IndexIQ’s lineup of exchange-traded funds is certainly innovative, including hedge fund ETFs and strategy ETFs that are not seen elsewhere in the industry. Its new merger arbitrage ETF is just as unique, offering investors the ability to bank on the differential between current stock prices and agreed merger prices.

The new fund will be known as the IQ ARB Merger Arbitrage ETF (MNA) and will invest in companies that have announced a public takeover, according to the press release. The fund is based on IndexIQ’s proprietary IQ ARB Merger Arbitrage Index, which has produced year-to-date returns of 19.48% solely by bridging the gap between takeover announcements and completion.

The fund’s largest holdings include Starnet Networks 8.78%, BJ Services 8.28%, and Sun Microsystems at 7.89%. More than 37% of the fund is invested in cash due to a weakened acquisition climate amidst a credit crunch. IndexIQ fully expects an increase in merger activity, pointing to record amounts of cash on hand at S&P500 listed companies and decade low stock prices.