Investors anchor JPMorgan shipping fund with $545m

JPMorgan Asset Management’s Global Maritime Investment Fund has secured $545m in commitments against a $750m fundraising target. The fund is expecting returns between 18% to 20%, the ‘majority ‘of which will come in the form of current income, according a fund executive.

JPMorgan Asset Management has held a first close on a fund that will invest in ships, netting $545 million in investor commitments against a $750 million fundraising target.

The fundraising, disclosed in a series of regulatory filings with the Securities and Exchange Commission, caps a multi-year effort to create a fund to capitalise on the collapse of ship prices.

“We looked at it two years ago,” Steven Weddle, a client strategist in JPMorgan Asset Management’s Infrastructure Investments Group, said during a recent investment pitch in front of the $7.2 billion San Diego County Employees Retirement Association. “And talking about it two years ago just wasn’t right.

“You have to get the correct entry point as to when you’re going to go after this opportunity and it was recently, just over the last six months …, given what happened with the global recession as well as the financial crisis, [that] created an exceptional opportunity looking at shipping prices,” he added, according to a video recording of the meeting.

Andrian Dacy, the chief investment officer of the so-called Global Maritime Investment Fund, told the San Diego pension that from 2003 to 2008, a “confluence of capital, demand and limited supply” created a historic bubble in the price of ships worldwide which has since popped and created an attractive buying opportunity.

“If you buy today at today’s prices, the returns are . . . . upwards of 18 percent unlevered returns,” Dacy said, referring to a market of the shipping sector known as dry cargo. These are ships that carry bulk, non-liquid commodities such as iron ore or wheat. Between 30 to 40 percent of the fund will be allocated to these vessels, according to one of the other fund executives who spoke at the meeting.

Aside from dry bulk vessels, the fund will also invest in tankers that carry liquids, such as crude oil, and container ships, which carry finished goods in large metal containers, according to an investment presentation.

Overall, the fund is expecting an 18 to 20 percent return, Dacy said, the “majority” of which will be current income for investors.

The San Diego County Employees Retirement Association unanimously approved a $75 million commitment to the fund at the pension's May meeting. 

A term sheet posted on the pension’s website indicates the fund charges a 1.5 percent management fee and a 20 percent carried interest.

However, because the pension invested in the fund before 28 May, the Global Maritime Fund will need to achieve a “preferred” return of 12 percent before the 20 percent carried interest becomes payable, as opposed to a 9 percent preferred return being offered to investors who come into the fund at a later date.