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QAI and MNA Are Two ETFs for the 'Muddle Through' Economy


One is low-correlation and the other pure equity.

IQ ARB Merger Arbitrage ETF (NYSEARCA:MNA)

For another play on the market that takes more of a pure equity approach, investors should consider another fund from IndexIQ, MNA. This product tracks the IQ ARB Merger Arbitrage Index, which aims to give investors exposure that is representative of global merger arbitrage activity.

This process is done by investing in global companies for which there has been a public announcement of a takeover by an acquirer. The idea is to buy the company's shares at a price below the target price and then profit from the spread once the deal goes through. This could be especially true if the deal closes at a price above the initial takeover target price, potentially giving investors solid gains.

However, it should be noted that no deal is guaranteed and that investors could lose out if the purchase is called off by the acquirer. Still, the strategy has proven to be a low correlated way to play equities and this fund also employs an equity hedge which can help to protect portfolios in down markets.

In fact, according to the fund's most recent fact sheet, the index of MNA's beta compared to the S&P 500 is just 0.3, while the standard deviation over the last one year is below 12%. Unfortunately, costs are somewhat high at 76 basis points per year, while volume is rather low-suggesting wide bid ask spreads-which could add to total costs.

Nevertheless, MNA has proven to be a very stable performer that moves pretty much independent of the market over the past year. The fund has stayed in a range of just $21.8/share to $26.7/share in the trailing 52-week period and has added about 3.2% in the time frame.
Given these decent numbers and the low volatility inherent in the fund's style, it could be a great choice for today's muddle through economy. The product looks to slowly add over time and will likely move independent of broad market woes, making it a great choice for both a flat or an uncertain market situation.

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No positions in stocks mentioned.
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