U.S. Investing

Invest in Corporate Takeovers with This Fund

It is easy to admire the concept behind the IQ Merger Arbitrage ETF (MNA), seeking investment results that track, before fees and expenses, the price and yield performance of the IQ Merger Arbitrage Index.

The IQ Merger Arbitrage Index aims to achieve capital appreciation by investing in global companies that have been publicly announced to be bought by an acquirer. This unique approach is based on a passive strategy of owning shares of certain announced takeover targets, with the goal of generating returns that are representative of global merger arbitrage activity.

The strategy also includes short exposure to global equities as a partial equity market hedge. In doing so, it uses a tax-efficient, rules-based approach to gain exposure to global merger arbitrage activity.

The fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in the stocks included in its underlying index. That underlying index uses a systematic investment process designed to identify opportunities in companies whose equity securities trade in developed markets, including the United States. The non-diversified fund invests in stocks that either have been announced as a merger partner for a buyer, an acquisition or another buyout-related transaction.

Source: StockCharts.com

MNA provides diversification benefits and low correlation to other asset classes, since its returns are driven primarily by the successful completion of deals.

The fund’s total net assets are $461 million, and its inception date is Nov. 17, 2009. The exchange-traded fund currently trades just under $32 a share with an expense ratio of 0.76%, meaning it is relatively expensive to hold in relation to other ETFs.

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However, as with any opportunity, I urge all potential investors to exercise their own due diligence, just as I do, in deciding whether or not this fund fits their own individual portfolio goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.