Hartmann Group is the owner and manager of a fleet of about 150 ships and one of the world’s leading shipping groups. Its diversified fleet comprises gas tankers, product tankers, bulk carriers, container vessels, multi-purpose ships and pneumatic cement carriers. Hartmann Group is a co-founder and investor in Pelagic Partners.
The shipowning fund Pelagic Partners is a unique set up and a joint venture which has huge potential. It is a project born out of an exciting idea between co-founder Atef Abou Mehri and myself, and I am delighted to say the fund is growing enormously.
We launched the fund in 2020 and our investments have performed impressively so far. We have invested in a mixed fleet and under-priced tonnage – it is purely equity without any leverage – and this has been a very successful concept.
It is a fund with a difference: the founders are independent shipowners and managers with access to deal flows. Based in Cyprus, we come under the regulatory framework of the country’s Alternative Investments Fund Law which provide investor protection and transparency through a regime which is aligned with European Union directives.
The basic idea initially was to appeal to Middle Eastern investors: until now this was not an investor type who has been actively engaged in the shipping sector, but with our fund’s special set-up we are positive that it offers an attractive new opportunity. However, that does not mean the fund is not open to other investors. We want to make the fund as profitable as possible and I think that we have already succeeded in that regard.
An integrated offering
Since we first started out in 1981 as a one ship company, the Hartmann Group has been focussed on assets that we can own and manage.
This management includes the provision of commercial, technical and crewing services. We handle the complete line of management for our own assets and our partners’, such as Pelagic. We have never been speculators: our philosophy is to keep our fleet at a constant number and operate our ships for many years.
Hartmann Group has two main hubs in Germany and Cyprus, both with some form of specialisation. Germany is mainly focussed on gas carriers, but also container ships and smaller multi purpose vessels. Cyprus supports larger multi-purpose Vessels as well as Bulk Carriers, pneumatic Cement Carriers and Product Tankers. We also have commercial management offices in Germany, the U.S. and Singapore as well as crewing and training companies in Poland and the Philippines.
Sensible, strategic and ethical
When it comes to managing ships, we always look at the whole supply chain. The first is the cost side and the second is income. We do not see our role as “squeezing the last cent” out of operating expenses, but rather as having good cost control to maximise the income through customer satisfaction and reliability (and therefore earning days) of our Vessels. On the income side, we aim for high-class charters and good healthy, steady returns. Given our high-class charterers, we are obliged to meet high standards – even with the older assets.
Our people onboard the ships are our most important asset and we do not believe in running ships on low wage crews. We will never be the cheapest crew manager in the market because we want to develop and keep our staff – and generally maintain very high standard of training and competency. We take intense care of the pastoral side, which is typically rewarded with high loyalty from our seafarers. Our people stay with us!
This investment in people is actually also an investment in the ships themselves. For example, we maintain vessels as much as possible with our own, well-trained crew continuously during the voyages, which minimises the downtime and repair costs of the vessels, as well as the costs and times for the periodic dry dockings.
Looking to the future
There are currently a lot of new conventional vessels being ordered. But most of these ships will still be trading up until 2050. In my opinion, this is a very risky investment given the regulatory uncertainty surrounding decarbonisation. There is still no clear view as to which fuels and propulsion types will emerge as commercially viable and able to meet the planet’s need to significantly reduce its carbon emissions. As we have already seen in Germany and the UK, there could be a push to meet decarbonisation goals before 2050. It is also not entirely clear which fuel will emerge as a winner for ships. I think that there is still a strong argument for ammonia as a future fuel, with LNG as a bridge technology. Hydrogen, although an interesting concept, poses significant challenges around its storage. But it is still too early to make that call.
What is obvious is it is extremely hard to make long-term investment decisions regarding newbuildings when so much uncertainty remains.
With the fund we are focussing on second-hand tonnage at a reasonable price, which I think is still a very good investment. It also takes away the risk of a 25-year lifespan when you know it’s a ship that will only trade for five to 10 years.
We believe that well maintained older ships operated by experienced crew will deliver very good and steady returns for the next years to come, until new propulsion technologies are available on a wider scale.
What next for Pelagic Partners?
Due to the strong market fundamentals and trust in our leadership and management, we witnessed a strong demand for Fund I that encouraged us to set up Fund II. We are excited to expand our offering to new clients who are interested in the shipping industry and seeking healthy risk-adjusted returns. More details on Pelagic Partners’ Fund II will be shared later this year.