Bulldog Preps SPACs Hedge Fund

Jan 8 2008 | 2:00am ET

Activist hedge fund shop Bulldog Investors is adding a new strategy to its product line. The Saddle Brook, N.J.-based firm is launching the Absolute Plus Fund, focused on investing in special purpose acquisitions companies or “blank check companies,” this month with some $8 million in assets.

“There are great opportunities there and I think we’re one of the top hedge fund managers in understanding how they work and their risks and rewards,” said co-founder Phil Goldstein. “It’s such a conservative investment but has the perception of being very risky. We’re looking for double-digit returns annualized with a minimum of 6.5% per annum, which will be the worst case. It’s very attractive versus just having your money in the bank and the risk is comparable to having a certificate of deposit.”

According to Goldstein, what makes SPACs safe is that their capital goes into a bank trust fund which can’t be touched until a deal is approved. The shareholders have an opportunity to endorse the deal, and if they don’t they are entitled to a pro-rated share of the trust fund.

“It’s a win-win if a good deal comes down the road but if it doesn’t, then the manager has to take the hit,” Goldstein said.  “We’ve had a lot of experience in dealing with the managers and we know who the good ones are. It’s just safer than just investing in straight equities.”

Goldstein estimates there are 95 SPACs currently trading with $14 billion in total capitalization.  

The firm is marketing its new offering, which charges a management fee of 75 basis points and 15% incentive fee above a hurdle of three-month Treasury bills, to its existing investors comprising of individuals and funds of funds.


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