As infrastructure investors begin to cast their nets wider in the search for high-yielding and diversifying assets, marine infrastructure is one area which offers many characteristics that will appeal to institutional investors. Inter alia it:
The marine infrastructure universe
- Offers attractive risk/return profiles
- Provides diversification through low correlation to other asset classes/GDP growth
- Is a large, investible market with a permanent requirement for capital
- Is attractively priced (current timing is opportune) and
- Is not weighed down by competing institutional capital
The marine asset market is large-valued at US$1-US$2trn-and is made up of a wide range of assets that form essential components of world trade and the global economy. Most are generic; there are some 55,000 cargo-carrying ships that together transport over 85% of goods traded world-wide. However, non-conventional assets, such as floating regasification terminals for liquefied natural gas (LNG) imports, are playing an expanding role within the marine asset universe.
In this article, we define investment in marine infrastructure as the purchase and long-term charter (typically 5 to 15 years) of ships and other floating structures that require marine expertise for their operation. The infrastructure-like nature of these assets-providing long-term contracted cash flows from high-quality end-users (counterparties), on a take-or-pay basis-fits the requirements of institutional investors seeking high-yielding, asset-backed income generation.
Although the marine asset markets have a reputation for high volatility, this can be hugely misleading. Just as in most other asset classes, there is a wide range of risk profiles depending on the investment strategy chosen. It is not necessary to adopt a high-risk strategy to generate attractive yields and returns. Using data compiled from a marine assets study spanning 15+ years as an estimate of returns, it can be seen that a long-term, diversified marine asset strategy is attractive when compared with other major traditional and alternative/real asset classes.