CHAPEL HILL, N.C., Feb. 1, 2022 /PRNewswire/ — Chapel Hill, North Carolina-based asset manager Morgan Creek Capital Management and New York-based fintech company EXOS Financial today launched the Morgan Creek – Exos Active SPAC Arbitrage ETF (ticker: CSH), an actively managed ETF with an investment strategy that invests in SPACs, and their underlying US Treasury collateral, to earn a potentially higher return per unit of risk than traditional cash alternatives.
CSH seeks to provide investors with short-duration investment exposure that still earns a meaningful positive return. The fund seeks to achieve this objective by holding a diversified portfolio of “pre-combination SPACs”, which are structurally collateralized by US T-bills or equivalents and embedded equity options. It actively manages the underlying portfolio in an attempt to optimize returns relative to the risk to its underlying collateral value.
“There has never been a more challenging time to be a saver”, said Mark Yusko, CEO and Chief Investment Officer at Morgan Creek Capital Management. “Record high inflation and ultra-low interest rates make it extremely difficult for investors to make the most of their cash. Banks are paying close to zero and other cash alternatives like credit, or longer duration bonds, offer only a small incremental return, but can leave investors with significant losses in the worst case scenarios”.
“We’re thrilled about bringing this new ETF to market in collaboration with Morgan Creek,” said Peter Early, Head of Business Development at EXOS Financial. “CSH is built for investors looking to earn a return on their liquid assets without compromising on safety. We do this by leveraging our expertise and extensive knowledge of SPACs while we have the ability to redeem our shares for the underlying collateral at some date in the future. This stage of a SPAC’s life cycle is unique because it offers the protection of the US government credit with the upside potential of equity, which is quite appealing.”
CSH will hold a diversified portfolio that is weighted based on a proprietary valuation analysis which is updated in real time. “We believe that active management is absolutely essential when navigating the world of SPACs. Our ETF manages risk through consistent and systematic rebalancing using a structured analytical framework that compares the expected return of each security in the universe relative to its risk to the underlying collateral value. This proprietary process is what keeps the portfolio well-positioned for small, but consistent, gains without over-exposing investors to any single security,” said PM Dewey Tucker.
Special Purpose Acquisition Companies, or SPACs, are hybrid investment vehicles where trust assets are collateralized by a pool of US Treasuries, and include equity options embedded in the structure that could allow for additional return above the risk-free rate. CSH is designed to capitalize on these key structural features of SPACs, and therefore is not necessarily dependent on the performance of the SPAC market as a whole, or on the performance of the individual companies that utilize SPACs to go public.
The expense ratio of CSH is 1.25%.
About Morgan Creek Capital Management
Morgan Creek Capital Management is an asset manager founded by Mark W. Yusko, the former CIO of the University of North Carolina Endowment. Morgan Creek utilizes the Endowment model of investing, specializing in targeting opportunistic and focused investments. The firm has decades of investment experience and relationships around the globe, and is a thematic investor focusing on important secular macro trends such as innovative technology, the wealth transfer to developing markets, next generation consumers, as well as demographics and new models in healthcare delivery.
About EXOS Financial
EXOS is a fintech company building a modern institutional finance platform to disrupt the legacy investment banks. Helmed by Brady Dougan, the former CEO of Credit Suisse, EXOS has deep experience and intellectual property in all aspects of SPACs. With CSH, EXOS is bringing its banking, capital markets, technology expertise, and resources to its second publicly listed fund.
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus and summary prospectus, which may be obtained visting the Fund’s website https://www.csh-etf.com or calling (855) 857-2677. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Past performance is no guarantee of future results.
The Fund invests in equity securities, warrants and rights of SPACs, which raise funds to seek potential Combination opportunities. Unless and until a Combination is completed, a SPAC generally invests its assets in U.S. government securities, money market securities, and cash. If a Combination that meets the requirements for the SPAC is not completed within a pre-established period of time (e.g., 18-24 months), the invested funds are generally returned to the entity’s shareholders (less any applicable taxes, fees, and administrative expenses); however, in certain cases, the SPAC may extend its period of operations beyond the initial pre-established period of time. If this occurs, a fund investing in the SPAC may have difficulty redeeming its holdings, or may not be able to do so at a desirable time. Because SPACs have no operating history or ongoing business other than seeking Combinations, the value of their securities is particularly dependent on the ability of the entity’s management to identify and complete a profitable Combination. There is no guarantee that the SPACs in which the Fund invests will complete a Combination or that any Combination that is completed will be profitable.
Borrowing magnifies the potential for gain or loss by the Fund and, therefore, increases the possibility of fluctuation in the Fund’s NAV. This is the speculative factor known as leverage. Because the Fund’s investments will fluctuate in value, while the interest on borrowed amounts may be fixed, the Fund’s NAV may tend to increase more as the value of its investments increases, or to decrease more as the value of its investments decreases, during times of borrowing. Unless profits on investments acquired with borrowed funds exceed the costs of borrowing, the use of borrowing will cause the Fund’s investment performance to decrease.
Post-Combination SPAC Warrants. Although the Fund generally will not hold the common stock of a Post-Combination SPAC, the Fund may hold warrants to buy the stock of companies that are derived from a SPAC. Post-Combination SPACs may be unseasoned and lack a trading history, a track record of reporting to investors, and widely available research coverage. Post-Combination SPACs are thus often subject to extreme price volatility and speculative trading. The stocks underlying the warrants may have above average price appreciation that may not continue and the performance of these stocks may not replicate the performance exhibited in the past, which could adversely affect the value of the warrants the Fund holds.
Because the Fund is “non-diversified,” it may invest a greater percentage of its assets in the securities of a single issuer or a lesser number of issuers than if it was a diversified fund. As a result, a decline in the value of an investment in a single issuer or a small number of issuers could cause the Fund’s overall value to decline to a great degree than if the Fund held a more diversified portfolio. The fund is new and has a limited operating history.
Glossary: “Pre-Combination” SPACs are SPACs that are either seeking a target for Combination or have not yet completed a Combination with an identified target. “Post-Combination” SPACs are operating companies that have completed a Combination with a SPAC within the last three calendar years.
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.
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SOURCE Morgan Creek Capital Management