2020 is a SPAC-Tacular Year for Sovereign Wealth Funds

Posted on 11/24/2020

In 2020, the usage of SPACs, essentially blank-check companies, by institutional investors is being witnessed at unprecedented levels. Even sovereign investors and public funds are making big bets in SPACs. Some major Canadian SPAC investors include the Alberta Investment Management Corporation (AIMCo) and Healthcare of Ontario Pension Plan (HOOPP). SPACs are shell companies with no actual business operations, but are made for the purpose of raising capital through an IPO.

Direct Investments in SPACs by Sovereign Wealth Funds

Source: SWFI.com. BuyerType: Sovereign Wealth Fund.

What is a SPAC

A special purpose acquisition company (SPAC) is formed for the purpose of raising capital through an IPO and using those funds to acquire an operating business.

According to SWFI transaction data, sovereign wealth funds have invested more than US$ 1.79 billion in SPACs versus around US$ 68 million recorded in 2019. Looking deeper into the numbers, Churchill Capital Corporation III, a SPAC run by former Citibank Michael Klein, who runs M. Klein and Compan. Churchill Capital Corporation III lured GIC Private Limited and Saudi Arabia’s Public Investment Fund (PIF). Other popular SPACs being invested by SWF capital include Flying Eagle Acquisition and Foley Trasimene Acquisition Corp I and II.

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