Liquid Alternatives: The First Trust Merger Arbitrage ETF Will Skim Merger Spreads

https://dailyalts.com/wp-content/uploads/2020/02/merger-bluediamond.jpg

It’s a hedge fund type, actively managed ETF. But don’t balk at its fees.

The First Trust Merger Arbitrage ETF (MARB), which is in the process of being listed in the US, will profit from merger spreads.

In a merger arbitrage strategy, the fund will purchase and sell the stocks of two merging companies to profit from pricing inefficiencies in the two stocks. The profits are thereby locked in on an almost riskless basis, though there is the danger that the transaction may fall through for reasons such as regulations, financial instability, or tax complications.

The fund may also have to sit on cash in the event of a slowdown in deal-making activity.

First Trust Merger Arbitrage ETF and merger spreads

So the First Trust Merger Arbitrage ETF (MARB) would typically buy the stock of the company being acquired, and short that of the acquirer, according to ETF Stream.

What should one expect from MARB?

For instance, the IQ Merger Arbitrage ETF (MNA) generated a 3-year annualized market total return of 3.99% compared to 7.79%, the median return for this asset class. The MNA ETF had assets of $968.5 million as at end-January, 2020, and a net expense ratio of 0.77%.

In contrast, the First Trust Merger Arbitrage ETF (MARB) imposes a fee of 1.94%, quite akin to hedge funds. Of this, its own management fee is 1.25%.

Why the high fees?

More on First Trust – and its absence from fee wars

First Trust is an ETF fund house that is deliberately low-profile, even though it’s the sixth-largest ETF provider in the US.

The reason – it makes financial advisors its public face and is not afraid to charge high fees. It has purposefully stayed away from the recent fee wars. The fund house has also steadfastly refused to go the rob-advisor way or to provide advice directly.

It, therefore, has its advisors’ back.

“We’re very focussed on providing tools for advisors. We don’t tend advertise much to the retail public. Retail investors are best served by financial professionals in our opinion. That’s why we’re a little bit under the radar,” said Ryan Issakainen, Senior Vice President at First Trust to ETF Stream.

Related Story:  Alternative Investments: Christmas Cheer as Fund Managers Cut Fees                                                  

Image Credit: thebluediamondgallery.com

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Alt Insights

January 29, 2020

Venture Capital: The Kobe in “Bryant Stibel & Co”

Venture Capital: The Kobe in “Bryant Stibel & Co”
Shape

Latest Alternative Investment News

https://dailyalts.com/wp-content/uploads/2020/02/52e4dc4a4854ae14ea898579ce203e7c1d22dfe05b53794a732973d6_640.jpg
ESG: Graham Clapp Says ESG-Focus is Creating a New Bubble
February 27, 2020     ESG and Sustainability, News

RWC Partners fund manager Graham Clapp warned that sustainable investing trends are poised to form a possible bubble in the markets. He compared it to the tech boom of the 1990s….

https://dailyalts.com/wp-content/uploads/2019/11/Warren_Buffett_in_2010.jpg
Hedge Fund: Whitney Tilson Pumps Berkshire Hathaway as Top Retirement Stock
February 27, 2020     Hedge Funds, News

Former hedge fund manager Whitney Tilson has called Berkshire Hathaway (NYSE: BRK.A) the to retirement stock. Tilson, who now writes for Empire Financial Research, issued a note this week praising…

https://dailyalts.com/wp-content/uploads/2020/02/money-1084517_640-invesco-etf.jpg
Liquid Alternatives: Invesco Launches New Sterling Corporate Bond ETF With ESG

Invesco, the fund manager with $1.23 trillion in assets under management as of December 31, 2019, has launched in Europe a new, first-of-its-kind, sterling-denominated, corporate bond ETF with an ESG…

https://dailyalts.com/wp-content/uploads/2020/02/cryptocurrency-3423267_640-six-ieomx.jpg
Digital Assets: The SIX Swiss Exchange Buys A Stake in Crypto Trading Platform Omniex
February 27, 2020     Digital Assets, News

SIX Swiss Exchange announced it had struck a partnership agreement last week with San Francisco-based Omniex. The financial terms of the agreement, which also includes the acquisition of a stake…

Scroll to Top