SPAC fever rages on with today’s launch of the actively managed Morgan Creek-Exos SPAC Originated ETF (SPXZ), a collaboration between a hedge fund and a fintech company run by a former CEO of Credit Suisse.
SPACs, of course, are special purpose acquisition companies. Also known as “blank-check” companies, these are publicly traded shell companies that exist solely to raise money to buy or merge with private entities running actual businesses, then take them public. A SPAC has a set time period—typically two to three years—to make a deal. If it doesn’t, the money is returned to its investors.
According to the website SPAC Research, a record 248 SPACs debuted on U.S. exchanges last year, raising more than $83 billion. In 2021, there have already been 67 SPAC-related initial public offerings that raised $19.5 billion.
SPACs give private companies that want to go public a shortcut so they don’t have to raise cash from multiple investors via road shows. Citing data from Dealogic, The Wall Street Journal recently reported that SPACs accounted for more than 70% of all money raised via IPOs this month (as of January 21).
The Morgan Creek-Exos SPAC Originated ETF is the third SPAC-focused ETF on the U.S. market following two launches in last year’s fourth quarter. The product is a joint effort involving Morgan Creek Capital Management LLC and Exos Asset Management LLC.
Morgan Creek is an asset manager in Chapel Hill, N.C., that was founded by Mark Yusko, the former chief investment officer of the University of North Carolina's endowment fund. The firm uses the endowment model for investing, including alternative investments via private equity and hedge funds and offering its own global equity long/short institutional fund. Exos is a New York City company billing itself as a next-gen platform for B2B institutional finance. It was founded by Brady Dougan, who served as CEO of Credit Suisse for eight years until 2015.
The Morgan Creek-Exos SPAC Originated ETF will put two-thirds of its holdings in the largest companies that have already completed SPAC mergers during the past three years; the other one-third will consist of SPACs still looking for companies to merge with. The portfolio is equal dollar-weighted, and will “generally” rebalance monthly.
The prospectus notes that Exos will make the investment decisions for the SPXZ fund, while Morgan Creek offers oversight.
The SPXZ fund charges an expense ratio of 1.00%. That’s five basis points more than the fee charged by the SPAC and New Issue ETF (SPCX), an $87 million fund operated by Tuttle Tactical Management that launched in December as the first actively managed SPAC-focused ETF. The Tuttle portfolio of 67 holdings includes only pre-merger SPACs. Tuttle is a sponsor of six ETFs, including five based on its trend aggregation strategy.
SPCX is up 16.8% year to date and up 20.2% since it launched on December 16. In both periods, it handily beat the S&P 500 Index.