Nordcapital - Secondary Market

Ship funds are traditionally longer-term investments, with an investment horizon of 15 years or more. The optimal economic period for a ship fund is extended by the tonnage tax. As a result, many ships remain longer in the fund than was originally specified in the prospectus. The demand for tradability of shares has led to development of a liquid and transparent secondary market in recent years. For purchasers of secondary market shares, that opens up an investment segment with a favourable opportunity/risk profile.

Market in transition
In the period from 1992 to 2006 a total of about €26.5 billion has gone into ship funds. In 2006 alone, the total was €2.55 billion. As the amount of capital placed in funds increases, there is also an increase in the demand for trading in fund shares. At the same time, the secondary market platforms have made trading easier and more transparent for buyers and sellers. That has led to a continuous rise in the trading volume in the secondary market in the past few years. There is a multiplier effect from continued high rates of sale in the primary market with a simultaneous increase in the trading quota. The secondary market is therefore expected to increase strongly in the coming years. Secondary market turnover was already up to about €220 million in 2006, versus €10 million in 2001. Turnover is expected to rise to more than €320 million in 2007.

Flexibility for investors
The development of a functioning secondary market gives investors more flexibility today. Investors can choose the selling time themselves, independently of fund management and of the other shareholders, for example to realize profit early in a positive market environment, to minimise possible taxation burdens on differential amounts, to cover unexpected liquidity needs, or to transfer assets.

Attractive risk/return profile
At the same time, a liquid and transparent secondary market enables private investors to engage in lucrative shipping markets worldwide, via diversified portfolios of ship funds. Compared with participation in a single-ship company, exposure is much more widely spread by a broad selection of ships. That contributes to the attractive risk/return profile of secondary market funds.

Nordcapital secondary market funds
The concept design of Nordcapital secondary market funds and the purchase of shares in the investment phase is the responsibility of Nordcapital Portfolio Management GmbH & Cie. KG. It handles portfolio management and administration of the ship funds. The secondary market funds are characterised by short terms, feature a pre-selected initial portfolio, and make use of the leverage effect. Nordcapital concentrates primarily on the shipping markets.