Invest Like a Hedge Fund with This ETF

While celebrity hedge fund managers get all the attention, most of the asset class is far more boring.

Many investors forget many hedge funds don’t exist to buy stocks. They buy assets that are completely uncorrelated to major stock indexes. When stocks go down, these assets should go up. That’s the theory, anyway. Sometimes reality doesn’t cooperate and many asset classes go down at the same time.

Hedge funds also will go both long and short various assets.

The Horizons Morningstar Hedge Fund Index ETF (TSX:HHF) is a simple way for folks to invest in the space. It provides investors with exposure to between 600 and 800 different hedge funds all in one place. That way investors aren’t exposed to the risk of owning a single hedge fund specifically.

The fund’s largest holdings are varied, including long positions in S&P 500 and Japanese 10-year bond futures, as well as long Euro bond futures. Prominent short positions include betting against Australian three- and 10-year bonds and Canadian 10-year bond futures.

The ETF is also long copper, silver, soybeans, and heating oil, while shorting wheat and gold.

It’s a somewhat small fund, with just over $36 million in assets and weak average volume with approximately 1,200 shares trading hands during an average trading day. In addition, the fund’s management fee of 0.95% is one of the highest in the Canadian ETF sector today.

However, there are no other funds even remotely like it in Canada, which explains much of the fee premium.

The fund is managed by Fiera Capital Corporation, which is a leader in non-traditional investment solutions.