There is a New Focus in The Container Shipping Industry

The container shipping industry has experienced a multitude of financial and logistical challenges in 2015-2016. These adverse conditions have caused shipping lines to review their performance and adopt an operational strategy that focuses on prudence and efficiency.

Prudent [Pru-dent] acting with or showing care and thought for the future.

In perhaps the greatest example of the action shipping lines are taking to demonstrate their commitment to improving operations in 2017 (and beyond), A.P. Moller-Maersk recently announced that it will divide its shipping and energy holdings. This move will allow the company to participate in opportunities in each individual sector, that it may have previously overlooked as a conglomerate. This means more focus on Maersk’s shipping and logisitics services.

If you are investing in containers, or have gained access to the shipping industry through other means, the industry’s new focus offers a much more stable environment for you to forecast your investment returns. After all, less adversity in the market means more confidence for investors.

Partnerships & Alliances.

As the environment became more challenging in the shipping sector, container lines looked to establish partnerships and alliances with competitors and rival companies. This approach provides logistical advantages and has allowed container lines to pool their maritime assets and more efficiently deliver services to customers.

At the moment, the industry’s three established partnerships are:

  1. 2M Alliance – Maersk, Mediterranean Shipping Company
  2. Ocean 3 Alliance – CMA CGM, UASC, COSCO Shipping
  3. THE Alliance – Hapag-Lloyd, Kawasaki Kisen Kaisha Ltd. (K-Line), Mitsui OSK Lines Ltd., Nippon Yusen KK (NYK), Yang Ming Marine Transport Corp.

New Services and Trade Routes.

Industry leaders have also reviewed their shipping routes to maintain their operational efficiency. For example, in a move that focuses on the more profitable and prudent shipping opportunities in China, Maersk Line has removed 10 Chinese ports from their ports of call.

For many of the industry’s leaders, South American markets have demonstrated strong demand and shown they can be profitable. To benefit from this prosperity, the Mediterranean Shipping Co., CMA CGM, Hapag-Lloyd, Hamburg Sud, China Shipping, and Hyundai Merchant Marine are revising their existing services on the Asia-West Coast South America routes. In May of 2016, Maersk Line added a new southbound weekly shipping service between North Asia and the west coast of Latin and South America.

It’s Good News!

The container shipping industry is a business like any other business. And, in business, profit tops the list of important things to focus on. For leaders in this sector, it has meant taking prudent measures to reduce operating costs and increase their profits.

Some container shipping lines have introduced new, more profitable services and routes, while others have sought to strengthen ties with other companies and work in partnership toward making more money. In either case it means a rise in confidence in the industry, and that is good news for investors and container shipping lines.

Make An Educated Decision About Alternative Investments

When you are trying to make your first alternative investment, there are so many different types of investing options to choose from, the process can quickly become overwhelming. This makes it all the more important for you and/or your adviser to understand the fundamental differences between non-traditional investing options, so as to be able to properly evaluate risk versus reward of alternative investments.

This article will provide you with deeper insight into the three main characteristics of alternative investments. It is my hope that the information I share will help you make a confident an educated decision, particularly with regards to:

1. Return Efficiency
2. Potential for Downside Risk Protection
3. Correlation to Traditional Market Risks

Return Efficiency.

The return efficiency of a good alternative investment is best measured by adjusting the raw return for the amount of return variability. Investors frequently use the Sharpe Ratio to make this calculation.

This Sharpe Ratio is a measurement of the excess return (or risk premium) per the unit of deviation in investment assets or trading strategies. This is typically referred to as “risk.”

An added benefit of using the Sharpe Ratio, is that it makes “absolute-return” outcomes easier for you to compare.

When seeking an alternative investment, you should always try to find the investments with the most efficient return profile. This will result in proportionately higher returns without the burden of uneducated risk, and will therefore deliver a great investment experience, and more capital over the long-term.

All things considered, a higher Sharpe Ratio should be a goal whenever investing in alternatives.

Potential for Downside Risk Protection.

Downside risk protection is the second characteristic that you need to carefully evaluate.

When evaluating the downside risk, you should always try to identify asymmetric return distributions. These are returns which are skewed more towards the upside, rather than the downside, and do not characteristically experience large drops in performance.

The asymmetry you seek are often found in the flexibility of alternative strategies.

