Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
The rationale stems from the growth in Asian transport; predicated on the fact that the bounding main of Asia now accounts for over 50% of the worldÆs container shipping volume, 89% of growth in global iron ore trade since 2000, and also represents 30% of oil movements on its high seas.
Historically, shipping assets have had cyclical characteristics, their value dependent upon their ability to generate cashflow from their voyages. From its aquatic lair, CLSA Capital Partners currently thinks that this cycle currently offers a good entry point, valuations-wise, which will last for the next two years.
ôIn the planned Pacific Transport fund we will aim for high-teen IRRs and be looking for investments throughout the Pacific Basin, seeking to add value where we find those opportunities,ö says Richard Pyvis, chairman and CEO of CLSA Capital Partners, and admiral of the fleet-presumptive.
The fund has a 10-year life with two single-year extensions. Fees initially will be 2% and 20% and the typical transaction size is $30 million to $60 million. The fund has not formally opened yet, but the estimated target size is $400 million with assets under management, including leverage, expected to be in the region of $1 billion. The crew of the new fund will be announced in the next few weeks.
CLSA Capital Partners is the alternative asset arm of CLSA Asia Pacific and has $2 billion under management. The Pacific Transport Fund will join six other funds in the stable. These include private equity funds such as the property vehicle Fudo Capital and the Japanese fund CLSA Sunrise Capital. It also includes a hedge fund, Alcor Investment, although the joint venture that was announced last week with Paul SmithÆs Triple-A Partners, that intends to seed hedge funds, is being managed by another arm of CLSA.
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Actively managed funds were also not found to have better odds of higher returns than more passive funds.