Another Hedge Fund For You & Me

21-Jul-2011

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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By Murray Coleman, Barron’s,

Hedge funds typically require $1 million in investable assets just to qualify for consideration. Then they take 2% of your assets and 20% of your profits.

But exchange-traded funds are moving into the field, promising competitive returns without charging an arm and a leg.

The ProShares Hedge Replication ETF (HDG) launched today, charging an annual expense ratio of 0.95% and tracking a Merrill Lynch index covering a broad universe of more than 2,000 different types of hedgies.

The elder statesman is the IQ Hedge Multi-Strategy Tracker ETF (QAI). Launched a little more than two years ago, it’s managed to attract around $137 million in assets despite unfavorable start-up conditions.

Like HDG, it tracks a broad hedge-fund index reflecting the aggregate returns of different types of hedging strategies. It’s analogous to a “total-market” mutual fund. The QAI fund has an expense ratio of 0.75%, though it does get charged for the ETFs it buys, so the total is more like 1.13%, according to Morningstar estimates.

QAI made its debut just as the stock market was rebounding from the financial crisis and riskier plays were skyrocketing in value. The overall stock market jumped 15% in each of the fund’s first two quarters, not exactly ideal for a fund designed to hedge its bets using short selling and fixed-income securities.

But QAI began to hit its stride in the second quarter of last year. While the Standard & Poor’s 500 fell more than 11%, the ETF managed to lose less than 3%.

The new ProShares ETF could also be entering the market under less-than optimal conditions. A broad benchmark compiled by HedgeFund.Net reported earlier this week a 1% fall in June.

The extreme volatility in stocks and commodities so far this year has been difficult for many of the industry’s biggest names.

John Paulson’s flagship Advantage Fund was down close to 15% at mid-year, according to Reuters. Meanwhile, David Einhorn’s Greenlight Capital was reportedly off by 5% heading into the second-half of 2011.

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