Correlation to Traditional Market Risks.

The third and final characteristic that you need to evaluate when studying alternatives is their ability to deliver a revenue stream that is different from traditional investments.

By correctly understanding traditional market risks, you will be able to determine whether or not the investment can provide you with sufficient diversification, and protect you from the traditional investment risks in your portfolio.

Investors should always seek-out lower correlation investments to protect their capital from the poor returns experienced in traditional markets; like stocks and bonds.

When taking your first steps into the alternative investment market, you may want to begin with a single investment that is already completely diversified, and has proven it performs well in all types of markets. These kind of investments offer a nice balance of risk and stability over longer periods of time, serving as an excellent launching pad for any new investor.

Hard Assets: Attractive Alternative to Traditional Investing

Hard assets are commodities like gold, platinum, silver, copper, nickel, and oil. Based on their current asset performance, hard assets are in a Bull market that analysts believe could last for many more years. This can be attributed to the fact that hard assets are negatively correlated to stocks and bonds; meaning that they tend to behave differently and move in the opposite direction of equities. That said, hard assets are a popular way for investors to “cushion the blow” in the event that the stock markets take another tumble, or bond values fall.

hard asset investments appealing alternative

If preserving wealth is your goal, then investing in hard assets is an attractive alternative to risky traditional investments.

Aside from their non-correlation to traditional investments like stocks, hard assets are recognized as a safe haven for an investor’s capital. Remember the Cyprus banking fiasco? What happens to investors nowadays who place their hard-earned money in a financial institution that cannot guarantee the deposits? Let’s just say that hard assets play an important role in risk management within a portfolio, and that if preserving your investment principle and wealth is your primary goal, then investing in hard or tangible assets is an attractive alternative to risky traditional investment options.

Another reason that analysts are fond of hard assets is that the economies in China, India and other emerging markets, are growing rapidly. In fact, according to the International Monetary Fund, in the next five years Asia will represent a third of the world’s output and its economies will grow nearly 50 per cent. To me that statistic implies that we can expect significantly higher levels of energy consumption, as well as a rising demand for raw materials like silver and other precious metals. Looking ahead, as businesses and governments forecast their need for raw materials, I expect that we will see an increase the demand for commodities, and in doing so, raise the value.

purchasing alternative investments is easy

In most instances purchasing alternative investments is as easy as purchasing stock was “in the old days.”

Making an investment in hard assets is more appealing and much simpler than it was previously. In today’s marketplace there are an increasing number of investment opportunities that invest in precious metals, gemstones and even investing in containers. These offerings are available from an investment broker, and in most instances are as easy as purchasing stock was “in the old days.”

Why is Investing in Gemstones an Attractive Investment Option?

Investors finally discovered that introducing gemstones into an investment portfolio, is the secret to improving portfolio returns, while mitigating risk.

As investors search through piles of investment information about elegant gems, many are realizing that the key to investing in gemstones, is to start slow and build a valuable collection. Commonly, gemstones are investments with an intrinsic value (value in use) such as real estate investing, precious metals like gold, copper and other forms of physical assets. Remarkably, in most instances, thanks to their relatively low relationship to other financial assets (equities and bonds), gemstones have demonstrated they can provide investors with a valuable option to diversify their investment portfolios.

It is also known that gemstones will increase in value over the next decade, as they are slowly getting harder to find and the demand is rising. Moreover, they offer a degree of protection against inflation, unlike money or stock market investments.

What is the bottom line? Precious gems are secure investments, IF you know how to choose them.

In these challenging economic times, when the appetite for risk among investors for equities and bonds is declining, most fund managers now advocate that portfolios that include hard assets – such as gemstones, will generally provide a better risk/return profile; than investment portfolios without them. Therefore, contemporary investors see gemstone investing as an alternative investment, that offers protection against inflation and preserves their investment principle.

hard assets provide better risk return

Portfolios that include hard assets, such as gemstones, will generally provide a better risk/return profile than investment portfolios without them.

Although there will be a constant evolution of different types of gemstones, ranging from energy applications to a tangible possession, the one most crucial point to note is that gemstones are able to maximize the asset holder’s wealth.

As we are aware in today’s contemporary investment climate, gemstones are able to preserve capital from eroding and a natural hedge against inflation, and (for me) both of these are signs that this asset has created its own pull factor. It makes absolute sense to me!

