A new exchange-traded fund is on the way looking to tap the once red-hot SPAC market, even as investor enthusiasm for blank-check firms sputters and existing products stumble.
The actively managed RiverNorth SPAC Focus ETF would invest in so-called special purpose acquisition companies before they merge with their targets, according to a filing with the Securities and Exchange Commission this week.
If approved, it would join at least seven U.S.-listed ETFs linked to SPACs, several of which are enduring a miserable year.
Pressure is building in the space, with an index showing SPACs down 40% from the peak in February last year and regulators circling. The SEC is stepping up scrutiny of the vehicles on concern that investor protections are lacking and amid reports of suspicious trading patterns.
“The extreme euphoria we saw in the second half of 2020 through 2021 is now gone” when it comes to SPACs, said Max Gokhman, chief investment officer at AlphaTrAI. “The ship has sailed.”
One encouraging sign for the proposed new fund: three ETFs that also focus solely on pre-merger SPACs have performed better then their peers, with returns this year ranging from -1% to 0.6%.
Meanwhile, the De-SPAC ETF (ticker DSPC), which invests in companies that merged with SPACs, has dropped 36%. Two funds that invest in a combination of pre- and post-merger SPACs are each down 20%.
“When the negative press or the negative viewpoint is at a peak, that’s when you’ll find the most opportune investment situation,” said Mike Loukas, chief executive officer of TrueMark Investments, which will advise the proposed fund. RiverNorth Capital Management would be the sub-advisor.
The ticker and fees for the proposed fund have not yet been announced.
This article was provided by Bloomberg News.