Albemarle Shipping Fund has enjoyed a recovery in the shipping space over the past few years.
“Shipping cycles like this come along infrequently. When they do you have to grab the opportunity by the horns,” chief investment officer Will Homan-Russell told TradeWinds.
The London-based hedge fund has returned 499% since it began investing in January 2019. It has returned 27.4% so far this year to the end of May.
“When we launched the strategy we forecast a supply-driven recovery across the shipping space led by low orderbooks and constrained shipyard capacity. The expected rerating in shipping shares is well underway,” he said.
The fund was originally set up as a partnership with $25m of capital contributed by 15 partners.
It was converted into its current fund structure in at the end of 2021.
Founding partners Homan-Russell, Magnus Halvorsen and Cato Stonex now oversee the fund via WMC Capital and form the investment committee which meets daily.
At the end of May 2024, the fund had grown to assets under management of $222m.
Albemarle Shipping Fund is a long/short hedge fund investing across the shipping sector via listed equities, shipping-related commodity derivatives and forward freight agreements.
“Shipping is an asset-intensive, volatile, cyclical sector that lends itself favourably to a long/short investment approach,” Homan-Russell said.
The fund employs fundamental analysis for value investing via active management.
The portfolio is directional and concentrated.
It typically holds 20 to 30 high-conviction positions and can be positioned between -50% net short to +100% net long.
It has positioned itself between +50% and +100% net long over the past few years, given the strong fundamental backdrop.
The team employs a toolkit of subsector utilisation models and company financial models to create a holistic view of the shipping space.
Homan-Russell said: “We’re trying to position the fund ahead of cyclical inflexion points in freight rates, asset values and share prices across the various subsectors of shipping.
“When we have strong conviction of such events, we want to put capital to work quickly in a bold way via these concentrated bets.”
Investments have been focused mainly in dry bulk and tanker names over the past year.
“We thought the market had become overly pessimistic about the dry bulk space last summer and so built up a sizeable long book in equities and capesize FFAs; the unseasonably strong Q1 aided by El Nino led to the strongest Q1 rates since 2010 and a significant rerating in our holdings,” Homan-Russell said.
“On the tanker side, tightening demand has met muted supply growth leading to higher utilisation and share prices following NAVs [net asset values] higher,” he said.
Homan-Russell thinks the overall shipping market “looks comfortable for the coming years given still constrained shipyard capacity”.
“This current up cycle is being extended by the lack of shipyard capacity. But the yard space is cyclical too, just with a longer cycle; as newbuild prices rise higher, more shipyard capacity should come on stream and eventually lead to overbuilding again,” he concluded.
