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Use Cases for Liquid Alt ETFs

Investors are finding more and more practical uses that fit into their overall strategy.



Institutional investors have been making allocations to alternatives for about 20 years – so the strategies aren’t new to them. But how they use liquid alternative ETFs is evolving as you read this, according to recent Greenwich Associates research.

In fact, in the Greenwich report, some investors say they see a use for liquid alt ETFs as part of their core allocation strategy, which makes sense according to Kelly Ye, Director of Research & Alternative Investments and IndexIQ.

“Many systematic, rules-based investment plans already include an alternatives allocation,” says Ye. “Liquid alts are a more cost-efficient method of making that allocation as well as accessing systematic growth factors. In other words, a large part of the return is due factors which we label ‘hedge fund beta.’ Research has been demonstrating that for 20 years. Liquid alt products are designed to capture that beta, using public market formats. So, in a way, liquid alt ETFs are an alternative to an alternative – hedge funds offer limited transparency, greater dispersion of returns, and they are expensive.”

That’s just one of the use cases for liquid alt ETFs. Watch the video to hear more use cases directly from Ye. And learn more about liquid alt ETFs and how your investment peers are using them here.