IndexIQ has released a merger arbitrage ETF offering exposure to global corporate merger and acquisition activity.
The IQ ARB Merger Arbitrage ETF tracks an index investing in global companies that have had a public announcement of a takeover by an acquirer, a strategy which is generally referred to as merger arbitrage.
The strategy is designed to exploit the price differential between the current trading price of a stock and the price at the time the deal is completed.
It achieves this by owning certain announced takeover targets, to gain returns that are representative of global merger arbitrage activity. The index includes short exposure to global equities as a partial hedge.
The issuer says merger arbitrage funds have the potential to benefit from buying certain companies below the target price. It adds the difference between the target price and market price can be lucrative for investors, especially if there are competitive bids for a company.
IndexIQ chief executive officer Adam Patti says: "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."
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