Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Database
  • 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
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
    • ETFs Future-Forward 2021: An iShares Investing Symposium
    • Three Themes for 2021: An iShares & MSCI Investing Symposium
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Alternatives Channel
  2. Merger Arbitrage Set to Outperform Other Hedges
Alternatives Channel
Share

Merger Arbitrage Set to Outperform Other Hedges

Elle CarusoApr 08, 2022
2022-04-08

Commodities continued to rise last month as investors look for ways to hedge against inflation and rising rates, however, investors may be missing out on an especially well-positioned strategy: merger arbitrage.

Merger arbitrage is an alternative investment strategy offering investors the potential to create a more efficient and diversified portfolio, targeting both steady gains and minimization of drawdowns through up and down markets alike, according to Virtus.

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.

Commodities, on the other hand, rose another 9.63% in March after an 8.8% rise in February, driven by geopolitical conflict and inflation as the two main reasons for the broad-based uptick in commodities prices, according to Jim Wiederhold, associate director, commodities and real assets, S&P Dow Jones Indices.

MERFX invests in companies involved in pending mergers, takeovers, and other corporate reorganizations, with the goal of profiting from the timely completion of these transactions. Its returns historically have had a low correlation with the stock market and near-zero correlation with bond and commodities markets, as each investment tends to trade on idiosyncratic deal dynamics.

Regardless of whether the market goes up or down during the pendency of the transaction, the value of the consideration to be received is a fixed dollar amount that the arbitrageur stands to make as a potential return, or spread, upon the successful closing of the deal, according to Virtus.

In general, merger arbitrage managers seek to make their investment strategies as market-neutral as possible, leaving the bulk of the portfolio’s exposure to whether specific corporate events occur. As a result, merger arbitrage strategies have been able to generate positive returns in most market environments, providing significantly less downside in bear markets, according to Virtus.

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

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
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
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

Equity ETF Channel

Retirement Portfolio Redux: Is the 60%-40% Portfolio Dead?

Debbie CarlsonOct 22, 2020
2020-10-22

With the 10-year U.S. Treasury yield hovering below 1% and Federal Reserve Chairman Jerome Powell...

Equity ETF Channel

Portfolio Diversification Isn't Dead, It Was Just Sleeping

Debbie CarlsonOct 15, 2020
2020-10-15

Investors could be forgiven to think there was no reason to invest outside of the U.S. for the...

}
X