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Opportunities and risks in ship investments

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Ship investments: you should know this

Ship investments have existed for many centuries. If you wish, you can draw a direct line from the times of Christopher Columbus or Fernando Magellan to the “here and now”.

Already many centuries ago the necessary investments in a ship voyage or the operation of a ship were stemmed by ship participations and already at that time the investors were pleased about far above average returns.

Transport shipping on the upswing

Admittedly, large quantities of gold are no longer transported by today’s transport ships. Instead, trade in goods is flourishing, especially between Asia and Europe but also across the Pacific and Atlantic Oceans.

Around 90 percent of the global flow of goods is handled by shipping, which guarantees durability. In addition, the global trade volume is growing continuously and new ships are needed.

Some ships are likely to be decommissioned in the next few years, particularly as a result of stricter environmental legislation. The new emission guidelines of the International Maritime Organisation (IMO) have been in force since the beginning of 2020, and in 2022 ballast water will also be affected by a new regulation.

The consequence will be a renewal of the ship fleets and thus the chance of lucrative ship participations.


Ship investments as closed-end funds

Nowadays, ship investments work in different ways.

Classically, one invests in so-called ship funds, which are closed-end funds that basically collect money to buy or build a ship. The person who invests in this way becomes the entrepreneur and limited partner of a fund company.

The closed character means that the money invested in the ship’s shares is no longer available for a certain period of time. As a rule, ship investments are of a long-term nature and can have a time horizon of between ten and 25 years.

The money that flows from closed-end funds but also from other forms of investment in ship investments is earned through the chartering of the ships. With every voyage across the world’s oceans, the cash register rings a bell in colloquial language and the investor or investor also earns his share.

Added to this is the steel value of the ship, which is regarded as a hedge, but there are also a lot of imponderables such as the fluctuating exchange rate of the US dollar, possible insolvencies of the shipyard or shipping company and, of course, a changed economic situation or tax assessment.

Container investments are a special form of ship investment, in which investments are made “only” in overseas containers rather than in an entire ship. However, the principle is identical, with a duration of only two to five years.

With container investments, in addition to participation in funds, a direct investment is also possible, i.e. the investor simultaneously becomes the owner of the container, whereby the investment partner naturally takes care of the leasing, maintenance and possible sale.


Ship investments in the form of crowd investing

Ship investments in the form of crowd investing

A relatively new possibility for ship investments in the form of loans is crowd investing.

As the name suggests, several people or investors come together to provide a predetermined amount. A financial commitment is already possible for sums of 500 euros and is paid out at fixed interest rates and fixed maturities.

Ship investments in the form of cumulative loans in the form of crowd investing are covered throughout Germany by the Small Investor Protection Act, but also carry the risk of losses.

The investment is made in a ship that is presented down to the smallest detail, including the steel value. The capital flows to the shipping company, which either builds or modernises the ship in order to generate more profits.

In the case of ship investments through crowd investing, the return flow of the capital, which can take place both at the end of the term and on a quarterly basis, is also clearly regulated. From a tax point of view (as of 2019), this is a subordinated loan whose profits are to be used as capital gains and are subject to capital gains tax.

In general, ship investments are regarded as highly promising investments with yields in the double-digit percentage range.

Due to the risk involved, however, this form of investment should only be used as an addition to existing financial investments and should also be seen as long-term.

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