Shipping as an alternative investment
Aug 17th, 2009 | Filed under: Institutional Investing, Today's Post
As the Economist pointed out a couple of weeks ago, the shipping industry has seen better days:
“Since the recession bit hard last autumn a lot of attention has been paid to the plunge in the Baltic Dry Index, a composite measure of the cost of shipping bulk cargoes such as iron ore and coal. It fell by over 90% between June and October last year, although it has since recovered slightly and is hovering at just above a quarter of its peak.”
But although an investment in the shipping industry clearly comes with a boat-load of global growth beta, are there any aspects of this sector that might qualify as an “alternative” investment?
Turns out there may be. A new article in the Journal of Alternative Investments (available free for a limited time here at the Chartered Alternative Investment Analyst Association’s Website) reveals that shipping actually has some quintessential alternative investment properties.
In “Diversification Properties of Investments in Shipping”, Michael Grelck, Stefan Prigge, Lars Tegtmeier and Mihail Topalov take a more nuanced approach to examining this sector – focusing on shipping companies, not the shipping sector in general. What they find may be somewhat counter intuitive to most. Shipping stocks do not have a huge equity beta component. And as a result, they possess the diversification properties craved by alternative investors.
Report the authors: More…
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