MNA - MNA: Merger Arbitrage Improving With Discounts As Biden FTC Risk Is Discounted

2024-03-12 01:39:02 ET

Summary

• Merger arbitrage strategy ETFs like MNA were highly profitable from 2010 to 2020 due to quick government approval of mergers and high M&A deal volumes.
• Since 2020, the M&A fund MNA has underperformed as the Biden Administration has blocked numerous large mergers, and overall volumes have declined.
• In the coming months, the impact of US government politics on the alpha generation of the merger arbitrage strategy should be closely watched.
• Despite lackluster returns, MNA remains decorrelated to the S&P 500, giving it tremendous alpha-generation potential.
• A Trump win or a change in Biden's antitrust policy could benefit MNA greatly by 2025; however, bipartisan voter sentiment remains staunchly supportive of antitrust policies.

From 2010 to 2020, the merger arbitrage strategy was a stellar alpha generator. The US government quickly approved most mergers, creating a low-risk, high-profit opportunity in merger arbitrage strategy ETFs like the IQ Merger Arbitrage ETF ( MNA ). Since the new government, the merger arb's strategy has failed to deliver, with the ETF MNA falling since 2020 while virtually all equity funds have risen. In my view, the M&A fund will be exciting to watch over the coming months to see how US government politics will impact the alpha generation of the strategy....

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