Shipping investments are a form of
alternative investment
An alternative investment, also known as an alternative asset or alternative investment fund (AIF), is an investment in any asset class excluding stocks, bonds, and cash. The term is a relatively loose one and includes tangible assets such as ...
into an asset related to worldwide
shipping
Freight transport, also referred as ''Freight Forwarding'', is the physical process of transporting Commodity, commodities and merchandise goods and cargo. The term shipping originally referred to transport by sea but in American English, it h ...
. This could be into ships themselves, or a related asset such as
containers
A container is any receptacle or enclosure for holding a product used in storage, packaging, and transportation, including shipping.
Things kept inside of a container are protected on several sides by being inside of its structure. The term ...
, with the expectation of capital appreciation,
dividends
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...
, and/or interest earnings.
Characteristics
Some of the characteristics of shipping investments may include:
* Low correlation with traditional financial investments such as stocks and bonds
* Considered to be a relatively liquid investment as there is a second-hand market for shipping assets
* Considered to be a cyclical industry, with long supply and demand cycles since ships are large physical assets that take time to build, transport and dispose of
* Costs of purchase and sale may be moderately high
* There may be limited risk and return data
Ship ownership
Investment in ships involves purchasing or leasing new or second-hand vessels and either operating them directly or chartering them to other operators. Investors seek either profits generated from shipping fees, capital appreciation of the vessels themselves, or both. Due to the high capital commitments involved, ship investment has tended to be limited to ultra high net worth individuals and syndicates.
In the
UK, investments in cargo ships can qualify for the
Enterprise Investment Scheme The Enterprise Investment Scheme (EIS) is a series of UK tax reliefs launched in 1994 in succession to the Business Expansion Scheme. It is designed to encourage investments in small unquoted companies carrying on a qualifying trade in the United Ki ...
, making it possible for individual investors to access ship ownership as an asset class.
Shipping container investments
Investment in shipping containers involves purchasing a container and having an external company manage and lease the containers to merchants. Investors are often promised high rates of return based on purportedly growing demand from cargo ships preferring to lease containers instead of buying them.
The industry is known to have been targeted by
scams
A confidence trick is an attempt to defraud a person or group after first gaining their trust. Confidence tricks exploit victims using their credulity, naïveté, compassion, vanity, confidence, irresponsibility, and greed. Researchers have def ...
, particularly in the form of
Ponzi schemes
A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are coming ...
.
References
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Investment