Saw an article today on Yahoo Finance. The Man Group has announced that they will list their hedge fund as an ETF on the New York Stock Exchange. The type of ETF is what make this announcement interesting to me.

The fund (Man Dual Absolute Return Fund) will be structured to be market neutral and provide “absolute returns. It will attempt to do this by investing in 2 ways, 80% of the money will be allocated to Tykhe Capital, who will invest it using “quantitative models.” That’s vague enough that you would want to understand it a little more before taking the plunge. The other 20% will be invested in AHL Core, which will trade managed futures.

Man Group already does this type of thing in London, but it’s a first for the US (New York Stock Exchange). Now, as we wrote before, you can already invest in some absolute return mutual funds. But since these are mutual funds they are restricted in some of the hedging techniques they can use, in particular their ability to short stocks and the extent of thier stock options positions. It’s unclear what type of restrictions might be placed on the ETF of a hedge fund.

It’s also important to note that since this is a closed end fund, it may trade at a discount to it’s true value, so you have to worry not only about the investment approach, but also the investment communities opinion of the fund. The Man group has indicated that they would retain the right to buy back some of the issued stock to help correct that, but that in itself may not be enough to narrow the discount. Of course, it could also theoretically trade at a premium.

One thing is certain, this one should not be too highly correlated to the markets, and we’ll keep an eye on it to see if it is really a fair source of diversification for your portfolio.

This ETF may be fun to watch.