Thinking Outside the Style Box | The Hedge Fund Category Problem with Louis Camhi | Other People's Money with Max Wiethe

Episode Summary

Executive Summary: This episode introduces Other People’s Money and profiles Louis Cammy, founder of RLH Capital, a SPAC-focused fund built around a misunderstood niche. Cammy explains his path from banking and fundamental investing to launching RLH, his thesis on SPAC arbitrage and related niche trades, the challenges of fundraising for an unconventional strategy, and how the firm has evolved with the SPAC market into new financing opportunities.

Main Topics: Career path to founding RLH Capital (Priority: 5/5): Cammy recounts his progression from Credit Suisse M&A to fundamental long/short investing at Three Corner Global and Citadel, then launching RLH after seeing persistent opportunity in SPACs. What a SPAC actually is vs. the common misconception (Priority: 5/5): He emphasizes that many people confuse SPACs with de-SPAC equities; his focus is on the pre-deal SPAC instrument, which often behaves more like a fixed-income or convertible-like product. Original SPAC arbitrage thesis and portfolio construction (Priority: 5/5): RLH began as a levered treasury-arbitrage strategy with a majority of capital in lower-volatility SPAC arbitrage and a smaller sleeve for higher-upside opportunities. Fundraising and education challenges (Priority: 5/5): A major theme is how difficult it is to raise money for a niche, disliked, and poorly understood product, requiring extensive investor education and relationship-building. Use of SMAs, commingled capital, and operating infrastructure (Priority: 4/5): Cammy discusses why RLH uses outsourced operations and why SMAs can be helpful early, while still valuing a commingled fund for control and marketing. Strategy evolution with changing SPAC market conditions (Priority: 5/5): As SPAC issuance, deal quality, and market sentiment changed, RLH adapted by adding warrant trades, extension economics, and bridge financing for SPACs/targets. Positioning against other asset classes and benchmarks (Priority: 4/5): He frames SPAC investing as competing against fixed income, convertibles, and private credit rather than traditional equities, highlighting attractive yield and tax treatment.

Key Arguments: SPACs are widely misunderstood; the relevant trade is often the pre-deal SPAC, not the de-SPAC equity that most investors think of. A SPAC can function like a treasury-backed, fixed-income-like instrument until the shareholder vote; redeeming investors effectively hold a short-duration instrument with downside protection. Because the strategy is idiosyncratic and unpopular, fundraising requires more education than a standard long/short equity fund. SMAs can be a practical way to seed a new manager because they reduce operational burden and can validate a track record, but a commingled vehicle remains important for control and future fundraises. RLH’s edge comes from domain expertise and continuous access to the SPAC ecosystem, allowing it to spot arbitrage, warrant, extension, and bridge-financing opportunities. Strategy drift is framed positively as adaptation: the core expertise stays the same, but the trade changes with market cycles. If private credit is being sold for high-single-digit returns, liquid SPAC arbitrage can compare favorably on yield, simplicity, and in some cases tax treatment.

Data Points: Initial launch capital target: $5 million - Cammy said this was the amount he had in mind to start the fund with friends and family. Fund age at interview: 3 years - He noted RLH had just passed its three-year anniversary. Estimated SPAC market size now: ~$20 billion - Cammy estimated current outstanding SPAC capital after a peak above $100 billion. Peak SPAC market size: over $100 billion - Referenced as the market at the height of SPAC mania. Recent SPAC issuance: $6-7 billion - He cited issuance over the last few months, combining new issuance and capital tied to closed deals/liquidity. Typical portfolio mix: 80-90% SPAC arbitrage - He described most capital as allocated to lower-volatility SPAC arbitrage, with the remainder in higher-risk opportunities. Higher-risk sleeve: 10-20% - Allocated to trades with more upside, such as warrant and financing opportunities. Current deployed capital: around $100 million - Gross deployed across the commingled vehicle and SMAs. Target leverage/return profile: high single-digit to low double-digit returns - He described the original treasury-arbitrage thesis as producing high single-digit, low-double-digit yields. Average de-SPAC trading level: around $4 - He said average de-SPACs are trading around four dollars, illustrating weak post-merger performance. Short-dated option example: 1% in a month - He described a historical call-writing opportunity on SPACs with near-trust value and high annualized return potential. Typical investor minimum constraint: $5 million / max 20% of fund - He used this as an example of why some larger allocators cannot fit into a small commingled vehicle.

Pivotal Quotes: "This is not that show. So if you're looking for the next big trade, turn around, hit the door." — Max Wheathey: The host sets the tone that the podcast is about the business of fund management, not trade ideas. "The biggest misconception of SPAC is people think SPACs as, you know, these equities that have underperformed like, no, that's a de-SPAC." — Louis Cammy: He explains the core educational point behind RLH’s strategy and why the label matters. "I thought that could be a nice pairing of bringing a different skillset." — Louis Cammy: Cammy describes why his fundamental background could be valuable in a niche with limited traditional coverage.

Implications: The episode shows that niche fund launches depend as much on education, positioning, and infrastructure as on alpha. It also suggests that SPACs may remain investable through cycles, with the trade evolving rather than disappearing.