Rising charter rates are helping the shipping industry, and the hedge funds that are invested in them, reap big profits amid the international supply chain logjam.
Hedge funds and lenders are "flipping" container ships by signing multiyear contracts to charter them out of high rates. They're equity investments in the container-shipping companies are also paying off as stock prices climb, according to a Wall Street Journal report.
Record-setting rates haven't dampened demand for goods from big retailers like Amazon (AMZN) - Get Amazon.com, Inc. Report and Walmart (WMT) - Get Walmart Inc. Report, both of which have outlined plans to combat any shipping disruptions during the holiday season by chartering ships.
Shipping rates are notoriously volatile, and the sudden increase in rates has been a boon for the industry.
New York-based hedge fund Mangrove Partners, which manages a $1.3 billion fund, saw a 70% increase for the year through October. About half of those gains came from shipping investments, the Journal reported.
Mangrove had a loss of 38% last year.
Danish shipping giant A.P. Moller-Maersk made a profit of $5.44 billion in the third quarter on revenue of $16.61 billion. That profit is larger than Amazon and UPS (UPS) - Get United Parcel Service, Inc. Class B Report earnings combined for the most recent quarter.
Retailers are currently gearing up for a holiday shopping season that officially starts next week on Black Friday, and which they are hoping will fuel a boon for the industry amid high inflation rates.
Amazon says it has increased ports of entry across its network by 50% in order to combat supply chain issues and has double its container processing capacity.