New indices aim to provide systematic exposure to the returns of the well-known hedge fund strategy

Barclays announces the launch of the Barclays Merger Arbitrage US Index Family, a new addition to the Barclays range of Quantitative Investment Strategies.

Barclays launched its first Merger Arbitrage indices in 2010.  The addition of the new index family will allow investors to access potential returns from the successful completion of announced merger deals in the US.

The index aims to invest in a wide array of deals in the US and capture the deal spread between the price of the merger target shares and the terms of the deal. It takes a long position in the target company of the merger and a short position in the acquirer. The index is also available in a version where the index takes an additional short position in the US equity market to hedge out any residual market exposure of the portfolio of long target shares and short acquirer shares.

Currently deal flows in the US remain strong with $280 billion of deals announced in the first quarter of 20171. The index aims to have a diversified exposure to a broad range of deals in different sectors, reducing the amount of risk taken in any one deal.

The index has recently exhibited strong returns with back-tested excess returns of 4.03% in 2016 and 1.60% in 2017 to the end of May, with a low volatility of around 4% over the last year2.

Barclays expects to see strong interest in this new index from a wide variety of investors who desire liquid and cost-efficient exposure to the merger arbitrage risk premium, which is generally considered a relatively sophisticated strategy.

“The Barclays Merger Arbitrage US Index Family aims to provide clients with a cost-efficient, liquid and transparent way of accessing a strategy more commonly deployed by Hedge Funds. The index follows a fully systematic, rules-based approach, and aims to provide a diversified exposure to merger arbitrage opportunities in the US market,” said Dhvani Gupta, EFS Solutions.

“Barclays is delighted to expand our range of indices and increase the breadth of strategies available to investors via index format. We believe that this index should be compelling for a wide range of investors looking at source of returns other than traditional equity and fixed income beta, and again demonstrates the innovation in index-based investing,” said Benedict Redmond, Director EFS Solutions.

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  1Source: Bloomberg, Global M&A Market Review Financial Rankings 1Q 2017,         

  2Historical performance is not indicative of future performance, which cannot be predicted.

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