Ship-Funds for Institutional Investors
Institutional Investors are known as institutions with a high investment need. Their committed investments are driven by the portfolio allocation thoughts. Thus Institutional Investors observe the risks of their investments and invest their money in different asset classes to follow the idea of portfolio diversification theory. Even just from the decision criterion return on investment (ROI), each Institutional Investor has his individual need derived from the obligations. For example an insurance company has current cash inflows from its insurance contracts. These funds must be invested to bear interest for the repayment of insurance claims (due-date open), or for the final pay out at the end of the contractual time (for example life insurance). Other Institutional Investors emphasize a periodic dividend for their investments.
Institutional investors are financial institutions such as capital investment or insurance companies and especially pension funds with their management companies. Besides this so called "family offices" often referred to institutional investors as they take care for the asset management of wealthy families. Institutional investors should have a free available investment volume of at least € 500.000, -.
As institutional investors can play a much greater market power, they have a wide choice to define the terms of their investment products. Moreover the so-called "leverage effect" is an important factor. This effect simply means that the return of an investment will increased as long as the return of the asset is higher than the borrowing rate.
For institutional investors an investment in a ship funds can also be helpful to stabilize the entire portfolio. The company FondsMedia provides therefore a study to compare the correlation of investments in ship funds with other investment opportunities. The major conclusion of the study is, that ship funds have a high correlation with the bond market. Several reasons may be responsible for this:
- Financing of Ships, is largely driven by debt finance. Therefore high interest rates lead to higher costs of a ship and the issuing company must claim higher charter rates from the shipping companies.
- Shipping funds are recognized as real asset investments. This means the investment provides a kind of protection against inflation. And with rising inflation will also increase the interest.
Much more important is that correlations with other investment opportunities, such as the stock market, could not be detected. Therefore ship funds are applicable in a special way to stabilize an entire portfolio.
For private placements to institutional investors should be also noted, that usually an investment prospectus with an official approbation by the Federal Financial Supervisory Authority (BaFin) is not created.
Our recommendation: Check offers of private placements very careful according to the criteria provided in our checklist! Because it is not always inside, what's described outside on the product packaged!
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