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.