THE FRUITS OF PASSION One of the most fascinating areas of luxury spending is on collectable items, such as art and classic cars, which some buyers also consider to be investments. In the wake of the credit crunch, the media’s focus on these “investments of passion” as an alternative to more mainstream asset classes like equities has grown significantly. Reflecting this burgeoning interest, we launched the Knight Frank Luxury Investment Index (KFLII) in last year’s Wealth Report to track the performance of selected investments of passion. Consisting of nine asset classes, the 175% capital growth recorded by our weighted index to the end of Q3 2012 outperformed the majority of more mainstream asset classes over a tenyear period. Several classes came close to, or even exceeded, gold’s stratospheric +400% increase. One year later and KFLII had grown by a further 8%, while gold had lost a quarter of its value. Best-in-class examples continue to set auction records across most of KFLII’s categories (see panel below), but there is a wide variation across the index. Classic cars once again posted the largest gains, with values up 28% over twelve months, according to the Historic Automobile Group’s (HAGI) Top index, which tracks “exceptional historic automobiles.”
What’s more, HAGI’s Dietrich Hatlapa says it isn’t just the most famous marques that have performed strongly. “One of the biggest movers in our index last year was Japan’s first supercar, a Toyota 2000 GT from the late 1960s.” Outside the world of supercars, there is also growing interest from collectors in Group B rally cars like early model Audi Quattros, especially those with a race pedigree, Mr. Hatlapa points out. Although price growth might not be in the Ferrari league, the outlook is positive too for the wider classic car market. Specialist insurer Hagerty estimates that there are over 850,000 pre-1972 vehicles in the UK that have hit the bottom of their depreciation cycle. Despite being one of the least widely collected investments of passion, according to the Attitudes Survey, coins continue to perform strongly, up 10% year on year. Ian Goldbart, managing director of leading auctioneer Baldwins, says the market is attracting investors. “Because it is not actually a very big market, a small amount of extra money can make a large difference. You only need a few keen bidders at an auction and you are likely to see new world records being set.” The coin market has probably also been undervalued in some parts of
the world, compared with other asset classes. “There has always been strong demand for large denomination coins in the US,” says Mr. Goldbart, “but we are seeing growing interest in China, where the market has boomed over the past five years, and also India and Russia.” Globally, there is also a very strong market for gold Roman coins. “They are pieces of art in their own right,” he says. Rare stamp values are also rising, particularly in China, India and key Commonwealth markets. The Stanley Gibbons China 200 rare stamp index rose 36% between 2011 and 2012. The British market continues to grow, albeit more slowly, says Keith Heddle, investment director at Stanley Gibbons. “There was a huge amount of trading in 2011 and 2012; following such a bull run it’s not surprising that things have slowed down slightly.” Investment demand remains strong, particularly from Hong Kong and Singaporean-based investors, but also from Australia, where investors can add collectables to their pensions via SelfManaged Super Funds (SMSFs). There is also increased interest from potential collectors in Russia, says Mr. Heddle. Despite falling gold prices, the last twelve months have been remarkably strong for many facets of the jewelery
RECORD-BREAKERS Collectables continued to set new benchmark prices at auction in 2013
A 1794 US silver dollar set a record price for a coin when it fetched US$10M at auction in New York. The so-called “Flowing Hair Silver Dollar” is believed to be the first coin struck by the US Mint and was described by auctioneer David Bowers as “a piece of history.” 228
DOUGLAS ELLIMAN
An ultra-rare 1967 Ferrari 275 GTB/4 NART Spider set a new record for a road-going car when it sold for US$27.5M at the Monterey sales in August. The pristine vehicle, which had been owned by the same family for 45 years, was one of just ten built by Ferrari in 1967 and 1968.
The “Pink Star,” a 59.6-carat oval cut pink diamond, sold for US$83M at Sotheby’s Geneva in November—a new auction record for any gemstone or jewel. The flawless gem, mined by De Beers in Africa in 1999, took twenty months to cut and measures 2.69cm by 2.06cm.