Passion Investments

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The Financial Times takes a look at passion investments and luxury purchases for high net worth individuals.  The article looks forward to a March 6th release date of the Knights Frank Passion Index, stating "key collecting areas of fine art, watches, wine, jewellery, and classic cars, among others (and in order of popularity), marking an interesting counterpoint to fluctuations in global real estate markets, and yielding occasionally surprising results."

These are the types of reports we can use as individual appraisers in promoting our own services to HNWI, and appraisal organization can use to promote the importance of appraisals with the HNWI collecting community.

I will try to post on the report when it is available.

The FT reports

Unsurprisingly, fine art remains the most popular “investment of passion”, with iconic artworks such as Edvard Munch’s “The Scream” achieving US$107m (before the addition of the buyer’s premium) at Sotheby’s in May last year. As shown by the stratospheric prices reached in the major auction houses of London, New York and Hong Kong, modern and postwar masters – including Picasso, Giacometti, Modigliani, Rothko and Bacon – top the list, with demand for works by major artists filtering down throughout the art market. Jonathan Dodd, of Waterhouse & Dodd galleries in New York and London, says: “We have gone from being a gallery dealing in important and interesting works by many little-known artists, to dealing in major works by major artists. This has been a conscious decision to reflect prevailing market conditions – indeed global conditions, where the separation between the very rich and the rest seems to be at its greatest since the Victorian era. The very rich in those days put their money into art, and they are doing so again now, overheating the areas of the market that interest them – that is, the best of everything – and leaving the rest stone-cold.”

Although spending on fine art showed the greatest increase last year, the sector did not, at 199 per cent growth over 10 years to the third quarter of 2012, show the highest return on investment. That distinction goes to classic cars. With an astonishing growth of 395 per cent (according to the HAGI Classic Car Index), that sector has outperformed any other investment, with the single exception of gold (434 per cent). Furthermore, the return on coins (248 per cent), stamps (216 per cent) and fine wines (166 per cent) also shows that the best returns do not necessarily derive from the most popular investments, indicating that “passion” and prestige may be overriding purely financial considerations. Watches, the second most popular investment of passion, for instance (Hurun indicates that the average Chinese HNW male owns six luxury timepieces) appreciated by a mere 76 per cent over the period.

Statistics can, of course, easily be skewed by anomalies. In the case of classic cars, we may be seeing an echo of the 1970s, when fuel prices rocketed and high-performance cars were being sold off cheaply, affording, for example, the late Fabrizio Violati the opportunity to buy his collection of vintage Ferraris that form the basis of the Maranello Rosso museum in San Marino.

Source: The Financial Times