The current unprecedented global monetary and fiscal stimulus undertaken taken by Western Governments, coupled with the high inflation in the East, has somewhat rocked the traditional stock and bond markets; resulting in gemstones becoming a preferred mode of investment. According to analysts, there is no mistake about where gemstones values are headed next. All signs point to even higher values.

the diamond business harry winston quote

I love the diamond business. It’s a Cinderella world. It has everything. People; drama; romance; precious stones; speculation; excitement. What more could you want? – Harry Winston

Nowadays many portfolio investors – after years of trial and error, have finally discovered that the benefits of introducing alternative investment to an investment portfolio, is the secret to improving investment returns; while mitigating risk at the same time. All things considered, gemstones are very appealing to savvy, confident investors and have emerged as a nice fit for investors and institutions.

Where Do Alternative Investments Fit Into Your Portfolio?

After the poor performance of funds in 2008, and subsequent failure of many other alternative investments, it’s understandable that investors would be wary.

In the past, investors’ portfolios have been dominated by public equities and bonds. The risks associated with the equity portion of those investing portfolios has typically come as a result of exposure to traditional investments. That said, the severe financial crisis of 2008 (and into 2009) clearly demonstrated the dangers associated with the traditional approach to investing, and led many investors (including institutions) to search for nontraditional investment offerings.

Although it is almost impossible to define the perfect alternative investment, if I had to it would be an investing opportunity where I consistently enjoy positive returns, low volatility and low correlation to traditional investment offerings.

the perfect alternative investment

The perfect investment will consistently produce positive returns, experience low volatility and offer little to no correlation to traditional investments.

As a result of the asset management industry’s positive performance over the 10+ years, there are now a number of interesting and appealing investment opportunities that cannot easily be classified as one of the 10 core asset classes. This has prompted investment firms/managers to introduce and additional one – alternative investments, making it a total of 11 different core asset classes. Many analysts agree that this provides much clearer and more efficient information about asset allocation.

There are some investments that are clearly alternatives, given that their correlation to the other recognized asset classes is negligible. It is this lack of obvious correlation to other (traditional) asset classes that as savvy investors, we favour most about alternatives. This has proven to be very useful in avoiding financial disaster, particularly when equity markets are falling such as they did in 2009, 2011 and again in 2015.

Albeit the conventional justification for alternative investments has been their ability to effectively diversify against core equity and fixed-income allocations, please allow me to offer a strong word of caution … Not all alternative investments are guaranteed to experience low volatility. Some alternative offerings will generate high returns, but are subject to an aggressive investment approach that involves much more risk.

That said …

The biggest risk is not taking any risk … In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks. – Mark Zuckerberg

biggest risk is not taking any risk mark zuckerberg

Like a growing number of investors, I have begun to place much more emphasis on the value of alternative investment strategies, particularly investing in real estate, and have discovered that they can be very useful in helping me to achieve my long-term investment goals. That said, my greatest admiration for investing in alternatives can perhaps be best explained by the excitement I feel, having them in my portfolio.

Alternative Investments Appeal to Savvy, Confident Investors

In search of a better return on investment, while protecting against stock/bond volatility, savvy investors confidently invest in alternative investments.

Seeking greater return on investment, while shielding portfolios from the volatile nature of stock and bond trading, wealthy investors continue to invest in alternative investments. If you fancy yourself a savvy investor and you have the tolerance for risk, non-traditional investing options are an appealing alternative to stocks and bonds.

The Alternative Investment Landscape

Further examination of the ownership and sourcing of alternative investments, as well as the use of private equity investing, the Spectrem Group’s latest perspective report: Use of Hedge Funds and Private Equity in the Portfolios of the Wealthy; uncovered that:

  • The average investment for the US$25 million investor ranges from US$3.5 million for private placements to US$12.6 million for hedge funds.
    Ownership of alternative investments increases with an increase in wealth and decreases with increasing age.
  • Hedge funds receive more money from alternative investors than any other class of alternative investments, particularly from those with a net worth of US$25 million or more.
  • While 42 per cent of investors with a net worth over US$25 million own hedge funds, 69 per cent of investors with a net worth of US$125 million or more are invested in hedge funds.

alternatives higher rate of return diversified portfolio

Utilisation of alternative investments increases as wealth increases, and advisors should recognise the opportunity to introduce alternative investments as an investor’s net worth grows … Investors who find alternatives attractive are looking for a higher rate of return and a diversified portfolio of investments. – George H. Walper, Jr., President of Spectrem Group

Albeit the statistics are positive and are cause for excitement, many amateur investors struggle with finding their place in the alternative investment marketplace. In order to find the answer, investment-seekers must be acutely aware of how knowledgeable they are with regards to non-traditional investments, as well as truthful with themselves about what their tolerance for risk is.

