New analysis from the Financial Times has revealed that investment in hedge funds turned out to be a poor investment for US pension funds, which have failed to pick the best performing funds. The FT figures, compiled by academics at Maastricht University and Yale University, show between 2000 and 2008, US pension funds received just 1.9% a year return on average from hedge fund poor investments.
The UK newspaper has indicated that such poor returns may force pension funds to re-evaluate their hedge fund investment strategy. Although traditionally viewed as a risky market, pension funds could do well to assess the benefits from investing in aviation assets. Although the returns aren’t up there will the better performing hedge funds or the magi private equity number of a 20% return, recent performance, especially during the latest downturn, has shown them to be a safer investment. Doric Nimrod Air Two is one example of this. Shares in the listed Limited company aim to pay a quarterly dividend equivalent to 9% per annum (based on the issue price of 200 pence per share) following the leasing of three Airbus A380 planes to Emirates.
In such a low interest environment, solid return on real assets such as A380 aircraft has proven it can generate substantial returns with much less risk than other stocks. Aircraft leasing companies should not be tarred with the same brush as airlines – traditionally always seen as a risky -buy – and aside from a small blip with AIG-owned ILFC, they make consistently good returns for investors which is demonstrated by investor hunger for lessor paper in recent debt issuances by ACG and indeed Avolon’s IPO.
The only problem is these sorts of potential investors need to be educated in the real risk profile of aviation firms – this is where Airline Economics can help. Next year we are running three conferences in London, Miami and Hong Kong to give aviation companies the chance to explain their business to a group of investors in a one-day forum. For a program and to find out how you can participate, please contactvictoria@aviationnews-online.com or philipt@aviationnews-online.com