On September 17, 2021, CrossingBridge Advisors, LLC, launched their actively managed Pre-Merger SPAC ETF (SPC). CrossingBridge, primarily an institutional/high net worth advisor located in Pleasantville, New York, has approximately $970 million in assets under management and is responsible for the CrossingBridge Low Duration High Yield, CrossingBridge Ultra-Short Duration, and the CrossingBridge Responsible Credit funds.
While the buzz surrounding SPACs is that they are a high-risk, get-rich-quick scheme, the CrossingBridge fund is positioned as a cash alternative vehicle that seeks “total return with the preservation of capital.” They intend to invest in “SPACs that have yet to consummate a shareholder-approved merger or business combination,” which are also “trading at or below the SPAC’s pro-rata trust account value.” The fund hopes to offer significantly higher returns than you might find in a short-term fixed-income fund with a very limited downside.
A SPAC, or special purpose acquisition company, is a public corporation. As such, it can be judged on many of the same metrics that managers use to assess other potential investments: the quality and track record of the management team, the clarity of the business’s plan, and its yield. The handicap investors face is that individual SPACs don’t have performance records: they are created for a single purpose (for example, to help a private company go public) and have a limited lifespan (two years, in general).
SPACs have two special attractions. First, their business model allows them to execute the equivalent of an IPO with less hassle and expense than the traditional IPO process incurs. That makes them attractive to lots and lots of private companies. There are not 571 SPACs in existence with a total trust value north of $170 billion. Second, their portfolios are fully collateralized (typically) with Treasury securities. That is, they have actual money in the bank equal to or greater than their net asset value.
The CrossingBridge managers argue that it’s possible to assess a SPAC using the same discipline they use to assess the other high-yield companies in their portfolios. Those questions involve the time until culmination or liquidation, the SPAC’s yield (185 SPACs have a yield of 3% or more), the record of the management, and so on.
The fund will be managed by David Sherman and T. Kirk Whitney. Mr. Sherman has a distinguished record as a fixed-income investor (his RiverPark Short-Term High Yield Fund has the highest 5- and 10-year Sharpe ratios of any fund in existence), and he’s been investing in SPACs for 15 years. The fund’s initial expense ratio is 0.80%.
Interested parties might check out the fund’s website. Slightly obsessive parties might check out the adviser’s newly launched SPAC Informer website. SPAC Informer aims to provide the resources necessary for direct SPAC investors. Mr. Sherman analogizes it to the choice between trying to feed yourself by learning how to fish on your owner (SPAC Informer) or going to a professional fishmonger who does this stuff all the time and who can offer you a nice catch without all the hassle (the Pre-Merge SPAC ETF).