Everyone"s heard about investing in wine, art and cars, but what about all those alternative assets that might fly under most investors" radars?
Whether it"s a vintage bottle of wine or a classic Aston Martin once driven by Sean Connery, alternative asset classes have always attracted investors. Not only do they provide diversification from stock market investments, but they can also have an emotional and aspirational pull.
Often referred to as "passion investments", they can be as much about owning a tangible piece of history as making money - but that"s not to say they can"t provide a tidy return.
The Coutts index, "Objects of Desire", captures the price return of 15 passion assets across two broad categories - trophy property and alternative investments. According to the latest statistics, over a seven-and-a-half-year period from 2005, the index rose by 82 per cent - the MSCI All Country Equity Index only rose by 53 per cent over the same period.
Of all the alternative investments Coutts examined for their index, classic cars returned the most since 2005, rising by 257 per cent, with classic watches (176 per cent), Chinese works of art (163 per cent) and jewels (146 per cent) all doing exceptionally well too.
Clearly there"s good reason to invest, and, as Keith Heddle, Managing Director, Investment at Stanley Gibbons, explains, the appetite for alternative assets has increased since the global financial crisis. “Without doubt alternative investments have attracted far more interest since 2008/09. Back then people looked at asset allocation differently. They thought they were diversified, but weren"t, and they saw all stock markets in the world go down at the same time.”
Heddle insists there"s been a major shift towards alternative assets, as their low correlation to equity markets provides true diversity to a broad investment portfolio. But while most of the attention within alternative assets tends to focus on wine, classic cars and fine art, what are the "new alternatives" gaining popularity? And how do you access them?
Whisky
Like wine, rare and highly sought after whisky can prove an attractive investment at auction - as long as you understand what you"re buying and have the discipline to leave alone rather than take the cork out and sample a wee dram.
In 2014, the 1,000 best-performing investment-grade bottles of whisky increased 15.82 per cent in value, according to the Apex 1000 index, compiled by Rare Whisky 101, a company that tracks whisky investment performance.
Andy Simpson, Co-founder of Rare Whisky 101, is confident that growth should continue on a similar trajectory. “I"d expect around 15 per cent a year to be seen moving forward, certainly for the next two to three years, and with peaks significantly above that for the right bottles,” he says.
But what are the right bottles and which are the distilleries of interest? Rare Whisky 101"s Whisky Investors index will show you the best-performing distilleries, while the Rare Whisky Icon 100 index will show you which bottles are currently top of the pops.
Like most other alternative investments, rarity and limited editions can add value. So if a distillery"s closed, the whisky may be highly prized and therefore worth a great deal. Port Ellen shut its doors in the early 1980s and the distillery"s most sought-after whisky can now fetch around £2,200 a bottle.
Limited-edition prints
Owning an original painting by a great artist might not always be feasible - either due to financial constraints or just lack of works available. Limited-edition prints, however, offer good opportunities to invest in admired works. “For most people, an original Picasso is unaffordable, but the artist was known for running off 200 signed prints which are now highly sought after and cost thousands rather than millions,” says Heddle.
The market has developed hugely in recent years, but investors need to be aware that not all art prints will increase in value. According to British art gallery Red Rag, an artist signature on a print might have some value, but the print itself may be of poor quality. In some instances, artists have no involvement in the technical processes of printmaking other than simply signing the limited-edition print.
The price of a print often depends on the level to which the artist was involved in the print production. An "original print", where an artist has worked on it themselves (say, drawing an image onto a metal printing plate with a stylus) will often have a longer lasting value than a digital reproduction.
There are a plethora of dealers selling limited-edition prints online, so it pays to do your research and find a reputable source.
First-edition books
First-edition books by certain authors are increasingly sought after, and therefore attractive to investors. The first-edition market is very strong and it"s not necessarily the age of the book but the rarity that drives value.
“With US authors like F Scott Fitzgerald and John Steinbeck, the initial print runs were very small and it"s even rarer to find any of these first editions autographed, which is another factor that drives the price upwards,” says Heddle. Original, illustrated dust jackets can also make a huge difference to value as many have been thrown away over the years.
Manuscripts and documents also attract investors, and once again rarity as well as context tend to drive values. The PFC40 First Edition Books index might well be your starting point here. It measures the price performance of the world"s 40 most popular first editions, and was up 140.3 per cent between 2004 and 2014.
Autographs
The supply-and-demand side of the autograph market is similar to other collectibles - serious collectors and investors battle it out with museums and institutions for the most sought-after names.
According to Fraser Autographs, a memorabilia and autograph dealer, content, condition and authenticity of an item are vitally important and will affect the value. Manuscripts are often referenced by previous sales or ownership, so it pays to keep all paperwork if you want to cash in further down the line.
You need to be aware that valuations will be affected by fashion or circumstance. A long-dead artist or author suddenly catapulted back into the limelight might boost your investment, as with anyone who hits the headlines.
Autographs of those who are no longer with us tend to be valued higher too. Fraser Autographs is currently selling a signed photograph of Marilyn Monroe for £17,500, one of James Dean for £9,500, and a signed photo of Ernest Hemingway posing with famous bullfighters in Madrid for £5,500.
As Heddle confirms, autographs of stars of a bygone era can often command high prices. “You might think that huge stars of early film provided enormous quantities of autographs but the reality is that the likes of Charlie Chaplin didn"t do anywhere near the same level of red-carpet promotion as latter-day film stars. There weren"t the same marketing teams in operations organising signing sessions, so these autographs are valuable.”
For those looking to invest, The Frasers 100 Autograph Price index provides the definitive measure of overall market performance.
Pop memorabilia
In a world seemingly obsessed with celebrity, items owned by iconic stars can fetch enormous sums. For instance the white diamantÉ glove worn by Michael Jackson was sold at auction in 2009 for just over a quarter of a million pounds. While buying at auction is one option for investors, there are more structured ways to invest in pop memorabilia.
There are guitar funds that include instruments previously owned and played by, say, Jimi Hendrix or Jimmy Page. The Guitar Fund, managed by Anchorage Capital Investment, invests in rare vintage guitars as well as those with memorabilia status. The fund"s objective is to outperform the 42 Guitar index, which has demonstrated an average annual return of over 22 per cent in the last 19 years. Specialist asset management companies such as Marquee Capital run investment portfolios of celebrity memorabilia.
Whether investors have an interest in whisky, books or Hendrix" guitars, there"s usually an option to buy directly at auction or invest via a fund. Funds continue to launch - for instance Stanley Gibbons is about to unveil its first ever GB Rare Stamps fund, and there are niche funds in other areas.
But as Mohammad Kamal Syed, Head of Strategic Solutions at Coutts, says, the motivation isn"t always returns. “While many alternatives have provided spectacular returns, there"s more to investing in these assets than price appreciation. For many people, profit is furthest from their mind. Owners can bond with like-minded people in an elite network. The idea of someone paying $50 million for an uncomfortable old car, with windows that don"t work and a noisy engine, seems illogical. In many ways it is. But the happiness such a car can bring is immeasurable.”
This feature was published in the May/June issue of BL Magazine, which can be found here:
http://www.blglobal.co.uk/Magazines.aspx