This Merger Arbitrage ETF is Drawing Increased Interest

Trading volume has picked up in the latter part of this month in the third largest “Hedge Fund” ETF, IndexIQ IQ ARB Merger Arbitrage ETF (NYSE:MNA).

MNA has seen inflows to the tune of about $22 million year-to-date, bringing its asset base to about $139 million. Those inflows have brought MNA within shouting distance of the next largest “Hedge Fund” ETF in the space, WDTI (WisdomTree Managed Futures Strategy, Expense Ratio 0.95%), which has $181 million in assets under management.

Both funds are still well behind the largest ETF in the space, which also happens to come from sponsor IndexIQ, QAI (IQ Hedge MultiStrategy Tracker, Expense Ratio 0.75%, $1.14 billion in AUM).

Launched in November of 2009, MNA is the only ETF to focus on the concept of “Merger Arbitrage,” which is a common strategy among various Hedge Funds. When we look at top holdings within the fund, we see companies including LNKD (10.11%), STJ (8.23%), MDVN (5.80%), MON (5.53%), SABMiller PLC (4.06%), VAL (4.01%), RAD (3.54%), and Syngenta AG (3.17%).

There are clearly not only U.S.-listed securities eligible for inclusion in the portfolio, but also those that trade on overseas exchanges (like SABMiller PLC and Syngenta AG).

Fund literature states:

“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 differentiated 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 pa partial equity market hedge.”

MNA currently offers a dividend yield of 1.48%, which is likely an unsung benefit of the overall strategy. While some money managers look for “uncorrelated assets” when building client portfolios, we see the IQ Merger Arbitrage Index only has a 0.27% index beta to the S&P 500 Index itself.


MNA shares rose $0.03 (+0.10%) to $28.84 per share in afternoon trading. MNA has gained 2.74% year-to-date, versus a 7% rise in the S&P 500 during the same period.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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