IndexIQ has announced the mergers and acquisitions (M&A) deals investors can gain exposure to through the IQ Merger Arbitrage ETF (MNA).
MNA was the industry’s first exchange-traded fund (ETF) to give investors exposure to global corporate M&A activity, which is rapidly increasing.
MNA has more than five years of live performance, having launched on November 17, 2009, while its underlying index, the IQ Merger Arbitrage Index, has more than seven years of live performance, having launched on 31 October, 2007.
MNA was designed to provide capital appreciation by investing in global companies for which there has been a public announcement of a takeover by an acquirer, a strategy generally known as “merger arbitrage.” This strategy generally seeks to take advantage of the price differential, where it exists, between the current trading price of a stock and the price of that stock at the time the deal is completed.
As of 5 January, 2015, the deals that were added to and removed from the IQ Merger Arbitrage ETF are as follows:
“Historically, investors have not had broad access to capitalise on mergers and acquisitions activity in an ETF,” says Adam Patti, chief executive officer at IndexIQ. “The Merger Arbitrage ETF is a hedged strategy designed to take advantage of price disparities that exist in merger activity and strengthen investor portfolios by buying below the target price and realising the capital appreciation if the deal closes at or above the target price. As such a strategy had not historically been accessible in an ETF before the launch of MNA more than four years ago, we are very excited about providing investors with this liquid, transparent, low cost, and easily tradable product.”
Merger Arbitrage funds typically have the potential to benefit from buying target companies below the target price. The “spread” in price, the difference between the target price and market price, can be quite lucrative for investors, especially if there are competitive bids for a company. Given today’s relatively low corporate valuations and the significant amount of cash on corporate balance sheets, industry experts forecast a rapid increase in M&A activity.
The IQ Merger Arbitrage ETF seeks to track, before fees and expenses, the performance of the IQ Merger Arbitrage Index. The Index seeks to achieve capital appreciation by investing in global companies for which there has been a public announcement of a takeover by an acquirer. This approach is based on a passive strategy of owning certain announced takeover targets with the goal of generating returns that are representative of global merger arbitrage activity. The Index also includes short exposure to global equities as a partial equity market hedge.