Ship-operating vs. Ship-owning

Ship-operating and ship-owning offer distinct pathways for investors to gain exposure to the shipping sector.

Ship-operating model | thrives on an asset-light strategy · prioritizes agility & capitalizing on market dislocations · characterized by chartering in vessels from ship owners & deploying these assets in cargo voyages, often leveraging derivative contracts like forward freight agreements (FFAs) to hedge risks

Ship-owning model | inherently asset-heavy · requires significant capital investment in ships · charters out vessels to operators or cargo interests · profitability hinges on asset appreciation, capable technical management of the vessels, & ability to secure favorable charter rates

Best-in-class shipowner Golden Ocean Group is an investor in best-in-class ship operator SwissMarine. Reviewing their respective investment returns from 9/30/19 to 12/31/23--

- Golden Ocean stock price + dividends = 167% gain

- SwissMarine book value + dividends = 240% gain

(Source: analysis of Golden Ocean’s public filings)

Both Golden Ocean and SwissMarine profited in the dry bulk market, yet their returns demonstrate that a well-executed operating model can outperform the conventional ship-owning model. That said, the two approaches are not mutually exclusive as shown by Golden Ocean’s savvy investment in SwissMarine.