Red7Marine targets oil and gas and mining sectors with new maritime construction fund
Specialist asset managers Red7Marine have launched a shipping fund targeting the construction markets, while avoiding correlation to the Baltic Dry index of bulk shipping cost rates, which has declined fairly steadily since early 2010.
The fund will aim to benefit from growth in the oil and gas, renewable energy, mining and emerging economy sectors, by investing in specialist vessels and equipment used in offshore infrastructure, marine engineering and drilling.
Yannos Hadjiioannou, partner at Archipelago Investment Partners, which has offices in Athens and in London, differentiated the Marine Opportunities Fund I from other marine funds, which may rely on charter rates for transporting commodities.
He said: “Our fund is targeting a very specific segment of the market where demand is driven by the super-cycle investment in renewables, mining and oil and gas and where the supply of multi-purpose DP2 construction vessels is very limited. This is sustaining high utilisation rates and strong returns for investors.”
Marine Opportunities Fund I will buy then lease vessels to companies that need these services globally, for example in oil and gas, offshore mining and renewables and marine engineering.
It will target 15% per annum from charter rates, with additional returns coming from selling the ships when the fund’s cycle ends.
Hadjiioannou explained: “Investors are offered the opportunity to acquire shares at either the fund level or the SPV (vessel) level. The investment management and asset management (operations) are undertaken by AIP and Red7Marine Limited throughout the fund cycle.”
AI Partners and Red7Marine said they had already identified some vessels, and will “transfer the operational risks such as damage to the vessels, non-payment of charter fees, to the charterer”.
Hadjiioannou said: “With the current volatility in global markets, investors are looking for non-correlated, tangible assets that will provide immediate returns and minimise risk. This is a perfect example. The fund would invest in real world assets, and the pre-existing demand for the services means we can immediate deploy funds that will start earning from day one.”
He says annual expenditure in oil and gas and mining industries has exceeded $500bn, while government targets related to avoid or slow global warming and to boost renewable energy could be almost as much by 2020.
Martin Spurr, group chairman of Red7Marine, said the fund was in essence more an infrastructure fund than a ‘shipping fund’.
“Offshore construction is a huge growth industry, with demand from sectors across markets and across regions. All of this offshore activity requires specialist vessels and equipment, of which there are few providers in the market.”