IQ Merger Arbitrage ETF (MNA)
This fund too is a great choice for investors looking for uncorrelated ETFs amid the weakness in the market. The fund focuses on the merger arbitrage space and might hold up even in uncertain economic conditions.
The fund tracks the IQ Merger Arbitrage Index, a broad benchmark of companies for which there has been a public announcement of a takeover.
The objective of the ETF is to generate returns that are representative of global merger arbitrage activity, while also including short exposure to global equities as a type of market hedge (see all the Hedge Fund ETFs here).
The fund gains by going long in the to-be-acquired company and holding until the merger is completed. This is because when such a takeover deal is made public, the companies being acquired usually see a rise in their share prices, although not up to the acquisition price.
The fund manages a small asset base of $25.5 million, charging 75 basis points as fees.
As per the most recent fact sheet, the fund holds 42 securities, while Cole Real Estate Investments, Inc. (12.36%), ViroPharma Incorporated (9.56%) and Tokyo Electron Ltd. (9.48%) are the top three holdings.
The fund has shown decent performance since the start of the year, adding 2% so far, as against a decline recorded by all major indices.
IQ Hedge Multi-Strategy Tracker ETF (QAI)
The fund tracks the IQ Hedge Multi Strategy Index, which seeks to replicate the returns of hedge funds. The ETF is a fund of funds and uses various hedge fund strategies to reduce the overall correlation with equity markets, though the fund does not invest in hedge funds itself.
The fund manages an asset base of $653.5 million and has a decent volume with 145,887 shares traded in a day.
Some of the strategies employed by the ETF include long/short equity, global macro, market neutral, event driven, fixed income arbitrage, and emerging markets.
The fund invests in a variety of asset classes including bonds, equities, currencies and commodities and charges 75 basis points as fees.
Thus, the fund’s use of multi-strategy and multi-asset class investing lowers volatility and correlation with other assets classes. This is pretty much reflected by the fact that the fund has a low annualized standard deviation of just 7.01% and a beta of 0.21.
This article is brought to you courtesy of Eric Dutram.