Back to top

Image: Bigstock

ETFs to Watch as Global M&A Momentum Returns

Read MoreHide Full Article

Global M&A activity is regaining strong momentum, with third-quarter megadeals building on the year’s earlier resurgence. As economic concerns and persistent political and geopolitical tensions become the new normal, investors appear increasingly unfazed, causing M&A activity to surge.

Additionally, driven by growing expectations of further interest rate cuts by the Fed and abundant private-equity capital waiting to be deployed, the outlook for the global dealmaking market looks promising, according to CNBC.

Crunching the Global M&A Figures         

As per data from Dealogic, as quoted in the abovementioned article, M&A activity jumped in the third quarter, with deal value hitting $1.29 trillion, rising from $1.06 trillion in the second quarter and $1.1 trillion in the first quarter.

According to Mergermarket, as per the mentioned article, global M&A deals have already crossed $3.4 trillion in the first nine months, a 32% jump from last year, marking the strongest performance since 2021.

Quoting S&P Global, in the third quarter, U.S. bank M&A activity hit a four-year high, with 52 deals announced, the highest quarterly total since the third quarter of 2021. As per data from S&P Global Market Intelligence through Sept. 30., the combined deal value reached $16.63 billion, the largest quarterly sum since fourth-quarter 2021.

Per an EY-Parthenon survey, as quoted on the CNBC article, about 48% of CEOs surveyed in August are gearing up for more acquisitions, reflecting ongoing M&A momentum.

Dealmaking Soars on Rate-Cut Hopes

The Fed’s first rate cut of the year in September, signaling that financing costs may have peaked, gave a boost to corporate confidence. Lower interest rates reduce borrowing costs, making it cheaper for companies to fund acquisitions and other dealmaking activities, allowing companies to move forward with greater certainty.

According to the CME FedWatch tool, markets are anticipating a 94.6% likelihood of an interest rate cut in October and a 99.1% likelihood of a rate cut in December. Easing financial market conditions, fueled by the Fed's interest rate cut and rising expectations of further rate reductions, play a key role in driving the M&A market.

ETFs to Consider

Multiple factors that are driving a positive global M&A outlook for 2025 make increasing exposure to funds with a merger arbitrage strategy a smart move. Merger arbitrage, commonly seen as a hedge fund strategy, involves simultaneously buying and selling the stocks of two merging companies to generate “risk-free” profits.

Below, we mention a few funds that employ a merger arbitrage strategy, looking to capture the profit from the price spread between the target company's stock price after a public acquisition announcement and the price offered by the acquirer to purchase the target's shares.

However, often regarded as a “risk-free” strategy, this approach carries the risk of deals not going through.

NYLI Merger Arbitrage ETF (MNA - Free Report)

NYLI Merger Arbitrage ETF seeks to track the performance of the NYLI Merger Arbitrage Index with a basket of 52 securities. The fund has gathered an asset base of $250.6 million and charges an annual fee of 0.77%.

NYLI Merger Arbitrage ETF has gained 2.16% over the past three months and 8.93% over the past year.

AltShares Merger Arbitrage ETF (ARB - Free Report)

AltShares Merger Arbitrage ETF seeks to track the performance of the Water Island Merger Arbitrage USD Hedged Index with a basket of 56 securities. The fund has amassed an asset base of $89.6 million and charges an annual fee of 0.84%.

AltShares Merger Arbitrage ETF has gained 1.83% over the past three months and 5.65% over the past year.

FirstTrust Merger Arbitrage ETF (MARB - Free Report)

First Trust Merger Arbitrage ETF employs an active strategy, seeking to provide capital appreciation by establishing long and short positions in the securities of companies involved in corporate events, like mergers and acquisitions.

The fund has gathered an asset base of $33.4 million and has a basket of 30 securities. MARB charges an annual fee of 1.74%.

First Trust Merger Arbitrage ETF has gained 1.47% over the past three months and 5.56% over the past year.

Proshares Merger ETF (MRGR - Free Report)

Proshares Merger ETF seeks to track the performance of the S&P Merger Arbitrage Index, with a basket of 38 securities. The fund has gathered an asset base of $11.9 million and charges an annual fee of 0.75%.

Proshares Merger ETF has gained 2.96% over the past three months and 7.15% over the past year.

Published in