Zacks Investment Ideas feature highlights: Index IQ Merger Arbitrage ETF, Credit Suisse X-Links Merger Arbtrg ETN, ProShares Merger, iShares U.S. Healthcare Providers ETF and SPDR S&P Semiconductor ETF - Press Releases

For Immediate Release

Chicago, IL- July 08, 2015 – Today, Zacks Investment Ideas feature highlights Features: Index IQ Merger Arbitrage ETF (MNA), Credit Suisse X-Links Merger Arbtrg ETN (CSMA), ProShares Merger (MRGR),iShares U.S. Healthcare Providers ETF (IHF) and SPDR S&P Semiconductor ETF (XSD ).

3 ETFs to Profit from the M&A Boom

M&A activity is booming this year as companies rush to beat competitors in the race to become bigger and better. As organic growth has been hard to come by, companies are trying to grow, improve margins and achieve greater synergies by taking over rivals.

At current pace, 2015 appears to be on track to be the biggest year ever for M&A. Per Dealogic , US targeted M&A reached a half year record high of $1.03 trillion in the first half of this year, with 21 $10 billion plus deals announced so far. (Read: Great ETF Picks for the Second Half )

Global M&A volume reached $2.19 trillion in 1H 2015--second highest half year volume on record, even though deal activity has remained sluggish in Europe, with weak economic growth and concerns related to political problems in Greece.

Healthcare has been the most targeted sector in the US with $293.6 billion in deals—the highest half-year volume in record and up 73% from the same period last year. Technology ranks second, with $143.8 billion in deals—highest since the first half of 2000.

What's Fueling the Merger Mania?

Improving economy, ultra-low interest rates, and growing cash piles on companies' balance sheets are the main reasons for the surging interest in acquisitions. Potential cost savings through mergers are further fueling the urge to merge in the current ultra-competitive environment.

Many companies want to stay ahead in the takeover game by bulking up in order to avoid becoming targets of their rivals. As the rate hikes by the Fed are expected to be very gradual and subject to further improvement in the economy, corporate enthusiasm for deals remains high, signaling a strong second half for M&A. (Read: Invest in America with these 4 ETFs )

Below, we have highlighted three ETFs that are likely to benefit from the continued surge in M&A.

Index IQ Merger Arbitrage ETF (MNA)

Merger arbitrage strategy basically aims to exploit the spread between target stock's price after the announcement of the deal and the final takeover price. Due to the risk that an announced deal may not go through for some reason, target usually trades at a lower price until the takeover is complete. Regulatory hurdles often complicate the prospects of execution of deals, leading to the uncertainty.

There are many hedge funds that play this strategy. For individual investors, the option is available through ETFs. MNA invests in companies for which takeovers have been announced and goes short on broader global equities index. It charges an annual fee of 0.76%.

The product currently holds 31 companies, with Salix Pharma, Hospira and Baker Hughes being the top holdings. Looking at the performance—the product has returned 3.3% this year and 16.8% over the past three years, with very low volatility.

Investors should remember that these are "hedged" or somewhat "market-neutral" strategies. Their performance is largely independent of twists and turns in the market. Further since these strategies have low correlations with stocks, they also provide some diversification benefits to the portfolio.

While there are a couple more options in the space—(CSMA) and ( MRGR)—they have failed to take off, with just $5.5 million and $6.3 million in assets respectively, exposing them to closure risk.

iShares U.S. Healthcare Providers ETF ( IHF )

With Aetna's announcement last week to acquire Humana for about $37 billion, deal frenzy in the healthcare space continues unabated. It's been a take-over battle between the five largest health insurers—United Heath, Humana, Aetna, Anthem and Cigna—as the Federal Affordable Care Act continues to reshape the healthcare market.

Renewed market dynamics are forcing the companies to diversify, cut costs, gain scale and improve technologies. With the trend likely to continue in the coming months, investors should consider investing in IHF, which appears to be the best healthcare ETF to benefit from this trend.

This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. The product fund holds 51 securities in its portfolio with United Health, Express Scripts and Cigna being the top 3 holdings.

The fund has been able to attract $1040 million in assets so far. It charges 43 bps in annual fees and expenses and has gained almost 20% so far this year.

SPDR S&P Semiconductor ETF ( XSD )

M&A activity has been extremely hot in the Chip industry. With revenue growth slowing down , primarily due to strong US dollar, excessive inventories and the end of a PX cycle upgrade, semiconductor companies are trying to grow, expand into new markets and stay competitive by acquiring smaller players in the industry.

Avago Technologies' $36.6 billion offer for Broadcom is the largest Technology M&A deal announced on record. (Read: 4 Sector ETFs Outperforming in 2015 )

XSD tracks the S&P Semiconductor Select Industry Index, holding 47 stocks in its basket in almost equal weights. While equal weighting reduces the company specific risks, the product is tilted towards small cap stocks, making it more volatile than broader technology ETFs.

It charges 35 bps in fees per year and is up about 6% year-to-date.

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