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Wall Street Investment Banking Gains Momentum: ETFs in Focus
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After two years of subdued dealmaking, key Wall Street banks have been witnessing a resurgence in investment banking activity. Initial public offerings (IPOs), bond issuances, and mergers and acquisitions (M&As) have topped analyst expectations, driving a collective revenue increase of 26.6% to $8.08 billion for Bank of America, Goldman Sachs, Citigroup, Morgan Stanley and JPMorgan Chase, per a Yahoo Finance article.
Optimistic CEO Outlook
CEOs of the above-mentioned banks have indicated that there are signs for the turnaround, highlighting a growing pipeline of opportunities and using terms like "bullish" to describe their outlook. They see the current momentum as the early stages of a multi-year M&A cycle and anticipate sustained growth in investment banking activities.
The rebound in investment banking has provided a much-needed boost to banks as higher interest rates have weighed on traditional consumer banking margins. After enduring a challenging 2023, banking executives have now started to see concrete signs of improvement in dealmaking activity.
Pressure From Limited Partners for Boosting Growth
Limited partners and corporate mandates are driving increased pressure on companies to pursue growth or restructuring strategies post-pandemic. Private equity firms are under scrutiny to return gains to investors, prompting a need for heightened deal activity in corporate boardrooms.
Upbeat Trading Revenues in Q1
Trading revenues for the five major Wall Street banks also showed positive signs in the first quarter, with equities outperforming fixed income. Despite the inherent volatility of trading revenues, bullish expectations for the U.S. and global economy have fueled increased client activity. Rates are also likely to fall in the second half of 2024. All these are contributing to a stronger performance in this segment.
IPO Market Stabilizing
We are currently in an upward economic cycle. The performance of the IPO market in late March reflected a pretty improving trend. Volatility appears to be stabilizing, and indicators suggest a forthcoming increase in new issuances.
However, rising inflation suggests that higher interest rates will probably stick around for longer. But a higher-rate environment doesn’t necessarily shut the window for new issuers. The year's larger IPOs have delivered solid trading, averaging an 11% return from the offer (18% ex-biotech).
New filers continue to come in and there's already an abundance of prominent names in the queue. Overall, despite occasional bumps, the IPO market reverts to normalcy, a pattern faster than what was seen last year (read: Time for IPO ETFs?).
ETFs in Focus
Against this backdrop, investors may keep a track of these ETFs.
The underlying IQ Merger Arbitrage Index seeks to identify opportunities in companies whose equity securities trade in developed markets, including the United States, and in those that are involved in announced mergers, acquisitions and other buyout-related transactions. The fund charges 78 bps in fees (read: M&A to Bounce Back in 2024? ETFs in Focus).
The underlying Water Island Merger Arbitrage USD Hedged Index reflects a pure-play, global merger arbitrage strategy investing in definitive, publicly announced mergers and acquisitions. The fund charges 77 bps in fees.
The underlying Renaissance IPO Index captures approximately 80% of the total market capitalization of newly listed companies that have gone public within the last three years and meet certain size, liquidity and free float criteria. At each quarterly rebalance, new IPOs that meet the eligibility criteria are included while companies that have been public for three years or no longer meet the criteria are removed. The fund charges 60 bps in fees (read: M&A to Bounce Back in 2024? ETFs in Focus).
First Trust US Equity Opportunities ETF (FPX - Free Report)
The underlying IPOX-100 U.S. Index is a modified value-weighted price index measuring the performance of the top 100 companies ranked quarterly by market capitalization in the IPOX Composite U.S. Index. This is a rules-based, value-weighted index measuring the average performance of U.S. IPOs during their first 1,000 trading days. The fund charges 61 bps in fees.
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Wall Street Investment Banking Gains Momentum: ETFs in Focus
After two years of subdued dealmaking, key Wall Street banks have been witnessing a resurgence in investment banking activity. Initial public offerings (IPOs), bond issuances, and mergers and acquisitions (M&As) have topped analyst expectations, driving a collective revenue increase of 26.6% to $8.08 billion for Bank of America, Goldman Sachs, Citigroup, Morgan Stanley and JPMorgan Chase, per a Yahoo Finance article.
Optimistic CEO Outlook
CEOs of the above-mentioned banks have indicated that there are signs for the turnaround, highlighting a growing pipeline of opportunities and using terms like "bullish" to describe their outlook. They see the current momentum as the early stages of a multi-year M&A cycle and anticipate sustained growth in investment banking activities.
The rebound in investment banking has provided a much-needed boost to banks as higher interest rates have weighed on traditional consumer banking margins. After enduring a challenging 2023, banking executives have now started to see concrete signs of improvement in dealmaking activity.
Pressure From Limited Partners for Boosting Growth
Limited partners and corporate mandates are driving increased pressure on companies to pursue growth or restructuring strategies post-pandemic. Private equity firms are under scrutiny to return gains to investors, prompting a need for heightened deal activity in corporate boardrooms.
Upbeat Trading Revenues in Q1
Trading revenues for the five major Wall Street banks also showed positive signs in the first quarter, with equities outperforming fixed income. Despite the inherent volatility of trading revenues, bullish expectations for the U.S. and global economy have fueled increased client activity. Rates are also likely to fall in the second half of 2024. All these are contributing to a stronger performance in this segment.
IPO Market Stabilizing
We are currently in an upward economic cycle. The performance of the IPO market in late March reflected a pretty improving trend. Volatility appears to be stabilizing, and indicators suggest a forthcoming increase in new issuances.
However, rising inflation suggests that higher interest rates will probably stick around for longer. But a higher-rate environment doesn’t necessarily shut the window for new issuers. The year's larger IPOs have delivered solid trading, averaging an 11% return from the offer (18% ex-biotech).
New filers continue to come in and there's already an abundance of prominent names in the queue. Overall, despite occasional bumps, the IPO market reverts to normalcy, a pattern faster than what was seen last year (read: Time for IPO ETFs?).
ETFs in Focus
Against this backdrop, investors may keep a track of these ETFs.
IQ Merger Arbitrage ETF (MNA - Free Report)
The underlying IQ Merger Arbitrage Index seeks to identify opportunities in companies whose equity securities trade in developed markets, including the United States, and in those that are involved in announced mergers, acquisitions and other buyout-related transactions. The fund charges 78 bps in fees (read: M&A to Bounce Back in 2024? ETFs in Focus).
AltShares Merger Arbitrage ETF (ARB - Free Report)
The underlying Water Island Merger Arbitrage USD Hedged Index reflects a pure-play, global merger arbitrage strategy investing in definitive, publicly announced mergers and acquisitions. The fund charges 77 bps in fees.
Renaissance IPO ETF (IPO - Free Report)
The underlying Renaissance IPO Index captures approximately 80% of the total market capitalization of newly listed companies that have gone public within the last three years and meet certain size, liquidity and free float criteria. At each quarterly rebalance, new IPOs that meet the eligibility criteria are included while companies that have been public for three years or no longer meet the criteria are removed. The fund charges 60 bps in fees (read: M&A to Bounce Back in 2024? ETFs in Focus).
First Trust US Equity Opportunities ETF (FPX - Free Report)
The underlying IPOX-100 U.S. Index is a modified value-weighted price index measuring the performance of the top 100 companies ranked quarterly by market capitalization in the IPOX Composite U.S. Index. This is a rules-based, value-weighted index measuring the average performance of U.S. IPOs during their first 1,000 trading days. The fund charges 61 bps in fees.