Category Archives: Insights

Spotlight Investment Thesis:

Supply Chain Manufacturers to Aerospace, Defense, Power Generation and Oil and Gas.

We highlight herein our primary investment thesis driving our interest in Tier 1 supply chain manufacturers for OEMs in aerospace, defense, power generation, and oil and gas industries.  Tier 1 and Tier 2 suppliers can serve each of these industries to ease existing manufacturing capacity constraints.   Ridley Capital Group has identified five forces propelling growth for leading supply chain manufacturers:

  • Insatiable demand in aerospace, defense and power generation industries, with a resurgence building in oil and gas markets.
  • Critical constraints throughout the existing supply chain.
  • Aging of heavy industrial manufacturing infrastructure (and its owners).
  • Need to invest in manufacturing capacity, automation and raw materials.
  • Strong pricing power

 The heavy industrial manufacturing landscape is experiencing a massive structural realignment. Across aerospace, defense, power generation, and oil and gas, supply chains are shifting away from a decade of lean, just-in-time logistics toward deep resilience, massive production scaling, and technological integration.

The primary structural drivers that will dictate how supply chain manufacturers operate over the next five years include:

The Pivot from “Just-in-Time” to “Just-in-Case” (Reshoring & Sovereign Capacity)

Geopolitical fragmentation, trade controls, and recent maritime shipping disruptions (such as the impact of the Strait of Hormuz closure on global logistics) have turned single-source global dependencies into liabilities.

  • Aerospace & Defense: Manufacturers are actively “re-routing” supply chains away from sensitive regions. Securing domestically melted, milled, and certified specialty alloys (like aerospace-grade titanium and rare earth elements) has become a matter of national security.
  • Power Gen & Nuclear: The resurgence of nuclear energy—specifically the deployment of Small Modular Reactors (SMRs)—requires highly transparent, strictly localized supply chains. Component tracking, strict metallurgical quality, and rigorous regulatory traceability are forcing a reliance on trusted, domestic forging and casting partners.

Managing Historic Order Backlogs vs. Material Bottlenecks

Demand is skyrocketing, but physical throughput is hitting a wall. Supply chain survival over the next five years is less about winning contracts and more about the absolute discipline of execution.

  • The Pacing Items: In aerospace, commercial and military backlogs exceed 15,300 aircraft. The strict gatekeepers of this capacity are upstream: engine manufacturers, specialty casting/forging houses, and complex fastener ecosystems.
  • The Energy Crunch: Energy equipment manufacturers face severe competition for heavy industrial raw materials. The massive capital expansion in data centers, grid infrastructure, and oil field equipment is competing for the exact same high-strength components and raw industrial capacity.  Backlogs for Turbine manufacturers into 2031, creating a massive bottleneck in the construction of data centers and stabilizing energy grids throughout the U.S. 

Operationalizing AI and “Digital Twins” For Predictive Execution

Industrial manufacturing is moving away from isolated digital tools toward integrated digital operations. Supply chains are leveraging advanced technology to squeeze efficiency out of fixed physical footprints.

  • Predictive Maintenance & Quality: Manufacturers are deploying Industrial Internet of Things (IIoT) sensors and AI-driven predictive analytics to run condition-based monitoring. Catching a tooling defect or a pipeline anomaly before a failure occurs reduces catastrophic downtime.
  • Digital Twins & Simulation: In both aerospace assembly and complex oilfield equipment fabrication, companies are utilizing digital twins to simulate manufacturing stresses and workflow bottlenecks before cutting physical metal.
  • Defense Automation: AI is being integrated rapidly on the factory floor to optimize multi-stage special processes (like heat treatments, coatings, and non-destructive testing queues) which are historically major supply chain friction points.

Workforce Constraints and Institutional Knowledge Drain

The manufacturing sector is facing a severe structural deficit in skilled, specialized labor—such as experienced machinists, quality inspectors, and metallurgical engineers.

  • Automation as a Necessity: To combat the reality of an aging workforce nearing retirement, manufacturers are turning to Robotic Process Automation (RPA), low-code operational platforms, and autonomous inspection systems (such as drones or submersibles for hazardous environments) to maintain execution capacity.
  • Preserving Knowledge: Standardizing data and using AR/VR for rapid technical upskilling are no longer peripheral HR projects; they are core operational risks to ensure quality control under severe schedule pressures.

Capital Discipline and Energy Portfolio Diversification

Rising capital costs and shifting global demands are forcing equipment and component manufacturers to build highly flexible, multi-vector manufacturing lines.

  • Hydrocarbons vs. New Energy: Traditional oil and gas majors are maintaining strict capital discipline, prioritizing free cash flow and asset optimization over raw volume growth. However, they are also expanding into hydrogen, carbon capture, and offshore wind.
  • Flexible Tooling: Supply chain manufacturers must adapt their governance and tooling models to support traditional high-margin hydrocarbon extraction equipment while simultaneously fabricating components for lower-margin, highly regulated renewable or carbon-capture utilities without diluting structural returns.
Leave a comment

Ridley Capital Targeting Aerospace, Defense and Power Generation OEMs and Suppliers

March 3, 2026

Louisville, KY: Ridley Capital Group signed a letter of intent as a “Platform Investment” for its RCG Aerospace & Defense Fund to invest in a vertically integrated tier-1 suppliers serving aerospace exploration, defense, power generation and energy infrastructure industries. Ridley intends to self finance these acquisitions, while considering launching a parallel Reg D 506(b)investment fund for accredited investors.

