New York Life Insurance Co. agreed to
buy asset manager IndexIQ, pushing into exchange-traded funds
and adding offerings for retail investors who want to copy
The transaction “puts us into the forefront of two very
important growth trends in the industry,” Drew Lawton, chief
executive officer of New York Life Investment Management, said
in an interview. “Not just ETFs, but also alternatives and,
maybe more specifically, liquid alternatives.”
New York Life CEO Ted Mathas has been using deals to expand
beyond polices that provide death benefits and annuities at his
169-year-old company. The insurer acquired Dexia SA’s asset
manager this year after adding funds from firms such as
Cornerstone Capital Management and Marketfield Asset Management.
The purchase of Rye Brook, New York-based IndexIQ adds $1.5
billion in assets under management, according to a statement
today from the buyer. That includes about $950 million in the IQ
Hedge Multi-Strategy Tracker ETF (QAI), which seeks to replicate
results at funds that bet on macroeconomic themes, wager on
individual stocks rising and falling, or invest in companies
targeted for acquisitions.
New York Life’s MainStay Marketfield Fund (MFLDX) has been one of
the biggest beneficiaries of demand for products called liquid
alternatives, which seek to mimic strategies used by hedge funds
while letting clients invest or withdraw money daily. Still, the
mutual fund’s performance from investing in stocks, bonds,
commodities and other assets shows the risk of those strategies.
The Marketfield fund declined 11 percent this year, while the
Standard Poor’s 500 Index is up 12 percent.
The main IndexIQ fund has gained 3.7 percent this year.
It’s returned about 3 percent annually over the last five years,
in line with the performance of the Bloomberg Global Aggregate
Hedge Fund Index. The fund’s annual operating expenses are 0.91
percent, less than the performance fees and asset-based expenses
of a typical hedge fund.
“It’s your cheap core alternative hedge-fund exposure,”
said Adam Patti, co-founder and CEO of IndexIQ. “Hedge funds
are never going to beat the SP 500 in a roaring bull market.
They’re going to provide much lower volatility, and downside
The firm also offers ETFs that bet on mergers (using the
ticker MNA), seek to protect against inflation (CPI), and invest
in small real-estate investment trusts (ROOF (ROOF)).
Those products each have less than $100 million, and Patti
said that they may benefit from the marketing of the buyer,
which is the biggest U.S. life insurer owned by its
policyholders and oversees more than $100 billion at its
MainStay mutual fund business. Investors have added about $340
million to IndexIQ funds so far this year, mostly at the Hedge
New York Life may eventually introduce ETF versions of some
of its mutual funds using IndexIQ’s expertise, Lawton said. He
declined to discuss the terms of the IndexIQ deal, which is
scheduled to be completed in the first half of next year. RBC
Capital Markets is the banker for IndexIQ, which received legal
advice from Paul Weiss Rifkind Wharton Garrison LLP.
Asset managers including Ameriprise Financial Inc. (AMP) have
been diversifying beyond traditional stocks and bonds. The
company’s Columbia Management announced an agreement last month
to join with Blackstone Group LP to increase retail investors’
access to hedge fund strategies. Janus Capital Group Inc., the
fund manager that hired Bill Gross, acquired VelocityShares LLC
New York Life isn’t seeking to compete with larger ETF
providers like BlackRock Inc. (BLK) and State Street Corp., Lawton
said. Those firms offer products that track indexes such as the
SP 500 and seek to distinguish themselves with low fees. State
Street’s SPDR SP 500 ETF Trust oversees about $200 billion and
has an expense ratio of less than 0.10 percent.
“That’s really not our natural place,” Lawton said.
“We’re creating more access to hedge funds, or hedge-fund-like
vehicles, to a much broader population than probably has had
access to them in the past.”
To contact the reporter on this story:
Zachary Tracer in New York at
To contact the editors responsible for this story:
Dan Kraut at