As the "backbone" of capital-intensive
in- dustries, fixed assets represent one of the largest investment
segments associated with global infrastructure. König & Cie. expects
that the opportunity for private investment in fixed assets in the
firms target markets (shipping, rail, renewable energy and
infrastructure) will exceed $1 trillion over the next five years.
During the last two decades global economic growth and regulatory
and environmental developments have increased demand for production
capacity and efficiency, with resultant strengthening of demand for
the productive output of fixed assets.
Our investment strategy is driven by the fundamental characteristics
of fixed assets. Typically a number of characteristics which, when
compared to typical private equity investments, can provide the
following bene- fits:
High-quality Current Yield
The obligated cash flows associated with CTA investments in balanced
markets can produce current cash returns to equity investors of
approximately 10% because CTA typically are financed with cash flow
to debt service ratios that exceed 1.30. The essential nature of CTA
often results in cash flow credit quality that is equal to or better
than the unsecured borrowings of the asset user and hence give
investors the opportunity to close transactions even in limited
credit markets.
Downside Protection
The long lifespan and limited technical obsolescence risk of CTA
provide downside protection based on the ability of CTA to generate
cash flows and remain serviceable through different phases of
economic cycles.
Value-added Structuring
Users of CTA will generally pay for innovations that address their
unique needs. |
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König & Cie. seeks to increase its investment returns by
capitalizing on the principals' ability to structure innovative,
value-added solutions for CTA users.
Inflation Protection
Inflation typically increases the price of re- placement CTA and the
value of in-place CTA. Accordingly, a well-constructed portfolio of
CTA investments should provide a material level of protection
against future inflation.
Multiple Exit Strategies
CTA investments typically have a greater range of exit strategies
than traditional private equity asset types (e.g., buyouts and
venture capital). This range of potential realization opportunities
enhances flexibility with regard to controlling the timing of exits
and optimizing realizations.
The type of debt structures that we have utilized to fund CTA
investments tend to be viewed in the market as similar to the
secured debt of industrial issuers. Accordingly, we expect that
fluctuations in the markets for other types of debt will have a
limited effect on the execution of the fund's investment strategy.
With the main focus on CTA since its establishment in 1999 König &
Cie. has built up a strong brand name as CTA asset manager with a
total of approximately US$ 6 billion of assets under management,
whereas our long- term shipping expertise has so far resulted in more
than 80 vessel transactions with a volume of US$ 4,3 billion,
including 44 new- builds.
Currently we are active in four asset classes for institutional
investors: Shipping, Rail, Infra- structure and Renewable Energy. We
are con- stantly identifying and monitoring attractive in- vestment
opportunities in the various markets and customize them into
investment suitable for our institutional investor base. |
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