With current economic shocks and market volatility and unpredictability investors may be looking to diversify their investment portfolio to include assets which are more durable in difficult economic conditions. Passion assets, essentially any collectible that a person takes pleasure in owning, are one such diversification. As well as their intrinsic emotional value and tangibility they tend to be uncorrelated to other markets and there is potential for solid returns. Doing your own research to determine authenticity and provenance is essential as collectibles are vulnerable to fraud or forgery.
Here are a few to investigate further:
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Wine consumption is up during lockdown. Majestic, Berry Bros. & Rudd and Laithwaites have all reported a bounce.
However, it’s not just about consumption, wine is a key investment area. Fine wine prices are affected by supply and demand and have negligible correlation to global stock prices; as an investment fine wines are an asset which have been relatively unaffected by the coronavirus.
The UK’s main trading platform for fine wine Liv-ex reports that the market has remained stable during the pandemic. Whilst the S&P 500 – the index that tracks the stocks of the 500 largest-cap US companies – lost 34% between its all-time high on February 19th 2020 and March 23rd , the Liv-ex Fine Wine 1000 index — which measures the price performance of the 1,000 most traded wines — only fell 1.35% in March 2020 (Liv-ex reports monthly). Whilst the wine market posted a disappointing 1% rise in 2019, the longer-term picture is far more pleasing with a 120% rise recorded over the past decade.[1]
BI, the fine wine and spirits merchant, reported a 32% rise in sales of rare wines and spirits during April 2020 and an increased focus on wine as an alternative asset class.
Handbags
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On March 4th, Knight Frank’s The Wealth Report 2020 was released. It revealed that ‘collectable handbags’ had topped its Luxury Investment Index (KFLII) having
risen in value by 13% in a year to take the crown from rare whisky (up 5%). Collectable handbags have appreciated 108% in the last 10 years. The most expensive bag ever sold at auction remains the Hermès Himalaya Birkin Bag. Under Christie’s hammer in Hong Kong, the crocodile skin bag with ‘18K white gold & diamond hardware’ fetched HK$2.9m (£293,000).
Popular culture collectibles – board games
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Board games have had somewhat of a renaissance in the last few years. In part this is due to nostalgia, but paradoxically the rise of the digital versions of games is causing an upsurge in their analogue predecessors. In 2018 Reportlinker research revealed that the global board games market size is expected to reach values of over $12 billion by 2023. Lockdown has also increased interest in board games. GoogleTrends highlights a recent spike in searches and Sarah McClure, who runs Vintage Playtime – a website selling old board games – said that the first four weeks of lockdown were unbelievable: “It was busier than Christmas and we’ve not had a busier March or April since we started trading eight years ago.” She also notes that people are increasingly viewing games as an investment.
As with other investments, demand plus scarcity equate to increased value. In 2017 an original 1959 copy of Diplomacy was listed on eBay. It had belonged to the game’s inventor so had good provenance and fetched $5,234. Not many board games have this sort of provenance, but good condition, rare or coveted board games can command decent amounts of money. Board games also appreciate in value relatively quickly compared to other alternative investments.
Art
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Leonardo da Vinci’s Salvator Mundi sold for $450.3 million in November 2017 at Christie’s New York. It had previously sold for just £45 at a Sotheby’s London auction in 1958. It was then believed to be the work of an artist in the studio of da Vinci as opposed to the main man himself. This is the stuff of art investment dreams and not a common occurrence. However, art investing can still pay dividends. The art market registered a rise of around 5% in 2019 according to the Knight Frank Luxury Investment Index. Artprice also calculated that blue-chip artwork has outperformed the S&P 500 by in excess of 180% (with dividend reinvestment) since 2000 to average 8.9% per year.
This is an asset that isn’t correlated to other markets and is no longer completely confined to ultra-high net worth individuals. Masterworks is a company that allows people to invest in shares of the art, which it purchases. This fractional ownership makes this market far more accessible and affordable for investors.
MyArtBroker.com, a company that connects contemporary art sellers and art buyers, reported a 300% increase in enquiries from investors during March 2020 as stock markets were in crash mode. Ian Syer, co-founder of the company says: “Pre-Coronavirus, some of our largest clients were typically ordinary working people who financed art portfolios through leveraging their property and re-mortgaging, or taking advantage of cheap finance. Now, due to the Coronavirus crisis we have far more professional private investors looking to contemporary art as a potential safe haven asset.”
[1] Knight Frank Luxury Investment Index