MCRO is designed to replicate the performance of the IQ Hedge Macro Index, a benchmark that replicates the risk-adjusted return characteristics of a combination of hedge funds pursuing a macro strategy and hedge funds pursuing an emerging markets strategy. Like other hedge fund replication ETFs from IndexIQ, MCRO is an "ETF of ETFs," meaning that its underlying holdings are not stocks and bonds but rather other ETFs. Although this strategy is an efficient way to pursue complex strategies that include exposure to multiple asset classes, it also has the potential to increase expenses by creating multiple levels of costs. MCRO charges an expense ratio of 75 basis points, but the acquired fund fees and expenses from MCRO's underlying holdings add another 35 basis points, resulting in an effective expense ratio of 1.10%. A big reason for MCRO's sizeable acquired funds expense is the 20% allocation to iShares MSCI Emerging Markets Index ( EEM), which charges 72 basis points.