Expect Merger Arbitrage to Outperform Commodities

The Bureau of Labor Statistics’ Consumer Price Index (CPI) increased by 7.9% in February compared to one year prior, marking the fastest annual jump since 1982, eclipsing January’s previous 40-year record high rate of 7.5%.

On a month-over-month basis, the CPI rose 0.8% in February after increasing by 0.6% during the prior month.

In periods of inflation, investors tend to flock toward commodities; however, history shows that commodities’ long-term returns have been unfavorable. 

Over 150 years through last summer, Deutsche Bank calculates, oil returned -0.42% per year after subtracting for inflation; wheat, -1.12%; and copper, -0.56%. That compares with a 6.57% return for U.S. stocks, after inflation and including dividends, Barron’s reports

Instead, investors should consider adding a different alternative to their portfolios: a merger arbitrage strategy. With inflation surging and interest rates moving up from generational lows, it may be time to consider if your portfolio has too much duration – or interest-rate sensitivity – risk. If so, the Merger Fund (MERFX) may be able to help.

Introduced in 1989, MERFX was the first mutual fund devoted exclusively to merger arbitrage, offering easy access to a time-tested alternative investments strategy with all the benefits of mutual fund investing. 

Merger arbitrage strategies have historically provided attractive absolute returns with lower volatility and minimal correlation relative to traditional stock and bond strategies, making for a powerful portfolio diversifier.

Unlike traditional investments, the performance of event-driven investments, such as the Merger Fund (MERFX), is largely dependent on a number of identifiable variables, as opposed to market conditions.

MERFX  has provided positive performance in 29 out of 33 years since its inception in 1989.

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