Are ETFs the Ultimate SPAC Wrapper

Image of Jonathan Browne, Portfolio Manager at Robinson Capital
Jonathan Browne, Portfolio Manager at Robinson Capital
Are ETFs the Ultimate SPAC Wrapper

At the time of this writing, there were over 400 SPACs searching for merger targets
The amount of Specially Purpose Acquisition Companies (SPACs) have exploded in popularity over the past year and a half, and so has the number of available SPACs to invest in. With so many options, picking the right SPAC can be extremely difficult for an individual investor.

The Importance of an Experienced Asset Manager
As more and more SPACs come to market, it requires a larger team and more time and resources to analyze each option appropriately to decide if it’s a good investment or not. At Robinson Capital, we focus on analyzing and investing in pre-merger SPACs that have the most attractive risk versus return profile and in our view, have the highest likelihood of finding an exciting company to bring public.

What’s the best way to get access to SPACs?
For those wanting to invest in SPACs, there are several options to choose from.

  1. Purchasing SPACs without professional management and performing time consuming research on your own. 
  2. Be or become an accredited investor, which may come with excessive fees and long lock-up periods.
  3. Invest in an active, diversified and professionally managed SPAC ETF.

Potential Benefits of the SPAC ETF Structure

  1. Diversified Exposure - ETFs may provide access to a broad portfolio of SPACs, which can reduce security specific investment risk.

  2. Professional Management - Access to a professional management team who focuses on analyzing and identifying opportunities in the SPAC market.

  3. Daily Liquidity - ETFs can trade intraday during normal market hours, unlike traditional mutual funds that can be traded once a day or hedge funds which may require lengthy lock-up periods.

  4. Lower Fees - Investors can access what is primarily a hedge fund strategy, but through a lower cost ETF wrapper.

How to Invest in ETF that invests in Pre-Merger SPACs?

Robinson Capital serves as investment sub-adviser to the Robinson Alternative Yield Pre-Merger SPAC ETF (ticker: SPAX). SPAX is an actively managed exchange-traded fund (ETF) that intends to invest primarily in pre-merger SPACs. In fact, SPAX remains the only ETF that has specifically hard-coded into its prospectus that it must not hold any SPACs after the completion of a merger. SPAX seeks to provide total return while minimizing downside risk. Robinson Capital intends to sell SPAC investments in the SPAX portfolio prior to completed business combinations.

 

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