Risk Takers. Let’s face it. This is in fact what all investors are.
There is no investment which can bring returns without taking some risk, except one, and that is Knowledge. This is why Fund Managers, Financial Advisors, Wall Street Gurus are highly remunerated and their annual hefty success bonuses exceed the wildest dreams of most ambitious and well paid executives. Bonuses flying at the range of few hundred millions us dollars to one or two billion!
Investors’ usual critical questions are; Where and When? Two questions which demand knowledge, expert analysis and wise answers. Fund Managers and Financial Advisors usually have the knowledge and expertise to know the right answers to these troubleshooting questions.
The last two years they have focused in one of the most profitable but also risky (due to its cyclicality) investment options, which is the Shipping industry! Shipping has been the talk of the day since 2012 as it is obviously a good investment opportunity, now the freight market and vessels values remain at historical low levels.
This is why Private-equity and hedge funds are accumulating shipping debt at the fastest pace since they began buying the risky loans from banks in 2012. It can’t be unnoticed that about us$ 5 billion in shipping loans has changed hands in the past year, according to estimates by AMA Capital Partners LLC, a fund manager and adviser in New York.
Investor demand is driving prices as high as 90 cents on the dollar, from 70 to 80 cents a year ago. Funds are betting ship prices that collapsed as much as 80 percent in five years will rebound from historic lows. Shipping is a tangible and global business.
Investing in Shipping – buying shares in Ship-Owning companies (SVP’s) – is a tax free investment (at fund’s level) and despite the risks involved and asset values depreciation in a bad freight market environment, where the demand for tonnage is low, the vessels always retain part of their value, the scrap value, in case of a distress sale in a catastrophic market or vessel’s age being too old.
Investors in shipping anticipate combining income returns on their investment. One is the income deriving from the trading and vessels management and the other is from the sale and purchase gains when the assets are liquidated at appreciated prices, in a good freight market, where the demand for tonnage is brisk.
In view of high profit opportunities new specialized Private-equity firms have been established, like Starfleet Navigation Limited – teamed by highly experienced shipping and investment professionals- which are willing to take ownership of the assets and put it to work while they wait for prices to appreciate.
Having said that it would be an omission not to mention that in view of the optimism prevailing amongst the funds that are buying shipping loans there few that are less familiar with shipping, if not at all, they are newbies and the risks they take might be proven an expensive lesson.