Is IQ Merger Arbitrage ETF (MNA) a Hot ETF Right Now?

Launched on 11/17/2009, the IQ Merger Arbitrage ETF (MNA) is a smart beta exchange traded fund offering broad exposure to the Hedge Fund ETFs category of the U.S. equity market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

MNA is managed by Indexiq, and this fund has amassed over $522.41 M, which makes it the largest ETF in the Hedge Fund ETFs. This particular fund, before fees and expenses, seeks to match the performance of the IQ MERGER ARBITRAGE INDEX.

The IQ Merger Arbitrage 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.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.77% for this ETF, which makes it the least expensive product in the space.

The fund has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Morgan Stanley Ilf/treas/inst (CASH) accounts for about 19.60% of total assets, followed by Rockwell Collins Inc (COL) and Express Scripts Holding Co (ESRX).

The top 10 holdings account for about 66.04% of total assets under management.

Performance and Risk

The fund's year-to-date return has lost about -1.61%, and is up about 1.13% in the last one year (as of 05/04/2018). MNA has traded between $30.08 and $31.86 in the past 52-week period.

MNA has a beta of 0.14 and standard deviation of 4.98% for the trailing three-year period. With about 65 holdings, it effectively diversifies company-specific risk.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Rockwell Collins, Inc. (COL) : Free Stock Analysis Report
 
IQ-MERGER ARB (MNA): ETF Research Reports
 
Meta Financial Group, Inc. (CASH) : Free Stock Analysis Report
 
Express Scripts Holding Company (ESRX) : Free Stock Analysis Report
 
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