London-based alternative investment manager GMI (Global Maritime Investments) is planning a series of private equity partnerships focused on ship purchase and fleet management.
The move reflects a significant 10 to 15 per cent uptick in the prices of new vessels which have been flat for three years and GMI believes prices have a lot further to rise.
GMI, which has also offices in Athens, Cayman, Cyprus, Monaco and Singapore, was founded in late 2005 becoming the only manager to trade the volatility in global shipping rates by arbitraging the inherent mispricing in Forward Freight Agreements (FFAs) via the derivatives market and physical price of freight.
After a recent period of low volatility, the market is beginning to pick up. GMI has been and continues to deploy capital but ultimate constraints on current available capital in this strategy are leading the manager to seek other opportunities for growth in the form of joint ventures.
“As the world comes out of financial depression, we’re witnessing increasing commodity flow and so enhanced demand for freight capacity. Couple this with the low charter rate environment of the past three years leading to a significant drop in the number of new vessels arriving on the water and a big increase in older vessels being scrapped, and the potential financial returns from owning and operating a new fleet become obvious,” says Steve Rodley, co-founder and principal of GMI.
GMI is primarily financed by US institutional shareholders and has already committed some USD230m of assets to orders placed with top Chinese and Japanese shipyards for the delivery of six new vessels in 2015/16.
“The new vessels GMI has on order have a significant advantage for investors over older stock,” says Stuart Rae, co-founder and principal of GMI. “These ships will be powered by ‘eco-engines’ that burn about 6 fewer tons per day of fuel than equivalent old technology engines, materially enhancing the yield from the investment.
“Overall GMI’s models indicate we can generate a 30 per cent IRR for the equity with sensibly optimistic assumptions.”
