The infinite monkey theorem states that a monkey hitting keys at random on a typewriter keyboard for an infinite amount of time will eventually bang out some sort of recognizable text, such as the complete works of William Shakespeare.

Along the same lines, one might argue that Exchange-Traded Funds, or ETFs, are in alternatives’ form at least a version of the monkey-at-typewriter theorem, by virtue that a synthetic composition of securities combined into something that is purportedly a hedge fund can mimic, if not the best, but the same strategy and returns as a hedge fund manager — eventually.

All this monkey business theory stems from Rye Brook, New York-based IndexIQ’s release of the IQ ARB Merger Arbitrage ETF (ticker: MNA), which began trading this past Tuesday.

How it works: the ETF relies on a fixed rule book – the main requirement being that an acquirer must have offered a premium to a target company’s market price: More…