ProShares, the world’s biggest purveyor of inverse and leveraged funds, today launched an ETF with a hedge fund replication strategy, the latest exchange-traded fund that gives retail investors access to parts of the market previously only available to so-called accredited investors.

The ProShares Hedge Replication ETF (NYSEArca: HDG) has an annual expense ratio of 0.95 percent, the standard price the Bethesda, Md.-based company charges on its ETFs The fund strives for a high correlation with hedge fund beta by tracking an index based on the Merrill Lynch Factor Model – Exchange Series.

HDG will go face to face with competing ETFs from providers like Index IQ and AdvisorShares. Index IQ’s Hedge Multi-Strategy Tracker ETF (NYSEArca: QAI), the pioneer in the space, has gathered nearly $135 million since its 2009 inception. QAI costs 1.13 percent in total operating expenses, which includes a 0.75 percent net expense ratio -- the lowest in the class -- and 0.38 percent in acquired funds fees and expenses.

“Many portfolios could benefit from the risk/return characteristics of hedge funds, but investors often either can’t or don’t invest in hedge funds because of a variety of challenges,” Michael Sapir, ProShare Advisors chief executive officer, said in a press release.

Hedge funds typically invest in a broad array of assets that include equities, bonds and commodities, taking both long and short positions. But because hedge funds are less regulated than mutual funds and ETFs that must be registered under the Investment Company Act of 1940, they are less transparent, less liquid and have relatively high fees.

For example, accredited investors—defined as individuals or entities with net worth of more than $1 million and with annual income of at least $200,000—who qualify to invest in hedge funds, often pay “2-and-20” in fees to do so. That means a 2 percent annual management fee, plus 20 percent of any gains the funds make.

HDG’s underlying index targets a high correlation to the HFRI Fund Weighted Composite Index, which is an equally weighted benchmark consisting of more than 2,000 hedge funds, the company said on its website.

The index will have long or short exposure to six market benchmarks, including:

• The S&P 500 Total Return Index
• The ProShares UltraShort Euro ETF
• The MSCI EAFE US Dollar Net Total Return Index
• The MSCI Emerging Markets Free US Dollar Net Total Return Index
• The Russell 2000 Total Return Index
• One-month USD Libor (London Interbank Offered Rate)

HDG, which won’t invest in any hedge funds, is the company’s third Alpha ProShares ETF, “designed to provide advanced investment strategies in an ETF,” the company said in the release.