For investors panicked by trade war tensions, the IQ Merger Arbitrage ETF (MNA) is hedged well against market conditions created by Trump and Xi’s tit for tat.
MNA seeks to track, before fees and expenses, the performance of the IQ Merger Arbitrage Index. 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 a partial equity market hedge.
One unique aspect of MNA is that it is the type of ETF that investors can hide out in with the ongoing trade war jitters, and the general environment of global economic uncertainty, gaining diversification and protection. MNA also fits well into most portfolios because of the low correlation it has to stocks and bonds.
“Merger arbitrage strategies have historically generated relatively stable returns, and global M&A activity remains robust,” said Sal Bruno, chief investment officer of IndexIQ. “With global growth, Brexit and trade driving volatility into the markets, and in an uncertain interest rate environment, investors are looking for solutions to help them maintain market exposure while still managing downside participation.”
With an expense ratio of 0.78%, investors may want to consider the fund as trade tensions continue.
“Even though we have probably about a 25% weight in technology, we’re actually short about 12% on the technology sector,” Bruno told CNBC. “As we’ve seen some of the semis come under pressure with the China trade issues, … that’s actually provided very good downside protection … against that broad, down move that’s affecting the entire sector.”
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