Ship investments (Schiffsbeteiligung) are quite popular on the market these days. More and more people are investing their money into maritime capital and making a huge profit.
World trade is more profitable than it has ever been. Lots of money can be made shipping containers. Most of that money is coming from Germany. Due to a tax break, Germany is the owner of nearly a third of the shipping capacity in the world. Brokerage dealers such as Hannover Leasing have molded the market for ship funds from Germany. With the economic growth of the world and the procedure for moving omnipresent shipping containers around the globe, ship investments just seem like the most logical approach.
The ship fund trend has been an asset to the brokerage firms, but has the industry of global shipping worried. The concern seems to be that an unbalance between supply and demand could occur due to the brokerage firms selling the funds regardless of the developments in the overall market of shipping.
In the past, vessels were funded by the owner of the ship and his bank. This method was more honest because both knew the shipping industry and both had money on the line. Nowadays, retail investors who have no knowledge of the shipping industry create capital and vessels for tax reasons, when they are not necessarily needed.
Unlike any other country, Germany has laws that encourage ship investments, which lets people deduct up front for losses that may arise during the initial phase of their ship investments. Ship investments have returned up to eight percent every year for the last decade. After phasing out the system, Germany began imposing taxes according to the size of the vessel, but this has no effect on the owner’s profit.
Ship investments work like a partnership where an investor buys a portion of a fund with many ships. Every year, the investor will receive money from fees that customers pay when the ship is chartered. Ships are sold after around ten years and the last payment is made.
German investors put billions of dollars into ship investments each year, which pleases the investment brokers to no end. Back in the 1990s, investment banks attempted the same method to take fees from underwriting offerings of startup companies. Many of the companies ended up going bankrupt and the shareholders were the ones who had to pay the price.
The twist is that just because the owners go bankrupt does not mean that the vessels brought into operation just disappear. The supply and demand balances out very slowly with the retirement of older ships. Therefore, as long as the brokerage firms continue to sell the ship fund and investors continue to make ship investments for tax reasons, ships will continue to be manufactured and keep clogging up the market.
The service of ship funds is, of course, defended by brokerage firms who claim that the demand for shipping capacity is increasing significantly year by year.