Union Bank of Switzerland has brought together special situations research and its structured products developers to launch an index that reflects the bank's M&A watch list. UBS Mergers & Acquisitions Europe Investable Index Total Return (EUR), on which a swap against the MSCI Europe and a delta one certificate are already available, is designed as an underlying for financial contracts including structured products.
"As part of our work we produce an M&A watch list which comprises European stocks we think are attractive European takeover targets for particular buyers from within and outside Europe," said Daniel Stillit, head of special situations research.
The equally-weighted, dynamically-managed index of 56 stocks is rebalanced in line with any changes in the bank's watch list. Individual stocks are capped at five. A liquidity rule also applies to the index.
Stillit said the UBS research team did not develop a thesis and then back test it:" Rather we had a thesis and forward tested it," he said. "We launched the updated watch list on 15 Dec 09 and its indexed value has gone up by 36% and has outperformed the E300 index by 17% and the MSCI European Mid cap index by a similar amount."