Tufton Oceanic Assets believes its performance since its 2017 initial public offering demonstrates shipping can be an important long-term investment for big institutions.
Standard Life Aberdeen (SLA), the UK's biggest asset manager, with £545bn ($677bn) under management, demonstrated its confidence in the company by increasing its holding from 5.07% to 5.9% last week.
SLA's stake in the London-listed shipowning fund is now worth nearly $13.3m. It has 15.06m shares.
Tufton said it does not comment on specific investors or transactions, but welcomes all investors "big and small" in its shares, which trade under ticker symbol SHIP.
"We are very happy with the strong following SHIP has from top investors, many of which have participated in all four of our equity raisings since December 2017," the company added.
The fund is jointly run by Andrew Hampson and Paulo Almeida.
Almeida told TradeWinds the company and its "excellent investor base" have established that "shipping, when executed with the right strategy, can be a long-term part of institutional portfolios".
"The recent relative out-performance and continued stability of SHIP make us optimistic about growing the fund over the next few years. In the meantime, we have sufficient dry powder for further investments if the right opportunities arise," he added.
Tufton said in April that its first-quarter result was "strong" in volatile markets. Operating profit was $0.029 per share over the three months, equating to a 12% yield.
Hampson said one of the most frequent questions he is asked is how the company attracts its "quality and quantity" of investor interest when, apart from some strong periods for LPG and crude tankers over the past year or so, shipping equities are "otherwise so unloved by the markets".
Volatility low
"Our diversified portfolio with average charter coverage of about three years and very low leverage allows us to pay a strong consistent quarterly dividend of 1.75 cents per share, which is a 7% yield," Hampson explained.
"Not only that, but because of our conservative strategy, our net asset value [NAV] has been remarkably stable, with an annualised volatility of 3%."
By comparison, he added, the Bloomberg Shipping Index had volatility of more 30% over the same period.
Hampson said the index is also down 30% in terms of share value, while Tufton has a small positive return due to the strong dividend.
Less fragile than property and airlines?
He added that the company has traded for nearly all of the past two-and-a-half years since its IPO within a range from a base of a 5% discount to NAV to a ceiling of a 10% premium.
"This is remarkably stable versus traditional listed shipping companies, even those who have a large amount of charter coverage like SHIP does," Hampson said.
Tufton's shipping portfolio has low correlation to stock market equities, Almeida added: "While the spot markets can be volatile, a conservative shipping strategy need not follow economic cycles or equity markets."
"Positive supply-side factors such as structural slow steaming due to environmental factors and a limited newbuilding orderbook due to constrained financing and regulatory uncertainty give us high conviction of an attractive risk-return profile."
He said while he of course wishes the Covid-19 pandemic had never happened, it has demonstrated that shipping can be less fragile than more mainstream asset classes, such as real estate, aircraft, hotels and airports.
In March, the company spent $7m on an unnamed handysize bulker, bringing its fleet to 16 ships. It also bought a tanker and sold three general cargoships in the first quarter.
The new bulker has a fixed-rate time charter of between six and eight months with a major agricultural commodity trading and logistics company.
VesselsValue lists the ship as the 33,500-dwt Orient Alliance (built 2012), acquired from Interorient Shipmanagement.
