Equipment financing
We lease important equipment and machinery to large corporations and earn periodic income.
19.6 %
Historical returns
15 %
Maximum allocation
How equipment financing works
1. Large companies require machinery
2. Businesses prefer to lease
3. Repayment and returns
Industry-wise market share in equipment leasing
A steadily growing industry
Equipment financing advantages
Predictable cash flow
Borrowing companies pay monthly or quarterly leases, with around 40% of the total investment capital recovered in the first year.
Secured with collateral
We typically enter a Purchase Money Security Interest (PMSI) agreement, meaning Hedonova owns the equipment. This makes recovery easier in case of defaults.
Low correlation
This industry is completely uncorrelated to financial markets and payments from large corporations are constant even during economic downturns.
Tax benefits
Annual depreciation on the equipment is an expense that can be used to reduce the taxability of the fund, hence increasing net returns.
Featured portfolio holdings
Boeing Everett factory
Aerospace firms typically lease to airlines on longer cycles and lease parts and machinery on shorter cycles.
SOHO House interiors
Ultra-premium clubs require couture furnishings. We invest in syndicates from whom clubs like SOHO House lease their furniture.
Bird electric scooters
Bird operates Europe's largest electric scooter fleet. A major portion of the fleet is leased.
Samsung maritime assets
Shipping companies lease ships, tankers, containers and hydraulic equipment.
Invest in a diversified portfolio of unique assets
Risk management
Liquidity
Equipment leased is generally tailored to specific companies, making it difficult to lease to another firm in the event of a default, resulting in repossession.
Defaults
Companies that lease equipment may default on monthly lease payments. One-off defaults are usually covered by security deposits.
Ownership
Equipment is owned by special purpose vehicles, which are in turn owned by investors like Hedonova. In certain frontier markets, ownership laws can be ambiguous.
Equipment malfunctions
Equipment malfunctions usually need to be written off or replaced, which can be expensive. Almost every collection of equipment is insured.