A real asset management approach for Islamic investment in containerships
Purpose – The purpose of this paper is to provide a real asset management investment appraisal of the performance of containerships as a primary segment within international shipping, to facilitate Islamic equity investment through a shipping fund. The objectives are to evaluate the risks and retu...
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Main Authors: | , , |
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Format: | Article |
Language: | English English |
Published: |
Emerald Publishing
2020
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Subjects: | |
Online Access: | http://irep.iium.edu.my/60885/13/60885%20%20A%20real%20asset%20management%20approach.pdf http://irep.iium.edu.my/60885/14/60885%20%20A%20real%20asset%20management%20approach%20SCOPUS.pdf http://irep.iium.edu.my/60885/ https://www.emerald.com/insight/content/doi/10.1108/JIABR-07-2017-0105/full/html?skipTracking=true |
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Summary: | Purpose – The purpose of this paper is to provide a real asset management investment appraisal of the
performance of containerships as a primary segment within international shipping, to facilitate Islamic equity
investment through a shipping fund. The objectives are to evaluate the risks and returns of shipping under
the framework of Islamic equity finance, and to analyze the performance of investing in containerships over
the long term, to appeal to retail and institutional clients of Malaysian asset management institutions.
Design/methodology/approach – Accordingly, the methodology adopts an investment analysis of a full
population of historical data over a period of 20 years, to evaluate performance involving a maritime return on
investment (MROI), internal rate of return (IRR), net yield and standard deviation measures of risk and return.
Findings – The findings reveal that while earnings are volatile in comparison to capital market
expectations, unlevered, tax-free returns on containership investments outperform financial and other real
assets.
Research limitations/implications – Shipping is a strong growth industry with about 84 per cent of
global trade carried out by the international shipping industry. The problem is that many Islamic asset
management institutions and investors have essentially no exposure to Islamic investment in international
shipping.
Practical implications – However, shipping is a highly capital-intensive industry, and currently 75 per
cent of ship lending has been conducted by European banks and financed on a conventional basis. Postfinancial crisis, ship owners, ship lenders and shipyards have all been exposed to the impact of over-levered
balance sheets and debt finance. There is a demand for alternative sources of finance.
Social implications – By communicating risk and reward more effectively, retail and institutional
investors, as well as Islamic finance institutions, will realize that the social benefit of equity finance on the
basis of profit sharing is more efficient at allocating investible resources than debt finance at interest, thereby
increasing investment and economic growth.
Originality/value – The significance is that Islamic equity finance, rather than debt at the time-value of
money, should enhance the development of international shipping |
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