Spin-offs and mergers can be attractive to investors because they can reflect a company's efforts to focus on its business, restructure its operations, or even seek new leadership. In the case of large conglomerates, it can be difficult for investors to accurately assess which units may be the most profitable or fastest growing—turnovers can help clarify.
These deals may also lead to new opportunities to acquire high-growth businesses that were once linked to established firms, or to access underpriced shares bought for sale by institutional investors or funds. However, because tracking all M&A and spin-off activity across markets can take a limited amount of an investor's time, two exchange-traded funds (ETFs) are uniquely designed to focus on this type of development.
Leading Spin-Off Fund Successfully Seizes Growth Opportunities
Company Invesco S&P Spin-Off ETF NYSEARCA: CSD directs the index of firms that have recently entered into a break-up, which results in the dissolution of a part of the business and its formation as a new publicly traded entity. Investors in this fund are betting that the spin-off process can open access to new value for this new company, allowing for further growth.
Invesco S&P Spin-Off ETF today
Company Invesco S&P Spin-Off ETF
As of 05/15/2026 04:10 PM Eastern
- 52 week interval
- $78.27
▼
$138.15
- Dividend Yield
- 0.11%
- Assets Under Administration
- $190.75 million
In particular, the CSD focuses only on liquidated firms (and only those that continue this process within the last four years), not existing firms that have started spinning off. It also includes companies in all types of full market capitalization, as most companies that emerge from spin-offs are much smaller than their larger siblings. Most of the firms in the CSD basket are middle-cap companies, and include both highly publicized spin-offs such as GE Vernova Inc. NYSE: GEV and many niche firms such as Solventum Corp. NYSE: SOLVfrom 3M Co. NYSE: MMM.
The universe of recent spin-offs is not large, and CSD has just over a dozen holdings in its portfolio. These are not weighted equally, and the largest position represents more than 12% of the total asset base. The combination of a very narrow basket and a selection of companies with a large weight means that CSD may carry more risk than other broad funds. However, its year-to-date (YTD) return of more than 35% may go a long way in allaying investors' concerns, even with an expense ratio of 0.64%.
Meger Arbitrage Approach Abbreviated to ETF
On the other hand is the ProShares Merger ETF BATS: MRGRan ETF with a combination arbitrage strategy, which works by the spread between the current stock price of a potential acquisition target and the price offered by the acquiring company. Because compounding arbitrage can be a complex and risky endeavor for investors to undertake independently, a passively managed ETF may make it easier to access.
ProShares Merger ETF today
Company ProShares Merger ETF
As of 05/15/2026 04:10 PM Eastern
- 52 week interval
- $41.81
▼
$46.22
- Dividend Yield
- 3.20%
- Assets Under Administration
- $15.82 million
MRGR manages approximately 40 companies and distributes its funds evenly across its portfolio. As a fund focused on arbitrage, MRGR uses both long and short positions to profit from price inefficiencies. On the long side it is heavily weighted towards healthcare and financial names, while on the short side it is heavily weighted towards materials and industrials.
Because of its unique approach, MRGR is not designed to follow its share prices over time. The fund has so far returned only about 1% YTD, but it pays a mandatory distribution. Investors are currently earning a cash yield of 3.2% from this fund. With its unconventional strategy, investors should expect to spend more on this fund—its average expense ratio is 0.75%.
Of course, there are other ways that mergers can benefit, but investors may need to look for companies that want to merge outside of the ETF space. Still, the lower level of risk in the form of an arbitrage-oriented ETF may be attractive to investors looking for an alternative to companies at this stage of development.
Investors may want to keep in mind that the two funds above can perform very differently depending on overall market conditions. Spin-offs, for example, tend to do well during bull markets when investors have a strong appetite for high-growth names. Compound arbitrage is a useful method in volatile times because it does not depend on the direction of the market. In this way, the funds may balance each other and provide opportunities for profit in different areas.
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