March 2020 – We were able to summarizewith Tilo Kraus, Head of Global Sales & Syndicate at Hamburg Commercial Bank, in four questions and answers:
The coronavirus is currently showing how vulnerable the interwoven global economy is. Everything is connected to everything else; there are no real safe havens anymore. What does this mean for investors who want one thing above all in their financial transactions - security and predictability?
Tilo Kraus: After years of rising asset prices, there is more focus on defensive asset classes. However, the classic “safe haven” investments offer zero or even negative returns, even with very long terms. Against this background, defensive real asset investments in the area of debt financing, such as renewable energies, but also the financing of digital infrastructure, are becoming increasingly important. They are generally much less susceptible to macroeconomic distortions.
Ships, renewable energies, real estate and even airplanes are opportunities for real asset investments with large investment sums. How do you currently assess the market opportunities of these four divisions?
Tilo Kraus: Real estate is always exciting, if only because of the depth of the market in the asset class and its many subsectors. However, due to the high level of interest, some submarkets now no longer offer very attractive risk-return profiles. The financing of renewable energies offers interesting opportunities – in our opinion, especially where financing structures can be based purely on market prices and not on politically based feed-in tariffs. And despite the industry’s range of fluctuation, we currently consider the financing of ships to be very attractive.
Ship financing markets have indeed had turbulent phases in the past. In this respect, it is surprising that you consider the financing of ships to be interesting for institutional investors. What are your thoughts on this?
Tilo Kraus: Shipping is generally a more volatile business. However, you have to admit that the capital supply in Europe has decreased significantly. We therefore see attractive opportunities for investments with regard to both financing structures and margins, either with long-term and valuable charters, i.e. rentals, or through financing at or below the steel value of the ship.
What trends do you see in the financing environment and what opportunities for participation do you see for institutional investors?
Tilo Kraus: In Europe, unlike in the US, a large part of financing requirements continues to be covered by banks. However, this structure is currently shifting towards institutional investors in some asset classes, such as larger infrastructure financing. Very large investors are also involved in direct investments. For medium-sized investors, for reasons of capacity among other things, we see a pooling of investments in funds or the use of credit know-how about working with banks.