Little noticed in the annual August market slowdown were two fund closures that may signal an end to one of Wall Street’s hottest manias of the past few years: SPACs.

The Defiance Next Gen SPAC Derived ETF and the Morgan Creek - Exos SPAC Originated ETF shuttered last month, after struggling to maintain traction as the Federal Reserve’s monetary tightening weighs on risk assets and drains liquidity from a market once free-flowing with capital searching for a home.

Defiance’s fund, which traded under the ticker SPAK, was worth around $112 million at its peak, but liquidated with only $16 million in holdings. The index of special purpose acquisition companies and blank check merged firms it tracked is currently down 37% year-to-date. Morgan Creek’s ETF (ticker SPXZ) boasted a market capitalization of $47 million at its peak, but also struggled to maintain investor interest as everything from blue-chip stocks to speculative bets sold off this year.

Along with meme stocks and cryptocurrencies, SPACs were a hallmark of the stimulus-fueled pandemic market that has sputtered out in 2022 as the Federal Reserve rapidly tightens monetary policy to cool off soaring inflation. Increasing scrutiny from US regulators has also deflated the blank-check mania.

“While they raised assets initially in a ‘risk on’ environment, the market for SPACs has collapsed, with very little new issuance and many entities failing to identify targets and/or complete transactions,” said Jane Edmonson, founder of EQM Capital.

Defiance ETFs declined to comment on the filing beyond the details in its August press release announcing the closure. Morgan Creek could not be reached for comment beyond its press release.

Meantime, the SPAC rout is providing a windfall for a fund that bets against the space. The $23 million AXS Short De-SPAC Daily ETF (SOGU), which provides daily inverse exposure to companies that recently went public via a SPAC merger, is one of the best performing US active equity ETFs year-to-date, according to data compiled by Bloomberg.

The latest ETF closures underscore how SPAC-mania seems to be melting away just as quickly as it came about. SPAK was among the first funds of its kind to hit the US market, but is shuttering after just 22 months. SPXZ was also less than 2 years old. The pattern mirrors the broader trend across the industry: according to Bloomberg data, roughly 45% of the exchange-traded funds that have closed this year launched in either 2020 or 2021.  

This article was provided by Bloomberg News.