Optimization of Capital Distribution and Composition of a Shipping Company Fleet Through Evolutionary Algorithms

Abstract

The research examines the optimization of fleet management of a shipping company through control algorithms, as finding an algorithm that will reduce a marine company’s exposure to risk by diversifying its fleet composition is one way to make it dominant. The study focused on three companies that, in 2014, invested US$$1 billion in a fleet of tankers, using three different techniques to optimize their fleet composition: equal number of ships of all types, the established risk minimization model and the proposed Risky Asset Pricing maximization model. Seven years of data was used for the synthesis and 4 years of data was used for the evaluation. The research findings show that classic portfolio management through risk minimization is ineffective, as it appears to reduce performance below what is a random or evenly distributed fleet. Comparing the three methods, the superiority of the Risky Asset Pricing model is clear. This algorithm looks for solutions where the demand for ships is low but has enormous fluctuation potential and seeks to identify ships that are at high risk with great potential for price increases to maximize investor returns. The value of the research lies in the identification of methods to optimize capital distribution and composition of a shipping company fleet, which presents valuable insights for the benefit of scholars and maritime companies. Moreover, and contrary to extant works that focus on Markowitz’s theory, this article instead describes how evolutionary algorithms can be used to optimize fleet management.