Activity in the merger and acquisition space is getting hot and heavy. That makes a new exchange traded note (ETN) from Credit Suisse especially timely.
The Credit Suisse Merger Arbitrage Liquid Index (NYSEArca: CSMA) seeks to capture the spread between two prices: the price of a stock of the target company after an acquisition is announced and the price the acquiring company has proposed to pay to buy the target. [Another ETF for the M&A Pickup.]
Potential gains in the fund are realized after deals are completed. If a deal doesn’t go through, it could potentially mean losses in the fund.
The fund’s underlying index uses a quantitative methodology to track a basket of securities that are held as either long or short positions. The expense ratio is 0.55%.
Corporations are sitting on trillions of dollars right now, which is doing nothing in this low-interest rate environment. Eventually that cash will need to be deployed, and part of it may lead to a continued uptick in mergers and acquisitions. [ETF Solution to the Corporate Cash Problem.]