With 3M’s (NYSE: MMM) acquisition of Cogent (NasdaqGS: COGT), Sanofi-Aventis’ (NYSE: SNY) purchase of Genzyme Corp (NasdaqGS: GENZ) and the plethora of other other deals, you almost have to wonder why equities have performed so poorly when corporations continue to find value in the market.

The recent spate of mergers and acquisitions (M&A) stems from two things: the huge piles of cash on corporate balance sheets and the huge exodus of cash from equity mutual funds.

Despite their dismal performance of late, equity contribute substantial liquidity and balance to the markets, swooping in to buy shares of underpriced companies or shorting stocks whose valuations have become too rich. This balance helps slow M&A activity, keeping  share prices in line with fair value–most corporate buyers like to get a bargain. But like any investor, corporate acquirers sometimes make dumb buys just because money’s burning a hole in their pocket.

Regardless of whether a deal is ill-advised or a brilliant maneuver for the acquirer, hedge funds and other sophisticated investors can make out like bandits by arbitraging those deals. In the wake of announced buyouts, the share price of the acquiring company has a tendency to fall–particularly if it’s perceived to be overpaying–while the target’s stock price will increase to whatever premium is paid.

A basic merger-arbitrage strategy involves shorting the acquirer and going long the target.

Launched last November, IQ Merger Arbitrage (NYSE: MNA) brings this strategy to the masses and has succeeded thus far. Sticking primarily to the long side of the equity equation, the exchange-traded fund (ETF) takes positions in companies for which a takeover announcement has been made public. It also takes short positions on global equity indexes through the futures market as a hedge, though so far it hasn’t shorted any specific companies.

Although less than a year’s worth of data is available, the fund’s performance has been impressive. Since its inception, the ETF has returned 3.73 percent, while the MSCI World Index has lost 0.41 percent. This year the fund is up 0.83 percent, compared to the S&P 500’s 5.9 percent decline.

The fund’s low beta means that its returns aren’t particularly correlated to any asset class; IQ Merger Arbitrage is an excellent way to profit from the recent spate of M&A activity and cushion your portfolio against broader market moves.

What’s New

On August 25 ALPS launched Alerian MLP (NYSE: AMLP), the market’s first master limited partnership (MLP) ETF. That may come as a surprise to some given the recent proliferation of MLP products, but thus far everything has been structured as exchange-traded notes (ETN).

Tracking the Alerian MLP Infrastructure Index, Alerian MLP ETF will use the same benchmark as UBS E-TRACS Alerian Infrastructure (NYSE: MLPI), though there will be one major difference between the two products. Rather then simply tracking the performance of an index made up of 25 constituents as the, Alerian MLP ETF will hold a portfolio of these holdings. Any credit risk associated with holding an ETN is eliminated.

But be forewarned that this approach also increases the risk of tracking error; holding an index’s constituent parts rather then tracking the index itself means that the returns of the two can deviate.

With both products carrying a 0.85 percent expense ratio, I the two funds will perform similarly. That being said, I expect that Alerian MLP to attract assets quickly because investors are still leery of the additional–albeit minimal–credit risk that ETNs carry. Already generating average volume in excess of 100,000 shares daily, Alerian MLP is an enticing option for investors seeking exposure to this asset class.

Van Eck Global introduced India Small-Cap Index (NYSE: SCIF) last week. As the name implies, the ETF focuses on Indian small caps, which make up more than 90 percent of India’s investable market.

The investment thesis behind the fund makes sense; the country’s small companies, which are more leveraged to domestic growth than large cap companies, should benefit from a young population and ballooning middle class. Within the next 15 years India’s middle class is expected to grow to twice the size of the entire US population–a powerful catalyst.

But with an average daily trading volume of just 1,000 shares and an expense ratio of 0.91 percent, I’d give this fund some time to mature before dipping any toes in the water.