Amundi, Europe’s largest asset manager, has roughly halved its exposure to so-called blank-cheque companies, claiming the fast-growing sector, which has earned investment banks tens of millions of dollars in fees, is displaying “boom-and-bust” characteristics.
Vincent Mortier, Amundi’s deputy chief investment officer, said the €1.8tn asset manager has stakes in “less than 10” Spacs, having held “at least double” its current number last year.
“The bulk of our investment was made last year. But we have been smart enough to exit almost all of our Spacs earlier this year before the correction,” Mortier told Financial News. “Valuations were too high, and sometimes you need to take profit. Now we have very little exposure.”
Spacs, which raise funds to offer private companies a faster route to public markets, have seen a boom during the Covid pandemic.
More than 300 Spac listings worth $88.5bn took place globally during the first quarter, according to data from S&P Global Market Intelligence. The amount is nearly 22 times more than the $4bn raised during the same three months of 2020.
The high level of activity helped investment banks post their best-ever quarter, with Wall Street firms pulling in more than $30bn in fees during the first three months of 2021, according to data from Dealogic.
Deutsche Bank has also benefited. Last month the German lender reported a surge in profits at its investment bank because of the Spacs boom, which has also prompted it to bolster talent to support growth.
However, Mortier said the Spacs craze has reached a tipping point, drawing attention to the less than impressive performance from current listings. The Spac & NextGen IPO Index is down more than 30% from its peak in February.
“We are in a boom-and-bust dynamic,” said Mortier.
“First we had some significant greed and a lot of buzz with the retail army participating because of a fear of missing out. Now we have some fear — fear that not all Spacs are created equal, and maybe that some are too pricey.”
He added: “The technique itself is not bad — it is what it has become that is questionable.”
The majority of Spac listings have taken place in the US, but Europe has also experienced a boom with promoters choosing Amsterdam as their destination of choice.
There have also been some high-profile promoters.
In February, a Spac headed by former UniCredit boss Jean Pierre Mustier, Pegasus Europe, was unveiled.
Meanwhile, Klaus Hommels, a German tech investor, also launched a Spac through his venture-capital firm, Lakestar, in the same month.
Despite cutting back on its exposure to Spacs, Amundi is still scouring the market for opportunities.
“We don’t say it’s a no-goer, but we are very picky,” said Mortier.
“Now we are looking at new offerings in Europe, listening to sponsors. I’ve met a few, but so far we have not found anything that is very attractive.”
Amundi scaling back its exposure is the latest sign that the frenzy around Spacs might be starting to slow.
A survey by opinion sharing platform Procensus last month showed that 15% of investors were “very bearish” and expect high-profile failures to blow up the Spac market. Meanwhile, almost 45% predicted that activity will fall as a result of investors becoming more selective.
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