This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Merger Arb ETF Debuts

By Michael Johnston, founder of ETF Database

IndexIQ, the ETF issuer behind the first hedge fund ETFs, has brought its fifth exchange-traded product to market, the IQ ARB Merger Arbitrage ETF. The fund began trading Tuesday on the NYSE Arca Exchange under the clever ticker MNA.

The new ETF will track the IQ ARB Merger Arbitrage Index, a benchmark that includes global companies for which there has been a public announcement of a takeover by an acquirer. The index also includes short exposure to global equities as a partial equity market hedge.

Even after a deal is announced, most publicly traded target companies generally trade at a discount to the stated offer price, reflecting some degree of uncertainty that the deal will ultimately close. While the vast majority of announced transactions are ultimately consummated, it is not unheard of for regulatory hurdles, lawsuits, and financing issues to derail deals.

Merger arbitrage strategies are nothing new, but MNA represents the first time such tactics are being made widely available through the ETF structure. Merger arbitrage seeks to generate gains by purchasing stocks of takeover targets for less than the announced transaction price.

By holding these investments until the transaction closes, investors can pocket the difference. It sounds like a sound investment play and has the potential to deliver solid returns. But the merger arbitrage strategy comes with commensurate risk. If the deal closes, a profit can be made. But if the deal falls through, investors can be left holding the bag.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
MNA $28.29 -0.49%
BHI $48.66 1.70%
CSCO $27.35 -2.20%
ORCL $39.66 -1.70%
STAR $9.69 -1.90%


Chart of I:DJI
DOW 17,717.86 -112.90 -0.63%
S&P 500 2,068.87 -6.94 -0.33%
NASDAQ 4,788.6690 -16.6220 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs