chief executive officer at IndexIQ. “We are confident that this trend is still in its infancy.”

The IQ Alpha Hedge Strategy Fund is designed as a core holding for investors, providing broad market exposure and also acting as a replacement for more costly traditional hedge funds. It uses a proprietary investment process to synthesize the risk and return profiles of a broad range of hedge fund investing strategies, seeking to deliver hedge fund-like performance in a low cost, transparent, and highly liquid investment vehicle. The rules-based investment process selects components from a wide array of ETFs that cover commodities, currencies, stocks, bonds and real estate. Since its launch, the fund has performed as follows:

              Since Fund   Since Index   Inception
    1 Month   3 Month   YTD   1 Year   3 Year   5 Year   Inception*   Inception*   Date
IQHIX 6/30/2008
NAV   -2.87%   -2.31%   -1.36%   2.10%   2.70%   2.26%   2.26%        
IQHOX

7/23/2013

NAV   -2.88%   -2.51%   -1.56%   1.74%   2.24%   -   1.90%      

 

Index - IQHGALPH   -2.81%   -2.11%   -0.70%   3.76%   4.75%   4.59%   4.63%   3.27%   10/31/2007

*Performance greater than 1 year is annualized. The performance data quoted above represents past performance, which is not a guarantee of future results. 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. Current performance may be lower or higher than performance data quoted. Fund returns reflect dividends and capital gains distributions. Fund performance current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com . IQHIX Total Annual Fund Operating Expenses of 1.16% and Expense Ratio of 1.43%; IQHOX Total Annual Fund Operating Expenses of 1.65% and Expense Ratio of 1.92%.

Adoption by financial advisors

Growth in liquid alternatives has been driven in part by financial advisors, who may use the funds as part of an overall portfolio allocation strategy. Nearly three-quarters of financial advisors currently use alternative strategies, according to a study by Financial Advisor Magazine, and they continue to expand their allocations. 2

“Many individuals are just beginning to learn the role alternatives can play in a portfolio,” said Patti. “The advisor community has been critical in helping their clients understand how alternatives can navigate the markets in times of heightened volatility and uncertainty. This education process is critical to the continued growth of the asset class.”

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