Hedge funds and private equity firms are investing billions of dollars in the global maritime industry, attracted to the freight market's high volatility and cyclical risks, a hedge fund executive said.

Hedge funds are looking at the recent downturn in the tanker, dry bulk and container markets as an opportunity to make huge returns in a relatively short period, Andreas Beroutsos, managing director of U.S. hedge fund Eton Park Capital, said.

Private equity firms have invested about $4 billion in shipping in the last 12 months and were looking to commit more, he added.

"For us, the time is now. In two to three years if the market recovers fully, we would be looking to exit, not put more money in," Beroutsos told Reuters on the sidelines of an industry event.

The freight industry was battered by the economic downturn two years ago and has struggled to recover, with the dry bulk market still down nearly 80 percent from its peak in May 2008.

Spot freight markets can be very volatile as they are influenced by a spectrum of factors, including economic growth, weather, seasonal demand and fleet availability.

"Since the market in container ships bottomed in early August 2009, prices have come up 40 to 50 percent -- way faster than I would have thought," Beroutsos said.

Buy Ships, not Companies

Hedge funds are not looking to invest specifically in maritime companies, but in financial vehicles like joint ventures that purchase tankers and dry bulk carriers, he said.

Private equity firms have split their investment throughout the different freight markets, with tankers and dry bulk carriers each representing about 40 percent.

Eton Park committed $75 million last March to Euromar, a $175 million joint venture with ship operator Euroseas and private equity firm Rhone Capital. The joint venture currently handles five container ships.

"In addition to our Euromar joint venture, we are looking to deploy a good chunk more, perhaps in other segments of the shipping market within the next 12 months," Beroutsos said. (Reuters)