Tier 1 supply manufacturers to the aerospace, defense and power generation industries are experiencing strong product and services demand while managing new opportunities that require automation, robotics, and capacity expansion to gain market share and shape future opportunities.

RCG STABLE FUND: Fund Closes to New Investors

The RCG Stable Fund Partnership closed access to new investors in the Fund to ensure integrity in its investment decisions, which at a certain size, may be detrimental to the performance of the Fund. The Fund, launched in 2019, has alway focused on quality investment opportunities in the small to medium corporate credit markets. The Fund will continue to be actively managed for the benefit of current investors.

Banks Face New Challenges as $1.5 Trillion of CRE Loans Come Due

The collapse of Silicon Valley Bank in the Spring sparked debate about whether SVP was an isolated incident in an otherwise sound banking system or was this failure an indication of swiftly deteriorating balance sheets across the industry. Then Signature Bank was seized.

Then the First Republic was rescued. Suddenly, three of the four biggest bank failures in history happened seemingly overnight, and the safety and soundness of the entire system was under scrutiny.

The Federal Reserve bailed the system out (yet again) by acting as lender of last resort and opening the cash window to banks in trouble. Interestingly, these bank failures weren’t caused by the usual suspect – bad loans – but from bad asset management. Each bank failed because its investment portfolios held low yielding bonds with long maturities, and those bond values plunged as the Fed relentlessly pushed interest rates up. The building losses eroded regulatory capital levels and caused doubt that deposits were safe. While the system withstood the estimated $425 billion of withdrawals in the first quarter, liquidity has tightened as have lending protocols.

The Federal Reserve increased interest rates ten consecutive times since March 2022, hiking the prime rate to 8.25%, its highest level in 16 years. The impact from these rate hikes will certainly cause a drag on activity throughout the economy, but the commercial real estate industry is anticipating a particularly difficult period which may lead to an avalanche of loan defaults.

$1.5 trillion of CRE loans are coming due in the next three years according to data provider Trepp. CRE loans represent about 33% of all loans on the books of banks with assets between $1 billion and $10 billion according to Fitch, and higher interest rates will put many loans at risk of default.

While CRE mortgage delinquencies currently sit at a benign 0.76%, interest rates have more than doubled since January 2022 and refinancings will be tough to navigate for certain sectors of the market. To be clear, this is not a replay of the 2008 financial crisis as banks are much healthier today and CRE borrowers are generally much stronger financially than the sub-prime borrowers that lead real estate into the depths 15 years ago.  Still, we expect foundational cracks to surface in bank CRE loan portfolios, especially with those over exposed to office and retail sectors.

A wildcard for CRE borrowers refinancing properties will likely be sharply lower reappraised values set by banks. Office and retail sectors are in tough shape and borrowers will likely face steep mark-downs in property values. Meanwhile, losses in bank portfolios have tightened both liquidity levels and loan criteria which, among other factors, will require a higher percentage of cash equity to be in place to secure a refinancing. So, the challenges are real, and we expect some borrowers and lenders to struggle as the CRE market recalibrates with imaginative repurposing plans to rehabilitate underperforming properties.

1st Quarter 2023 Market Insights

The U.S. stock markets rebounded from a dismal 2022 in the first quarter led by the Nasdaq soaring 16.8%. The S&P 500 and the Dow Jones significantly lagged the Nasdaq, but still posted gains of 7.0% and 0.4% respectively for the quarter. 

The stock market’s first quarter performance was a bit unexpected given the Federal Reserve’s continued fight against inflation and increases in the federal funds interest rate. Despite these rate increases, the bond market rallied during the quarter to push government yields lower and help the Bloomberg U.S. Aggregate Bond Index post a 2.5% gain. 

A bounce was to be expected after both the stock and bond markets had a tough 2022, with both falling double digits. Investors were looking forward to a pause in interest rate hikes by the Fed and a slowing in the rate of inflation. Banking troubles, big layoffs in big tech, and a pullback in consumer spending forecasts choppy economic waters in the quarters to come. 

The S&P 500 is a weighted index, which means the biggest companies have an outsized impact on their performance. In fact, the ten biggest companies in the index represent 29.5% of its market capitalization and accounted for 90% of the gains during the first quarter. After the shellacking the index took in 2022, passive stock investors transitioned to equal weighted stock index ETFs in 2023. While this transition may have been ill-timed given the equal weighted index which fell 4.3% during the quarter, an equal weighted index is arguably a better benchmark for how the 500 largest publicly traded companies performed during a given time period. Looking back at 2022, when the weighted S&P 500 fell 18.11%, the equal weighted S&P 500 Index fell only 2.5%, representing a 20.61% difference in performance. Given these massive performance gaps, we believe using both performance benchmarks provide a better gauge for investors to measure the Fund’s performance. 

Despite a doubling in the 30-year mortgage rate over the past year, residential real estate continues to show impressive resiliency due to tight supply and sustained demand. While hot markets like Phoenix, Las Vegas, Austin and Boise, Idaho posted declines in average home prices, most markets in the Northeast, South and Midwest showed solid gains. This price stability is driven by existing homeowners’ unwillingness to exchange low mortgages on current homes for today’s higher rates on new homes. 

Click here to view Fact Sheets on the RCG Stable Fund and the RCG Select Opportunities Fund.