A team of blank-check company dealmakers is seeking to raise $100 million for a fund that will invest exclusively in special purpose acquisition companies.
Boston-area investment firm Easterly Alternatives plans a fund that will invest in as many as 15 SPACs, according to documents reviewed by Bloomberg. The firm and its partners say they've been involved in more than 50 SPAC initial public offerings in the past five years and say the fund will be the first of its kind.
The fund will primarily target new-issue blank-check companies that are repeat SPAC issuers and have “former public company executives on the sponsorship team,” according to the documents. Easterly is targeting gross returns of 12% to 15% annually and the minimum investment will be $5 million.
Blank-check companies are having a record-breaking year, raising more than $41 billion as of Sept. 24 — more than the last 10 years combined, data compiled by bloomberg show. Many well-known names, including hedge fund billionaire Bill Ackman, have started SPACs, which list on stock exchanges to raise money for the purpose of acquiring other companies. Intense investor interest has attracted scrutiny from the U.S. Securities and Exchange Commission, which said it's reviewing the market.
But some investors may be cooling on the asset class. The IPOX SPAC Index, which is followed as a benchmark for the vehicles, slid 6% last week.
The management team at the new fund is led by Darrell Crate, managing principal of Easterly Alternatives, who was part of a SPAC sponsor group that merged with Sirius International Insurance Group Ltd. in 2018.
“We've been sponsors, we've been investors — we understand the tensions and frictions among sponsors and investors,” Crate, who confirmed the information in the documents, said in an interview.
Josef Schuster, founder of Chicago-based IPOX Schuster, which created the SPAC index, said this is the first he's heard of a fund dedicated solely to blank-check companies. “It's entering the mainstream,” he said.
Easterly is part of Easterly Capital, which has more than $7 billion under management and has previously launched funds in real estate, health care and shipping. “We look for places where we can find an information edge,” Crate said.
The firm plans to wrap up fundraising by mid-2021. The fund will seek capital appreciation after an IPO but won't be required to be a long-term investor in the company.
The fund's life is expected to be four years with an option to extend for a year. The management fee is 1% per annum with an incentive fee of 10% with a 5% hurdle, according to materials. Leverage is 50% maximum.
Source: Bloomberg – Blank-Check Dealmakers Seek to Raise $100 Million for SPAC Fund