By Jessica DiNapoli

(Reuters) – Goldman Sachs Group Inc (NYSE:), has a new product that lets investors bet on Special Purpose Acquisition Companies (SPACs). This is its latest effort to capitalise on the trend towards dealmaking, according to people who are familiar with the subject.

According to sources, this product can be structured as a 2-year bond which pays interest and allows investors exposure SPACs but not ownership. According to sources, institutional investors could find it attractive if they are looking for consistent income via a diverse portfolio of SPACs.

However, one source said that Goldman Sachs had so far only organized a few of these products. These are referred to by Goldman Sachs as “SPAC-linked structural notes.”

For the offering, Goldman doesn’t charge any management fees. Sources said that the bank earns money by financing investors to take part in the product, and also by keeping some of their returns from the SPAC stocks, depending on how they perform.

The sources also said that the payout is based on SPAC stock performance over the past two years. Sources said that investors can take on greater risk in order to boost their returns. They also have the option to borrow from Goldman, which will increase the leverage of the offering. However, losses must be repaid to the bank.

Goldman Sachs refused to comment on specific details.

Goldman Sachs’ investment banking division has been greatly benefited by the boom in SPACs, which has risen to $137.4billion from $13.6billion just two years earlier. The bank said in April that financing SPAC deals – though a small part of its overall business – helped boost revenue and that advising SPACs on acquisitions would be a “tailwind” for earnings in the future.

According to sources, this new SPAC product was offered by an office in Goldman Sachs global markets division. This is not investment banking but sales and trading.

The sources said that investors are permitted to place bets on shares of SPACs in which Goldman Sachs bankers played a role. SPACs that are sponsored by Goldman Sachs cannot be excluded.

The protection investors have against loss is a good thing. SPAC shares can be sold at their original public offering value by shareholders voting on the mergers. According to reports, investors may give Goldman Sachs instructions for such redemptions.

“DOCTOR SELLING DONTS”

Mike Stegemoller (a Baylor University finance and banking professor who studies SPACs) said that Goldman Sachs is in a conflict because he serves as adviser and financier for SPAC transactions and also sells the product.

SPACs are unable to complete their mergers against companies if there is too much demand for redemptions of shares. Investors will then run out of money they have to make the deal happen. By offering redemptions of SPAC shares as a safety net for its investor clients, Goldman Sachs is relying on a practice that is a thorn in the side of some of its investment banking clients – SPACs and the companies that do deals with them.

“It’s like a doctor selling donuts in the office,” Stegemoller said.

Many investors have already taken advantage of their rights to redeem SPAC shares and Goldman Sachs will not be changing that. Reuters was unable to determine whether Goldman Sachs informed its SPAC clients and their reactions about the new product.

Goldman did not comment on the conflict.

Some hedge fund managers have already complained about Goldman Sachs’ latest product. They hoped that they wouldn’t be competing with Wall Street banks for investor dollars.

Julian Klymochko is the founder and CEO of Accelerate Financial Technologies Inc. Accelerate Financial Technologies Inc manages an exchange-traded fund that invests into SPACs.