Investment managers seeking a new asset class may want to chart a course for the high seas, as the shipping industry is providing fresh opportunity, according to a report from Mercer.
In a paper titled “Investment Case: Shipping” Mercer explains how specialist funds are now able to buy up shipping assets at deflated prices. When world trade was booming in the middle of the decade, charter rates rose, as did the value of the ships themselves. When the economic crisis hit, charter rates fell, slashing the rate of return for operators.
“The investment opportunity in shipping comes as a result of capital scarcity in the industry,” says Ryan Bisch, manager researcher in Mercer’s alternatives boutique. “Lending opportunities through the traditional channels such as shipping-focused commercial banks or direct ship owner equity has dried up and capital is very scarce.
He admits that shipping is not without its risks, as the market is not homogenous — the market for dry cargo shipping may be at a very different stage of the business cycle than tankers, for example.
“Shipping can be an attractive opportunistic investment option for investors with an appetite for private equity-like risk and ability to invest in illiquid assets,” he says. “However it is important to note that it should form part of a diversified alternatives investment portfolio and that the success of this opportunity relies on the ongoing recovery of the global economy.”
