Hedge funds have found their latest arbitrage opportunity in SPACs, the once-trendy investment beaten down last fall as the fast money set liquidated their holdings, but the window of opportunity could be closing. Special Purpose Acquisition Companies, or SPACs, are companies whose managers raise funds for an acquisition of an indeterminate private company. SPAC shares, which are priced anywhere from $6 to $10 apiece and whose funds are held in cash-like securities such as Treasury bonds and money-market funds, saw a sharp dislocation in their prices and yields since the fall. As hedge-fund investors demanded their money back, arbitrage funds and others that used SPACs as a cash-like hedge were forced to liquidate holdings, driving prices into the ground and driving up yields to as high as 15% or 16% last October. Yields have come down significantly as funds caught the scent of the popular strategy, but are still in the 7% to 8% range, on average, analysts say. When investors' rush to cash pushed Treasury yields to abysmal levels, the premium became even more attractive. "The SPAC common are really the best risk-adjusted investment I've ever seen in my career," says Neil Danics, a former risk-arbitrage hedge-fund manager who now runs the site SPACAnalytics.com. "You're basically buying the same short-term Treasury that yields zero, but you're buying it at 7% with greater upside if a good deal is announced." SPACs, which must find a deal within a two-year period, or liquidate and return cash to investors, have traditionally been seen as having the safety of cash, with potential for huge upside if managers produce a successful IPO. SPAC shares come with warrants to purchase additional securities if a deal comes to fruition.