Norwegian investment bank Cleaves Securities has revealed big returns from its shipping fund as markets remained volatile.
To the end of January, Cleaves Shipping Fund, run by Cleaves Asset Management (CAM), has achieved a performance of 53.5% since its inception in July 2022.
This makes it one of the best-performing hedge funds in the Nordic region over that period, according to Hedge Nordic.
The fund invests exclusively in listed shipping companies and will be subject to market volatility, said Carl Synvis, head of fund management at Cleaves Securities.
“However, possessing internally one of the highest ranked global shipping research teams, our strategies and decision making are based on solid fundamental macroeconomic and company research,” he added.
Synvis said the company is confident that investments in owners with a high degree of liquidity across various shipping segments will continue to offer attractive returns.
Cleaves said the first month of the year has been primarily influenced by the rising tensions in the Middle East.
The fund’s response has been to focus more heavily on product tankers, as the company felt these were more likely to be affected by reroutings than crude tankers.
“This strategic decision has shown to be correct with product rates surging throughout the month,” Cleaves said.
LR2 tankers have topped $100,000 per day at various points.
Stolt-Nielsen sold down
The chemical tanker market also exhibited robust performance in January, the investment bank explained.
The fund’s chemical exposure has been through Norway’s Stolt-Nielsen, with an allocation peaking at 11%.
In the final week of January, the fund sold this down to 8% of its portfolio to lock in some profits and to prevent the position from becoming overly dominant.
Stolt-Nielsen has seen a year-to-date increase of 35% in its stock price.
The fund has 45.8% allocated to tankers, with 35.2% in US dollars. Other shipping segments are less than 10% each.
The biggest slice invested in a company is 8.9% in US tanker owner International Seaways, with 8.8% in Singapore product carrier group Hafnia. Cleaves has 5.3% allocated to John Fredriksen’s tanker company Frontline.
“Throughout the month, we executed several profitable trades that have contributed positively to the portfolio’s performance,” Cleaves said.
It believes the ongoing situation in the Middle East will keep influencing shipping markets.
Ceasefire will be a negative short-term
“Should there be any ceasefires or peace agreements, these developments are likely to have a short-term negative effect on shipping equities,” the company warned.
“Nevertheless, the underlying fundamentals remain robust, and the valuations of product and crude tankers continue to be appealing,” Cleaves added.
The LPG carrier sector has notably shifted, with the US-Asia arbitrage and freight rates both experiencing significant contractions, the investment bank said.
“While we believe it might be premature for a rebound, the current levels present an attractive opportunity to begin accumulation,” the company explained.
Bulkers are also robust, it argued.
If conditions weaken around Chinese New Year, Cleaves will consider increasing its dry bulk exposure.
In July 2023, Cleaves said it had seen a big increase in the fund’s rate of return to 28.8% in its first 12 months.