Rewards Beyond Dividends
Uncorrelated performance. Stability of revenues in the government sector. Risk adjusted returns. Organic growth versus financial engineering. A hedge against instability in the world. Low leverage. Sector-specific exposure with proven specialists.
Why Aerospace, Defense, Intelligence, and Space?
THEMES
High regulatory compliance + high barriers to market entry = reduced competition from non-srategic buyers.
Global travel + world safety and security = long-term market viability.
Sector experience = ability to drive growth and profitability.
1 Sector = Multiple Opportunities
Cyclical markets = discourage non value-added investors.
Sub-sectors remain highly fragmented = consolidation opportunities.
Operational experience = ability to increase efficiency & improve operating profit performance.
Strong deal flow = consistent opportunity for investment.
COMMERCIAL MARKET TRENDS
Long-term demand for safe, efficient, and cost-effective air travel to bring people closer together from around the world.
Passenger travel is projected to increase an average of 5% each year for the next 20 years.
Commercial aircraft production levels are anticipated to increase significantly by 2025.
8.4-year backlog of commercial aircraft production
DEFENSE MARKET TRENDS
The war in Ukraine spurred a dramatic reaction from Europe and the rest of our allies around the globe and increased defense spending as each allied nation now strives to commit 2% of GDP to defense. These investments, combined with rising tensions with respect to China, are a reminder to everyone that the need for strong militaries is paramount to maintaining peace.
The war in Ukraine is having profound and abrupt effects on the aerospace and defense industry. Beyond the battlefield, this conflict has prompted a complete reset in the paradigm of defense spending, likely shaping strategic decision-making for an entire generation.
The global defense landscape is shifting as the world grapples with a resurgence of peer and near-peer threats, and the war in Ukraine has forced nations to reassess their arsenals and realign priorities to navigate an evolving and increasingly complex security environment.
In 2015, China launched the “Made in China 2025” strategic plan to reduce China’s reliance on foreign technology and boost the presence of Chinese technological manufacturers in the global marketplace. The goal is to elevate China’s technological capabilities and establish the country as a significant player in the evolving global economy.
Evidence of progress can be seen in the China-Russia relationship, which has undergone a significant shift. China is now leading in various areas, including defense-industrial expertise, which was once dominated by Russia. Western sanctions and severed business and political ties have severely limited Russia’s ability to supply its own forces, leading them to rely on China for military hardware. Russia’s defense industry is collapsing, allowing Chinese firms to serve foreign markets that were once dominated by Russia, including supplying the Russian military itself.
If “Made in China 2025” is successful, China will make significant strides toward becoming a world superpower in technology and manufacturing.
The 31 NATO allies have unanimously decided to increase their military spending target to a minimum of 2% of their respective national GDP.
The decision was initially made in 2014, following Russia’s annexation of Ukraine’s Crimean Peninsula. At that time, NATO allies agreed to halt the post-Cold War spending cuts and work towards reaching the 2% defense spending goal by 2024. In light of the ongoing war in Ukraine, persistent terrorism threats, and security challenges posed by China, the alliance has now shifted from viewing the 2% target as a maximum limit to considering it as a minimum requirement.
The United States has consistently surpassed the 2% threshold, but many of the non-US NATO allies have contributed well below 2%. In fact, just last year, only seven countries, including the US, met the target. When combining the GDP of all non-US NATO allies, it is nearly equal to the GDP of the United States. Therefore, this increase in military spending effectively means that an economy comparable in size to that of the United States is on the verge of almost doubling its defense expenditure.
