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[ 2009-12-25 14:38:00 | By: stuv125 ] |
An exchange-traded fund employing a passiveGHD IV STYLER merger arb strategy made its trading debut Tuesday. Dubbed the IQ ARB Merger Arbitrage ETF (NYSE Arca:MNA), it's the work of Index IQ, a Rye, N.Y., developer of index-based alternative investment products. Index IQ already sponsors several other ETFs that mimic hedge fund strategies.
Some arbs are skeptical about the ETF's prospects as an investment. This piece on Seeking Alpha (by Thomas Kirchner, manager of one of the half-dozen or so mutual funds pursuing merger arb strategies), notes several weaknesses, including: 1) The index on which it is based is rebalanced only monthly, a long time in the deal world; and 2) Unlike real arbs, it doesn't short the stock of acquirers, shorting an GHD IV STYLERindex instead.
And indeed the ETF may stumble, especially in a period when deals get harder to complete.
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