It is difficult for investors to sell shares in closed-end funds on the secondary market anyway. But even when ship fund units have been successfully sold, investors must expect further claims.
- Insolvency of the shipping company
- If the shipping company becomes insolvent, the insolvency administrator can reclaim possible distributions. In addition, investors as former shareholders may also be required to make additional capital contributions.
- Tax reclaims
- The sale of the shipping fund may give rise to additional tax reclaims.
Shipping companies in crisis
The major financial crisis of 2007/2008 had an enormous impact on maritime trade. As a result, the once booming business with new ships as well as containers suffered heavy losses and sharply falling freight rates.
The result was overcapacity, which drove many providers into insolvency. In the industry, it is assumed that far more than 450 insolvent ship funds have gone bankrupt since 2008. The high number clearly shows investors the risks they run in Exness when investing in a ship fund.
Investor protection for closed-end funds also for ship funds?
Since then, the new regulations for fund providers include investing in at least three ships or raising the hurdle for entering the fund to 20,000 euros. This is intended to protect inexperienced investors in particular from high and risky investments.
Whether these regulations also apply to ship funds has been the subject of repeated debate since 2013. The law explicitly does not apply to operationally active funds. And it is precisely the definition of the "operational activity" of funds that ultimately causes a fundamental regulation to fail. Thus, many ship funds are still not affected by regulation under the KAGB.
How serious is the investment in ship funds?
How serious an investment in a ship fund is depends on the seriousness of the provider. Since ship funds are investment products of the grey capital market, there is hardly any state supervision and regulation. The investor must therefore trust either the provider's figures or the investment advisor.
Is there a right to a fixed return?
With ship funds there is no right to a fixed return or a fixed repayment amount. The investor is dependent on the success of the shipping companies, which can transfer the lease for the ship or the purchase price at the end of the term.
Can a total loss be suffered?
Anyone who invests in a ship fund can risk a total loss. Ultimately, these funds are an entrepreneurial investment with all the opportunities, but also all the financial risks.
Eleena Timmons