iShares Launches Their First Actively Managed ETF
November 17, 2009

SAN DIEGO (ETFguide.com) - iShares kicked off a busy week for ETF providers with the launch of the iShares Diversified Alternatives Trust (NYSEArca: ALT).

ALT is iShares’ first actively managed ETF. The trust will attempt to profit from the mispricing of financial instruments, capturing spreads between assets and asset categories that deviate from the fair value of historical norms.

To accomplish its objective, the trust will seek to take advantage of interest rate and futures contract price differentials by simultaneously entering into long and short positions in various bond, commodity, currency and interest rate futures.

The managers will also take a look at historic performance patterns and their actual returns. Based on the notion that price history may be predictive of asset value, the fund may employ technical strategies to capture such returns.

Additionally, the trust will attempt to identify instances where there are discrepancies between the market and fundamental values of an asset. The employed relative value strategies tend to buy in markets that appear inexpensive on a relative basis, and sell in markets that appear expensive.

The trust uses a portfolio construction process in which each potential strategy and underlying asset is ranked in terms of expected return, volatility and trading cost.

In summary, the fund provides exposure to strategies that might be otherwise inaccessible for the average investor, due to their level of sophistication or lack of liquidity.

While the strategies sound good in theory, only time will tell if this non-traditional ETF will be able to deliver the returns hoped for.  The target, annualized portfolio return volatility is 6.8%. The annual expense ratio is 0.95%.