About the Index

The S&P Merger Arbitrage Index provides exposure to a global merger arbitrage strategy, which seeks to capture the spread between the price at which the stock of a company (each such company, a "target") trades after a proposed acquisition of such target is announced and the value (cash plus stock) that the acquiring company (the "acquirer") has proposed to pay for the stock of the target (a "spread"). Such a spread typically exists due to the uncertainty that the announced merger, acquisition or other corporate reorganization (each, a “deal”) will close, and if it closes, that such deal will be at the initially proposed economic terms. For deals that close, the price of the target after the deal is announced is expected to approach the proposed acquisition price by the closing date of the deal, resulting in a gain to strategies such as the index’s, which attempt to capture this spread. The size of the spread will depend on factors, including the perceived risk of the deal closing and the length of time expected until the deal is completed. For deals that are not consummated, the price of the target commonly falls back to pre-announcement levels, typically resulting in significant losses well in excess of the post-announcement spread the strategy attempts to capture.

The index takes long positions in target securities. The index also takes short positions in shares of the acquirer when the deal involves an exchange of the acquirer's stock. The short positions are intended to reduce the effect that declines in the value of the acquirer's stock could have on the spread.

The index is comprised of up to 40 publicly announced deals within developed market countries through a combination of long and, in certain cases, short security positions. When deals enter the index, the weight in long positions of targets is initiated at three percent (3%) and the initial weight in short positions of acquirers ranges between zero and three percent (0% and 3%), depending on terms of the deal. This limits the sum of initial net exposures to between zero and one hundred percent (0% and 100%), with both the long and short positions having a maximum initial exposure each of 120%. The index also includes a Treasury bill component, which constitutes the remainder of the index when net exposure from included deals is less than 100%. Certain deals are screened out based on liquidity, size, and remaining spread between the deal price and the stock price of the company being acquired. Additions and deletions occur on a rolling basis.

The index is denominated in local currencies.