ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Alternatives Channel
      • Artificial Intelligence
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Education
      • ETF Investing
      • ETF Strategist
      • Faith-Based Investing
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Invest Beyond Cash
      • Leveraged & Inverse
      • Modern Alpha
      • Portfolio Strategies
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Gold/Silver/Critical Materials
        • Crypytocurrency
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
    • Market Outlook
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Database Categories
    • Indexes
    • Scenario Analysis
    • Watchlists
    • Head-To-Head ETF Comparison Tool
    • Mutual Fund To ETF Converter
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • Gaining Perspective Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Alternatives Channel
  2. Consider the Merger Fund for Reduced Volatility
Alternatives Channel
Share

Consider the Merger Fund for Reduced Volatility

Tom LydonJul 26, 2022
2022-07-26

With stocks turbulent and bonds failing investors at the hands of rising interest rates, market participants may want to consider unique avenues for reducing volatility.

Merger arbitrage, which is often the territory of professional investors, is one way of doing that, and it’s accessible in fund form thanks to The Merger Fund, courtesy of Virtus Investment Partners. The actively managed MERIX focuses on shares of companies engaged in corporate reorganizations, including mergers and acquisitions.

“The highly specialized team seeks to profit from the timely completion of corporate transactions with minimal correlation to traditional stocks and bonds and positive correlation to interest rates, all while striving to minimize drawdowns in volatile markets,” according to Virtus.

Typically, the fund’s managers will buy shares in a target company in an all-cash acquisition. In takeovers financed by equity, MERIX can short the suitor’s shares. That form of deal-making and mixed cash/equity transactions often accounts for the bulk of the mutual fund’s roster.

Obviously, it takes experience to execute this strategy. Fortunately, the MERIX team has that. Managers Roy Behren and Michael Shannon have been running MERIX for 15 years, and they’ve been in the financial services industry for more than three decades.

“At its core, the process leans heavily on the experience of the investment team to quickly synthesize new deal information and identify opportunities based on a variety of deal-related factors like an estimate of the deals’ timeline, potential regulatory barriers, and possibility for shareholder disapproval,” according to Morningstar. “The firm’s proprietary quant risk system accompanies the team’s fundamental research by aggregating deal specific information for ongoing analysis and portfolio-level risk calculations. The tool has been sufficient for the team’s approach over time.”

As of the end of the second quarter, MERIX has 79 long positions and 10 short positions with an average position size of 1.14%, according to Virtus data. That’s an indication that the fund’s individual deal risk is low. The technology and industrial sectors combine for north of 53% of MERIX’s sector exposure.

Long-term data suggest that MERIX has the goods when it comes to solid returns across a variety of market environments and, perhaps equally as important, credibility when it comes to reducing correlations to traditional asset classes.

“The team’s expertise and ability to navigate this strategy through all environments shows in its track record. Since the fund launched in 1989, its A shares posted a 5.8% annualized return, with just four down years, and a below 0.15 beta to broader equity and fixed-income markets,” added Morningstar.

For more news, information, and strategy, visit the Alternatives Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2025 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X