A NEW CLASS OF INVESTMENT - THE SPARE PARTS TRUST

The Spare Parts Trust is a unique investment vehicle that leverages the value in the circular economy of heavy earthmoving assets. The fund invests primarily in high-value, high-demand components for large-scale mining and civil earthmoving equipment.

The Fund generates returns by acquiring undervalued and hard to source assets and reselling them at a premium to the original purchase price. Asset selection is based upon generating a risk weighted return, diversified by component type, asset value, respective equipment category and the estimated time it will take to dispose of the asset.

As an alternative asset class the Fund aims to generate returns uncorrelated to traditional markets through the investment market cycle. The Spare Parts Trust Concept Fund generated annualised returns of 19% over 17 months to 30 June 2022. These returns are the result of high conviction data driven decisions and effective strategy implementation for the chosen asset investment for the Fund.

LONG TERM DEMAND WITH CONSISTENT GROWTH

Over the next five years, the heavy construction equipment market is projected to grow significantly. In 2022 it reached US$132 Billion and is expected to reach $178 Billion by 2028, exhibiting a Compound Annual Growth Rate (CAGR) of 4.96% during 2023-2028. (IMARC Group, January 2023)

Notwithstanding the brief impact of COVID-19, markets since 2016 have experienced a sustained increase in the requirement of heavy earthmoving assets across the civil, construction, infrastructure and mining sectors. This resurgence in economic activity has seen companies continue to replenish and expand their fleets of equipment as well as recommission idle assets to meet continued market demand. Most notably, in contrast to previous market cycles, companies are continuing to pursue strategies to control costs to keep their machines moving for less.

INDIVIDUAL ASSETS GENERATING RECURRENT REVENUE

Heavy earthmoving machines are made of components with finite lifespans that require regular rebuilds. On average a component will be rebuilt between two and three times over a total lifespan of 45,000 to 60,000 operating hours. These machines are made up of numerous components including engines, transmissions, torque converters, differentials and final drives.

Not dissimilar to an inkjet printer, original machines manufacturers (OEM) can expect to generate up to two thirds of their revenue from after-sale service and support of equipment. Providing an alternative to OEM, assets within the YCFG portfolio can be offered for sale or exchange and rebuilt numerous times, often on long-term, ongoing contracts delivering guaranteed revenue.

REFERENCES

IMARC Group. (January 2023). Heavy Construction Equipment Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2023-2028. New York: International Market Analysis Research and Consulting Group