US investment manager Wealthspring Capital has launched its debut hedge fund strategy, Fountain Opportunities, which aims to capitalise on the ongoing boom in special purpose acquisition companies (SPACs).
The new fund, Fountain Opportunities, will take an opportunistic approach to the SPAC market through selective positioning in all aspects of the SPAC ecosystem and life-cycle, from SPAC to DeSPAC. The fund will employ leverage to buy and trade around positions and offers strategic participation in private investment in public equities. Fountain Opportunities, which will formally launch on 3 May, will pursue an aggressive return profile while taking advantage of the SPAC characteristics that help manage risk.
Co-founded by Matthew Simpson and David Gallers, New York-headquartered Wealthspring – which manages more than USD650 million in assets – hopes to raise its AUM to around USD1 billion by year-end with the new launch.
Investor appetite in SPACs has soared in recent times: some 250 SPACs announced IPOs in 2020, raising USD83 billion.
“We have seen unprecedented investor interest in SPACs, which has prompted significant volatility in the already speculative space,” says David Gallers. “Yet we see a tremendous opportunity for investors who employ a strategic and thoughtful approach, and Fountain Opportunities is uniquely positioned to take advantage of the cyclical nature of the SPAC market.”
The new strategy is the firm’s second SPAC-focused product, following the launch of its US Treasuries + Alpha fund two years ago. A separately managed account, which generated a 20 per cent return last year, that strategy is designed to offer investors access to SPACs while providing the recognised safety and security of US treasuries.
SPACs raise capital from investors, via IPOs, to buy shares in private companies, with a view to taking them public, typically through a merger with the publicly-traded SPAC. Shareholders can then either choose to participate further with the merger as an investor, or redeem stock for the cash held in escrow following a takeover. Should no takeover targets be found within two years, the SPAC dissolves, with cash returned to investors.
“To be best positioned for success in SPAC investing, you need to align with a management team who knows the space, knows the sponsors, the risks and the prospects,” adds Matthew Simpson. “We are differentiated in the SPAC space because we have a dedicated focus and a proven track record of successful SPAC investing. Fountain Opportunities will allow more investors to access what we view as an incredibly attractive space.”
