ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • 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 Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Alternatives Channel
  2. Merger Arbitrage Made Simple With MERIX
Alternatives Channel
Share

Merger Arbitrage Made Simple With MERIX

Tom LydonAug 30, 2022
2022-08-30

Rising interest rates, persistent inflation, and concern that the economy is slowing are among the factors pressuring both bonds and equities this year.

One way of looking at that scenario is as an opportune time for investors to consider alternative investment strategies, including merger arbitrage. The Merger Fund (MERIX) brings the benefits of a professional strategy and active management to everyday investors.

For investors who aren’t familiar with merger arbitrage, it’s a concept that initially sounds daunting, but in reality, it’s easy to understand. Moreover, via active management, MERIX alleviates the burdens investors face in getting acquainted with this strategy.

“Merger arbitrage is an absolute return strategy of investing in companies involved in pending mergers, takeovers, and other corporate reorganizations, with the goal of profiting from the timely completion of these transactions,” according to Virtus.

What makes MERIX a solid idea for investors looking for portfolio diversification and reduced correlations is that various mergers and acquisitions aren’t necessarily correlated to one another. For example, Microsoft’s (NASDAQ:MSFT) effort to acquire Activision (NASDAQ:ATVI) has essentially no bearing on similarly large takeovers in, say, the healthcare sector.

“In other words, the outcome of a single transaction will likely not impact the outcome of other portfolio investments. In contrast to traditional long-only strategies, investment returns are driven primarily by the outcome of the specific transaction rather than the direction of equity or bond markets,” added Virtus.

MERIX also makes it easy for investors to comprehend arbitrage, which in simple terms is the target’s stock trading at a discount to the suitor’s offer on speculation that the deal won’t make it to the finish line. For example, ABC Inc. offers to acquire XYZ Corp. for $50 per share when the target is trading at $35. It’s possible that XYZ stock jumps to $45 or so, but it’s unlikely that it goes all the way to $50 because a merger announcement is much different than confirmation that a deal is closing.

“The size of this discount, known as the arbitrage spread, is influenced by general market conditions, as well as by deal-specific considerations that affect the transaction’s timing and perceived probability of success. Merger arbitrage managers try to profit from this spread while hedging their positions against a variety of risks,” noted Virtus.

Bottom line: MERIX can act both as a portfolio diversification tool and one that can damp volatility while providing steady returns and protection against rising interest rates.

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

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

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