There are mixed opinions on whether it is the right time to invest in shipping, this year’s Capital Link Forum in London heard.
John Wessel, managing director at Oldendorff Overseas Investments, firmly declared: “No, it’s not a good time to invest, because it’s too expensive and you will not be able to make returns to justify the risk” —while acknowledging that it was hard to say among the pure shipping community present.
Andrew Hampson, CEO of Tufton Investment Management, also admitted that investing in shipping, compared with other asset classes and sectors, is a hard sell for an industry that is so diversified, particularly from an ownership point of view, and that has a lack of public capital markets performance.
“Actually, getting people to invest in shipping in the first place is one of the hardest tasks we have,” he said.
“Should you be invested in shipping? Clearly, I believe firmly, so. I think the risk returns are there.
“You’re really investing in world trade. And world trade is not going to stop, irrespective of whatever happens in the world.”
Hampson indicated that trade is most likely to increase with rerouting as various geopolitical events “crop up”, which in itself creates further demand.
“At the moment, there is growing demand because of geopolitical events,” he added.
“It’s a great time to be investing in the fixed asset side of shipping.”
Hampson also observed that supply and capacity to build new ships are limited.
James Cirenza, managing director of DNB Markets, said: “Over single-digit returns, shipping has been a tremendous alpha generating space. And I don’t think that the story is over.”
Richard Diamond from Castlewood Capital Partners was equally positive: “I invest in shipping because I think the risk-reward is really good, and I’ve made a lot of money in the last three years, and I think the opportunities are even better today.”
Similarly, Will Homan-Russell, chief investment officer at WMC Capital, said: “Given this lack of shipyard capacity, or at least tightness, it remains a good period to be fundamentally long in shipping.”
He added that shipping is very diversified, which continues to produce a lot of opportunities.
Geopolitics providing opportunity
Hampson expanded on the impact of geopolitical tensions on potential investors, who might feel scared and subsequently discouraged from investing in the industry.
“Those of us in the know might see some of those geopolitical events as opportunities. Be it the Russian-Ukraine crisis, the situation in the Red Sea with container ships, having to go further round, etc. I see that as a massive opportunity,” he said.
Hampson said the UK economy had affected investment levels.
“Not wishing to comment on UK politics too much, but from a certain time when a very short-lived UK prime minister was actually in power, I think that really messed things up from then on, from an economic point of view,” he said.
“We’ve seen a lot of pension funds and other institutional funds looking to seek investments which they consider to be far more liquid than the shipping industry.
“So, I think it’s harder today than it was … 10 years ago.”
