Q: This is following on my previous question, Here is the information regarding this new fund from Spartan.
I do value your opinion on this one and how it rates regarding risk factor. Thanks
LSQ – which has been quite successful in pursuing other market-neutral arbitrage opportunities – anticipates that its SPAC arbitrage strategy will achieve double-digit returns on a portfolio basis using modest leverage (3x) with a very low-to-negative correlation to other markets, and with low drawdowns. We intend to pause fundraising once the strategy reaches $100M.
SPACs and the SPAC Market
- For those unfamiliar with SPACs, they are publicly-traded shell corporations that raise capital with a view to acquiring an operating business. Once a SPAC is IPO’d in the public markets (at say $10/share), it typically has 18-24 months to find an acquisition (capital raised is held in short-term money market instruments until deployed).
- When the sponsors of a SPAC find an acquisition, the underlying investors can either (#1) vote against the transaction and redeem their shares at the SPAC’s original IPO price (in this case $10), or (#2) vote for the transaction and participate. In an increasing number of instances, SPACs are permitting investors to vote for the transaction and redeem their shares (again, at their original $10 IPO price, per our example).
- In addition, SPACs are usually issued with warrants entitling the holder to participate in the SPAC’s potentially-successful acquisition. These warrants can also have a tradable market value.
- While SPACs can vary greatly in terms of size, quality, experience of the underlying sponsor, etc., for a SPAC investor, the worst-case scenario is a guaranteed return of capital at the SPAC’s IPO price (again $10 per our example), plus the residual value of any warrants, while the best case is participating in a very successful transaction.
Since SPACs are plentiful (33 have been issued in 2018 so far), trade on the open market (usually Nasdaq), frequently at a premium or discount to their original IPO price, and have a known ‘worst-case scenario’ and ‘timing’ attributes, they present considerable investment opportunities for a hedge fund manager with a detailed knowledge of the sector.
Please see the attached materials for additional details.
Seed investors – i.e., the first $10M – are entitled to the 1.5% & 10% fee structure with the right of seed investors to double their investments at that same pricing level during the term of the fund. We are looking to launch early in Q1 – likely end of January 2019.
We are in the process of compiling our order book so please let me know if you are interested in having an intro call and potentially allocating.
I do value your opinion on this one and how it rates regarding risk factor. Thanks
LSQ – which has been quite successful in pursuing other market-neutral arbitrage opportunities – anticipates that its SPAC arbitrage strategy will achieve double-digit returns on a portfolio basis using modest leverage (3x) with a very low-to-negative correlation to other markets, and with low drawdowns. We intend to pause fundraising once the strategy reaches $100M.
SPACs and the SPAC Market
- For those unfamiliar with SPACs, they are publicly-traded shell corporations that raise capital with a view to acquiring an operating business. Once a SPAC is IPO’d in the public markets (at say $10/share), it typically has 18-24 months to find an acquisition (capital raised is held in short-term money market instruments until deployed).
- When the sponsors of a SPAC find an acquisition, the underlying investors can either (#1) vote against the transaction and redeem their shares at the SPAC’s original IPO price (in this case $10), or (#2) vote for the transaction and participate. In an increasing number of instances, SPACs are permitting investors to vote for the transaction and redeem their shares (again, at their original $10 IPO price, per our example).
- In addition, SPACs are usually issued with warrants entitling the holder to participate in the SPAC’s potentially-successful acquisition. These warrants can also have a tradable market value.
- While SPACs can vary greatly in terms of size, quality, experience of the underlying sponsor, etc., for a SPAC investor, the worst-case scenario is a guaranteed return of capital at the SPAC’s IPO price (again $10 per our example), plus the residual value of any warrants, while the best case is participating in a very successful transaction.
Since SPACs are plentiful (33 have been issued in 2018 so far), trade on the open market (usually Nasdaq), frequently at a premium or discount to their original IPO price, and have a known ‘worst-case scenario’ and ‘timing’ attributes, they present considerable investment opportunities for a hedge fund manager with a detailed knowledge of the sector.
Please see the attached materials for additional details.
Seed investors – i.e., the first $10M – are entitled to the 1.5% & 10% fee structure with the right of seed investors to double their investments at that same pricing level during the term of the fund. We are looking to launch early in Q1 – likely end of January 2019.
We are in the process of compiling our order book so please let me know if you are interested in having an intro call and potentially allocating.
