Asia’s Ultra-Rich Are Piling Investments Into Blank-Check Firms

(Bloomberg) --

Asia's richest families and individuals are jumping on the SPAC wagon, 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 into special purpose acquisition companies to generate better returns in the low interest-rate environment.

“We're seeing a growing number of high net worth individuals and family offices in Asia increasing their fund allocation to subscription for SPAC shares,” said Dennis Tam, chief executive officer of Ho's family office Black Spade Capital, which is building a portfolio themed on the vehicles. “The SPAC market is very robust now, thanks to a very low cost of fund which implies a low opportunity cost to invest.”

Near-zero interest rates have prompted Asia's wealthy to seek alternative channels of investment, paying special attention to SPACs sponsored by large private equity funds like KKR & Co. and billionaires including Adrian Cheng, Li Ka-shing and Richard Li. Hong Kong and Singapore could see the craze widen as the cities explore allowing SPAC listings.

“This year we're going to see Asian investors, especially those on the private wealth side, increasingly get in on SPACs,” said health-care entrepreneur David Sin, who has sponsored one such company.

Sin is seeing a spike in investment interest from rich individuals and private banking money. Some recent SPACs have seen more than 90% of funding come from private wealth instead of 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 fail to identify targets, then investors may elect to get their investment back at the initial public offering price by exercising their redemption right.

“In this sense it can be viewed as a safer investment than bonds because of a very remote default risk,” said Tam. “In addition, if you invest in the more reputable SPACs founded by reputable tycoons and big PE funds, investors may make a fairly high return.”

Asian financial centers aren't the only ones looking to catch more of the SPAC market, which is dominated by the U.S. The U.K. may ease rules to make it more attractive for SPACs to list in London, a report showed this week.

Some are skeptical that the boom will be sustained.

“As the number of SPAC IPOs increases, there may be too many sponsors confident of their skills at unearthing under-appreciated targets, chasing after too few worthy businesses,” said Edward Au, Hong Kong-based southern region managing partner at Deloitte. The risk of SPACs failing to make suitable acquisitions could dampen sentiment for the industry, he said.

So far this year at least eight blank-check companies backed by Asian sponsors including Primavera Capital and Hopu Investment Management have gone public in the U.S., raising at least $2.42 billion, data compiled by Bloomberg show. That's a big acceleration from 2020, when 11 Asian SPACs raised $2.26 billion throughout the whole year.

Hong Kong-based Raffles Family Office, which managed $1.8 billion of assets as of August, has offered its clients exposure to SPACs including Richard Li's Bridgetown 2 Holdings Ltd.

“We've seen growing interest in the areas of cleantech, biotech and healthcare,” said Raffles CEO Chiman Kwan. “Some of the crucial factors in choosing a SPAC sponsor to work with are their credibility, commercial acumen and track record of choosing suitable acquisition targets and closing deals.”

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