CLOCKWISE FROM ABOVE: Keith Richards’ Bentley S3 Continental ‘Flying Spur’ sold for over £700,000 through Bonhams at Goodwood Revival in 2015; Mercedes-Benz Type 190 SL
ASSET EXPECTATIONS
Are wine, paintings and fast cars too much of a gamble, asks John Redwood, Chief Global Strategist at Charles Stanley
Investing in wine, cars or paintings sounds like having lots more fun than buying a government bond or choosing a share fund. It gives you an interest. You can display it for your friends; enjoy the pleasures of a good painting every day by hanging it on your wall; you can drive a classic car for entertainment or sample your wine investment to make sure it still tastes good. There’s not much you can do with a government bond. Your friends will not be much impressed. Talking about a share fund has a bit more excitement, but it’s still important to avoid too much technical analysis or even too much detail about the companies in the portfolio. Most people have a low tolerance for financial jargon. The problem with so called alternative investments though is not their fun but their lack of practicality. Many of them are high maintenance. That classic car needs a garage. It might let you down in traffic, overheat, break down or otherwise embarrass you. Instead of making you lots of money it might present you with a whopping repair bill when it turned out all was not well beneath the bonnet. The fine painting on your wall needs insuring. You best keep it out of direct sunlight and organise the lighting, heating and moisture content of the atmosphere around its delicate constitution. If it’s valuable it would be better not to advertise you own it, for fear of becoming a burglar’s target. As the worth of most art rests on the reputation of the painter, you need to make sure that your picture has proof of provenance to show it is not fake or a copy. You can still lose out if your chosen artist ceases to be so much admired. At least you keep the wine below ground and out of sight. It will need a cellar, requires a low even temperature and limited light. It can go off if you keep it too long. Individual bottles may be corked. CONTINUED OVERLEAF »
© DAIMLER AG; © FERRARI S.P.A.; © BONHAMS
of investing in classic cars, as critics are quick to point out, is the bother and cost of having to garage, maintain and insure them yourself. You can avoid such issues by investing in a classic car fund. This not only enables you to invest in the asset class in a more liquid way, but it also offers diversification, since you are buying into a larger pool of assets rather than just one or two individual cars. All the same, you need to invest for the long-term in order to sidestep volatility and guarantee a decent return. The WMG Collectable Car Fund is the first and, so far, the only FCA-regulated, investable car fund. Its founder and chairman is Mehmet Dalman, a former banker who is currently chairman of luxury car dealers HR Owen and Cardiff City Football Club, while the portfolio manager, Richard Hawken, has an international motor racing licence as well as being a classic car collector since the mid-1990s. Between them they know a thing or two about the vehicles in which they invest on your behalf. The minimum investment they require is £100,000. Like a hedge fund, it levies a management fee of two per cent per
annum and a performance fee of 20 per cent provided it exceeds the hurdle of an eight per cent annual return For those wishing to invest smaller amounts, there is the Classic Car Fund launched by the Count of Custoza Family Office in Zurich in 2011. It is run by fund manager and classic car collector Filippo Pignatti Morano, who hosts the Classic Car Fund group on LinkedIn. The minimum investment is €10,000 and it offers what it calls soft lock periods of one or two years (its fee structure is similar to WMG). The fund has a four-year track record of five per cent net per annum. It even offers a unique approach described as ‘subscription in kind loan value’. This means you can ‘subscribe’ your own previously acquired classic car into the fund – they will value it at this point, obviously – and thereby enjoy the diversification of being in a larger pool of classic cars, with all maintenance costs paid for by the fund, but you get to keep the car in your own garage at home, using it as and when you like. Another option is the California-based Family Classic Cars Fund. The minimum investment is $10,000, for which you become a part-owner of all vehicles in the fund and a shareholder in the operating company that stores and maintains the vehicles. Because the fund is dollar-denominated, you will have to factor in exchange rate fluctuations as well. You should only become a classic car collector on the basis that you have a keen interest in the subject, that you are in it for the long haul, and that your acquisitions represent only a small percentage of your investment portfolio. But as long as you take a common-sense approach you can participate in some of the juiciest returns offered by any alternative investment class.
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