Tufton Oceanic’s deals for ships are targeting yield amid uncertainty in vessel resale values, says portfolio manager Paulo Almeida.
Tufton, which has been linked to a spate of tanker and bulker buys, has invested some $650m in shipping assets on behalf of European pension funds, Almeida told attendees at the Capital Link Maritime Forum in New York.
Due to the mandate from pension funds on income, Tufton’s primary focus is the yield on ships, Almeida says. Tufton targets yields of around 10% on its ships, he added.
Almeida says current income, not capital gains, are the best returns private equity can hope for in the shipping industry due to the tenuous S&P market and whether second-hand ship sales can be done at a profit.
“We focus on yield plays,” Almeida said. “You are not going to get a return from capital appreciation unless you have a very bullish view of shipyard capacity and the outlook on rates.”
Almeida says returns in the shipping industry should revert to mean around the “very high single digits.” Although the industry is slowly getting healthier, he does not forecast earnings on ships will ever return to levels seen in 2011.
“I don’t believe in a quick recovery,” Almeida said.
