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Asia’s wealthiest families and individuals are jumping on the SPAC bandwagon, investing in the blank check companies that have taken global markets by storm.
Family offices, including those backed by casino mogul Lawrence Ho, are piling up special purpose acquisition companies to generate better returns in the environment of low interest rates.
“We are seeing a growing number of high net worth individuals and family offices in Asia increasing their allocation of funds to subscribe for SPAC shares,” said Dennis Tam, CEO of Ho’s family office. Black Spade Capital, which is building a thematic portfolio on vehicles. “The SPAC market is very robust now, thanks to a very low cost of the fund, which implies a low opportunity cost to invest.”
Interest rates near zero have prompted the wealthy in Asia to seek alternative investment channels, paying particular attention to SPACs sponsored by large private equity funds like KKR & Co. and billionaires like Adrian Cheng, Li Ka-shing and Richard Li. Hong Kong and Singapore could see the madness widening as cities explore allowing SPAC listings.
“This year we will see Asian investors, especially those on the private wealth side, increasingly participating in SPACs,” said healthcare entrepreneur David Sin, who has sponsored one such venture.
Sin is experiencing an increase in investment interest from the rich and money from private banks. Some recent SPACs have seen more than 90% of funds come from private wealth rather than institutional investors, he said.
SPACs raise money from investors and then look to acquire another business, usually a private one, within two years. If they do not identify the objectives, investors can choose to recoup their investment at the initial public offering price by exercising their right of redemption.
“In this sense, it can be seen as a safer investment than bonds due to a very remote default risk,” Tam said. “Also, if you invest in the most reputable SPACs founded by reputable moguls and large private equity funds, investors can get quite a high return.”
Asian financial centers are not the only ones looking to capture more of the SPAC market, which is dominated by the US. The UK may loosen the rules to make it more attractive for SPACs to list in London, a report shown this week.
Some are skeptical that the boom will continue.
“As the number of SPAC IPOs increases, there may be too many backers relying on their abilities to unearth underrated targets, pursuing too few worthy business,” said Edward Au, Managing Partner South Hong Kong Region at Deloitte. The risk of SPACs failing to make proper acquisitions could dampen confidence in the industry, he said.
So far this year, at least eight blank check companies backed by Asian backers, including Primavera Capital and Hopu Investment Management have gone public in the US, raising at least $ 2.42 billion, data compiled by Bloomberg shows. That’s a huge acceleration from 2020, when 11 Asian SPACs raised $ 2.26 billion for the entire year.
Based in Hong Kong Raffles Family Office, which managed $ 1.8 billion in assets through August, has offered its clients exposure to SPAC, including Richard Li’s Bridgetown 2 Holdings Ltd.
“We have seen growing interest in the areas of cleantech, biotechnology and health care”Said Raffles CEO Chiman Kwan. “Some of the crucial factors in choosing a SPAC sponsor to work with are their credibility, business acumen, and track record in choosing appropriate acquisition targets and closing deals.”