U.K.-based Tufton Oceanic Finance Group is adding a new twist to its product line. The firm this month launched the Oceanic Small Cap Fund, a Cayman Islands-based hybrid hedge/private equity offering, and took in $55 million in assets. The fund will hold a second and final close in July, with a target of $200 million.
“Our other two funds are typical hedge funds, but up to 67% of this fund can be invested in pre-IPO energy or shipping companies, and the balance will be in OTC companies,” said Lucy Alexander, Tufton’s marketer. Tufton currently manages the Oceanic Hedge Fund and the Oceanic Energy Fund.
On the energy side, the fund will invest in energy pipelines, oil services, mining, renewable and alternative energy concerns as well as dry bulk, container and wet cargo transportation concerns. Its portfolio will consist of 10 to 20 global companies with market caps between $20 million and $350 million. According to fund documents, there were a total of 181 energy and shipping IPOs over the last four years and the firm expects this trend to continue or increase.
The fund’s hedge component stems from commodity hedging and its fee and term structures. “If we were to do an ethanol infrastructure project in Brazil, we might hedge the commodity and the same goes for an investment in an oil field in Angola where we might actually hedge the oil price to take some of the commodity risk out of it,” said Alexander.
The portfolio manager is Cato Brahde, who also manages the firm’s Oceanic and Energy Funds.
The new offering charges 2% for management and 20% for performance, with a U.S.$1 million minimum investment requirement. It has an expected four-year life cycle with an option for another year and investors can redeem every six months with 90 days notice. It is targeting returns of 30% annually. The fund is already putting its dry powder to work inking in two deals: an E&P company in the North Sea and an Angolan oil field.
Ted Kalborg founded Tufton in 1985. The firm is currently managing US$1.3 billion.