Tuttle Tactical Management has launched an ETF providing actively managed exposure to Special Purpose Acquisition Companies (SPACs).
Matthew Tuttle, CEO & CIO, Tuttle Tactical Management.
Listed on NYSE Arca, the SPAC and New Issue ETF (SPCX US) invests in a portfolio of SPACs that the fund’s managers believe represent favourable investment opportunities.
SPACs
Often referred to as blank-cheque companies, SPACs are listed acquisition vehicles that are formed for the specific purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more private operating companies.
SPACs often have pre-determined time frames to merge (typically two years) or the SPAC will liquidate.
For private operating companies looking to raise funds and/or go public, SPACs offer an alternative to the traditional initial public offering (IPO) process.
SPAC IPOs have witnessed an acceleration in popularity in 2020. Through December 8, there have been 217 SPAC IPOs year-to-date, with gross proceeds exceeding $74 billion. This compares to 59 SPAC IPOs in 2019 representing $13.6 billion in gross proceeds.
The strategy
Fund management is headed up by Matthew Tuttle, CEO and CIO of Tuttle Tactical Management.
Tuttle and his team perform research and due diligence on SPAC sponsors, evaluating a range of factors including the history of the sponsor’s management team in allocating capital and securing financing, their record managing public companies, and the extent of any relevant experience and domain knowledge in the industry in which the SPAC is searching for a deal.
The fund’s managers may purchase units or shares of SPACs in the secondary market or during a SPAC’s IPO. For SPACs that are already listed and trading, they must have a minimum capitalization of $100 million and have completed their IPO within the last two years to be eligible for selection.
It is expected that the fund will engage in frequent trading, resulting in a high portfolio turnover rate. The fund’s managers may dispose of a position when a SPAC announces a business combination, or its price increases, or to avoid concentrating assets in an industry.
For cash management purposes or due to a lack of suitable investment opportunities, the fund may hold up to 20% of its net assets in cash or similar short-term, high-quality debt securities.
As of December, 15, the fund had 43 holdings with a median market cap of $674 million. Notable positions included Churchill Capital Corp IV (5.94%), Social Capital Hedosophia VI (3.75%), Foley Trasimene Acquisition Corp (3.32%), Dragoneer Growth Opportunities (3.09%), Social Capital Hedosophia V (3.02%), CC Neuberger Principal Holdings II (2.71%), RedBall Acquisition Corp (2.60%), Apollo Strategic Growth Capital (2.59%), E. Merge Technology Acquisition Corp (2.55%), and TWC Tech Holdings II Corp. (2.55%).
‘No place for an index fund’
Commenting on the launch, Tuttle said: “As there is limited information on publicly-traded SPACs, selecting the right SPAC in which to invest can seem like a daunting task. SPCX offers investors a broad portfolio of SPACs within the familiar liquid and tax-efficient wrapper of an ETF.”
He added: “The SPAC market is one of rapid change and opportunity. As a result, we feel the most appropriate strategy for managing a portfolio of SPACs is through active management as it can be more flexible in reacting to market events. This is no place for an index fund based on a rigid set of rules.”
The fund has total annual fund operating expenses of 0.95%.
It becomes the second SPAC-related ETF to hit the market following the launch of the Defiance Next Gen SPAC Derived ETF (SPAK US) in September.
SPAK is referenced to the Indxx SPAC & NextGen IPO Index, a passive rules-based index that tracks the performance of newly listed SPACs and IPOs derived from SPACs over the preceding 36 months.