Monday, May 18, 2009
SFS-Kuwait shipping fund aims for high returns
Monday, 18 May 2009
SFS Group Public Company Ltd (SFS), the Cyprus-based financial conglomerate, aims to achieve high returns for its shipping fund based on Shariah law, that is expected to be launched following its joint venture agreement with Kuwait Finance House Labuan (KFHL) a wholly-owned subsidiary of Kuwait Finance House (Malaysia) Berhad (KFHMB).
SFS's top management team led by its chairman Christodoulos Ellinas, vice-chairman Phillip Larkos and executive director John Pitsillos told the Financial Mirror in an exclusive interview that the joint venture with Kuwaiti Finance House will drastically improve the prospects of the group in the area of Shariah compliant investments.
The Shipping Fund, launched via a Limited partnership in the Cayman Islands, will have a maturity of seven years from first closing day with an option to extend for up to three years to allow for orderly liquidation of the fund's assets. The objective is to raise USD 150-200 mln.
"SFS and KFHL will each invest USD 7.5 mln and take up 10% of the Fund's capital and the rest will be sold to institutional investors in the Middle East, the Far East and Europe with minimum subscription at USD 1 mln per investment," said Ellinas.
SFS Vice-Chairman Larkos expects the prospectus to be ready by September and for the joint venture to start accepting applications by the end of 2009.
Shariah law
The Shipping Fund's objective is to invest directly in shipping assets and charter the vessels primarily to market leaders, but always in line with the provisions of the Islamic Shariah law.
While the sourcing, appraisal and operational aspects will initially be carried out by the SFS team, the structuring and whether the investment guidelines are adhered to will be decided by a group of Shariah scholars from Kuwait.
SFS Executive Director John Pitsillos said that after a couple of investments are approved, then the decision making will be fast as the managers will know the basic guidelines.
Ellinas and Larkos further clarified that investing in container vessels, for example, will not be contemplated since it will be impossible to verify whether the ships will refrain from transporting pigs, armaments and other offending products including pornographic material.
The fund will also not be charged interest on its financing, which is forbidden under Islamic law.
Niche market
SFS managers welcome the fact that the shipping fund is based on Shariah law since it will abide by high ethical standards, and at the same time will be among the few shipping funds in a position to penetrate the growing number of Moslem investors in the Middle East, Far East and Europe insisting to invest in Shariah-approved financial instruments.
"Our relationship with the KFH, one of the largest in the Islamic world with total assets exceeding USD 38 bln and a huge network, will help attract investors for the shipping fund and other funds that we may jointly do in future," said Larkos.
Track record
"Our track record during the last 10 years is one of our strongest selling points," said Ellinas, referring to the fact that SFS managed to sell all its ships at the height of the bull-run in early 2008 and well before the crash.
"We are not speculators. Our investment decisions are based on low risk with an average 32% overall IRR return within a range of 20% to 317%," said Ellinas.
Larkos said the SFS-Kuwait shipping fund is aiming for a 20% IRR return, interested mostly in investing in cash generating deals rather than capital appreciation.
Pitsillos further clarified that the risk for the fund is the vessel charterer and interest rates, both of which can be hedged to reduce such risk. He added that the major benefit for the SFS Group will emerge after the fifth year when the fund will start to divest, and if in the meantime the fund managers exceed the performance targets which would allow SFS to receive a performance bonus in addition to management fees.
Ellinas said SFS' decision to employ Ooi Boon Aun, the former Cyprus consul in Hong Kong, as Head of SFS Asia Pacific since July 2008 had been instrumental in forging the close ties with the Kuwait Finance House.
Source: Financial Mirror
0 comments:
Post a Comment