Are You Investment Savvy?

Of those investors who considered themselves to be “very knowledgeable” about investments are more likely to have alternatives in their portfolio than those who do not (37 per cent versus 24 per cent). On the other hand, those who consider themselves only “fairly knowledgeable” about investing are more likely to not include alternative investments (61 per cent versus 53 per cent) in their portfolio.

What is Your Risk Tolerance?

Compared to other investors, those who are investing in alternatives are more likely to describe their risk tolerance as “aggressive” or “most aggressive,” than those who do not invest in non-traditional options.

In the study, 40 per cent of ultra-high net-worth investors who owned alternative investments, identified their risk tolerance as “aggressive,” compared with 39 per cent of those who describe their risk tolerance as “moderate,” and 11 per cent who reported their risk tolerance as “conservative.”

In Conclusion.

Investors who have carefully assessed the risk all of the more traditional opportunities for investment and have made the decision to begin to investigate the market’s niche alternatives, that have consistently demonstrated low correlation and strong returns despite a volatile and challenging economic times, have succeeded in diversifying their holdings, eliminating unnecessary risk and positioned themselves for long-term financial security and success.

Investors Invest To Avoid Risks Of Traditional Investments

Investors are shifting their focus (and money) to investments in nontraditional options that reduce their exposure to the risks of traditional investments.

With traditional investments – like stocks, mutual funds and bonds – consistently delivering poor performances year after year, and the world seemingly headed for financial and economic disaster, the global investment community is moving its focus (and money) to investing in nontraditional options that will shelter them from the repercussions of falling equities.

This move by global investors to avoid the risk associated with volatile assets, and instead invest in opportunities that preserve wealth, signifies the emergence of the independent, savvy investor that can identify the increasing risk in traditional markets and is adamant about seeking-out safer alternatives to protect their portfolio.

great depression milton friedman quote

The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy. – Milton Friedman

The age of the new, more savvy investor is characterized by a departure from traditional investing strategies that rely heavily upon advisers. Instead, this progressive approach is insistent upon transparency from an alternative investments provider, as well as maintaining “hands-on” management over individual portfolio assets. This more assertive strategy is appealing to investors who want more control over the outcome of their financial future.

Gone are the days when investors watched helplessly as their fortunes, being managed by complete strangers, rose and (mostly) fell daily. Nowadays, the investment community is embracing opportunities – like investing in containers, that offer tangible assets in industries that have historically performed well, and are not directly correlated with traditional market volatility. This has proven to deliver the portfolio diversification that today’s educated investors desire.

real estate investing to build wealth robert kiyosaki quote

Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth. – Robert Kiyosaki

The greatest appeal of nontraditional investments is their ability to lower an investor’s exposure to the traditional investing strategies that have proven themselves to be too risky to provide the foundation of an investment portfolio. Although still representing a significant portion of investor holdings, stocks, bonds, and mutual funds are being complimented or replaced by alternative assets, such as investing in precious metals, gemstones, and containers. These investments have proven to preserve investors’ wealth in times of financial and economic uncertainty.

Also among the hard assets that are growing in popularity and are increasingly recommended by industry analysts is real estate. Commercial property values in major cities like Hong Kong, London and New York have shown they can consistently hold their value, and that carefully chosen real estate investments can depended upon to deliver strong returns to investors; even in challenging economic times. Nowadays, the investment community knows better than to expect this type of positive performance from traditional stock market and/or bond investments.

diversification globalization key fujio mitarai quote

Diversification and globalization are the keys to the future. – Fujio Mitarai

Generally speaking, alternative investments can be found in sectors that promote and facilitate global growth and development of the international community, such as shipping containers’ contribution to world trade and technology’s increasing demand for silver. Investors should seek-out opportunities like these to ensure steady investing returns, and avoid the established risks associated with traditional investment offerings.