Container Investments has been there for the last thirty years but the recent surge in popularity is mainly attributed to globalization and increasing displeasure with traditional form of investments. The surge in trading agreements between countries and between corporations bolstered by seamless communication in recent years has helped the shipping industry grow at a rapid pace. As a result, the expansion of shipping industry invites more capital investments not only in vessels but also in containers. The top four exporters and importers of the European Union are Germany, Italy, Netherlands and the United Kingdom and China alone accounts for over 30% containerized cargo activities in the world. According trade statistics, UK is the seventh largest importer of containerized cargo in the world, and the trend is expected to continue for the foreseeable future. About 90% of the world trade happens via sea and this has given rise to numerous sub-sectors such as docking, waste management and container leasing.
Containers are built on demand depending on orders from liner shipping companies in different sizes. As the order flow fluctuates in the economic cycle, post 2008 financial meltdown, shipping companies prefer leasing the containers to avoid huge capital investments and this gave rise to the birth of container leasing companies. For number of years now, the share of leased containers is on the rise compared with owned containers. Since Long-term leases with shipping companies were honored in timely manner and the sign of economic recovery visible, leasing companies are sourcing capital directly or via different investment companies to increase capacity in the form of containers.
Pacific Tycoon is one of the famous container leasing companies, and the company helps investor own a single container for $4100. The owner is provided with choice of fixed lease and variable lease, and the company pays 12% on fixed lease and variable lease is an aggressive option to earn up to 30% on the upside. The payments are made quarterly for investor owning less than 5 containers and the income is transferred monthly for those who own over 5 containers.
According to the company, the containers owned by the investors are insured both in sea and land, and also the depreciation can be accounted for taxable purpose with suitable arrangements. The company claims a return of 26% for the asset class, container investments and the containers could be sold off any time as exit strategy.
Into the risk profile, the container investments are neither standardized nor regulated by any government authorities, and numerous offers in the past had turned into Ponzi schemes. The due-diligence and cautious approach should be handy for the investors in choosing the right company. Institutional investors in the past have successfully used container investments as diversification measure. This form of investment has low correlation with financial instruments such as stocks and bonds. With exit strategy in place, unlike other alternative assets, container investments are considered to be relatively liquid, but the purchase cost of containers are moderately high. In-line with alternative assets characteristics, there is minimal information on secondary source which are reliable to assess the real potential and risks.