SOFT ASSETS

PHOTO CHRISTIE’S IMAGES

According to the Knight Frank Luxury Investment Index (KFLII), by the end of Q2 2017, passion assets had outperformed other asset classes like gold, with wine, art, coins and classic cars reigning as some of the more popular investment-grade collectibles.

For the first time since 2010, the ultra rich have spent more investing in art than wine, and The Wealth Report lists art as the top investment choice for the wealthy last year. After Christie’s record-shattering US$450.31 million (S$591 million) sale of Leonardo Da Vinci’s Salvator Mundi last November, some are expecting to see a revival of interest in Old Masters and more treasures coming out of the woodwork. However, the contemporary art market is showing promise, with wealthy buyers from the East snapping up Western art. Last year, Jean-Michel Basquiat’s Untitled (1982) became the most expensive work by a US artist when it sold for US$110.5 million at auction to Japanese entrepreneur Yusaku Maezawa.

Art watchers also predict interest in works by female artists with the rise of female empowerment, encapsulated by campaigns like the #metoo movement. German artist Katharina Grosse, whose abstract works are increasingly sought after, might be worth looking into.

Art aside, those working on expanding their cellars have more reason to do so. In 2016, the top luxury investment choice was wine, which saw 21 per cent growth. It places a commendable second in 2017 with an 11 per cent uptick. Asian buyers with a preference for limited varieties from regions like Burgundy make up the bulk of wine investors, according to The Wealth Report.

It’s no surprise that Chinese buyers emerged as the top luxury investors in 2017. Hong Kong jeweller Chow Tai Fook paid US$71.2 million for The Pink Star, a 59.6 carat vivid pink diamond. When the hammer fell at the Sotheby’s auction, it set the world record for the top auction price for any gem.

CLASSIC CARS

While the exact classification of classic cars varies from country to country, the term is broadly used to refer to vehicles built before Jan 1, 1977. According to the KFLII, this asset class, with Porsche and Ferrari leading the way, has seen nearly 500 per cent returns over the past decade, outpacing art and wine by more than 100 per cent. Last year, the most expensive car sold at public auction was a 1956 Aston Martin DBR1, which sold for US$22,550,000 at the RM Sotheby’s Monterey 2017 sale. This year, a 1965 Ferrari 275 GTB Speciale fetched US$8,085,000 at public auction.

Among passion assets, classic cars require the most tender loving care. “Cars need to be driven regularly in order to be technically sound and maintain their optimal market value,” says Dietrich Hatlapa, founder of Historic Automobile Group International, an independent London-based research organisation renowned for its classic car market indices. “Mechanics and restorers who work on the car need to be experts in that particular field. If not, they can potentially destroy value by handling the car the wrong way.” 

While the appeal of classic marques remains strong in the US and Europe, Hatlapa notes that “many Asian owners like newer cars, super cars or rare performance cars (such as supercars like the 1995 McLaren F1 and LM 2013 Lamborghini Veneno, which are produced in extremely small quantities), which can be instantly collectible”. As to which models fare best financially, Hatlapa recommends European marques with “a strong racing or sports car heritage”. Rarity (cars made in numbers smaller than 1,000) directly correlates with value, as does condition. “Full historic documentation of any example and all original accessories for the car are important. Cars in preserved original condition can fetch even higher prices than fully restored examples,” says Hatlapa.

The 1956 Aston Martin DBR1 was the most expensive British car sold at public auction last year.

COLOURED DIAMONDS

Worth over US$100 billion, the gemstone industry offers abundant opportunities for affluent investors. Diamonds are an attractive investment option as they don’t take up a lot of space, are portable, durable and inflation proof. According to Quek Chin Yeow, Sotheby’s deputy chairman for Asia, and chairman of International Jewellery, Asia, “the global demand for diamonds shows no signs of abating”. Diamond prices have been “steadily growing for decades” and the gems are “recognised for their relatively high rate of liquidity”.

Quek also attests to seeing “healthy returns for white and coloured diamonds”. The Pink Star, a 59.6 carat pink diamond, sold for a record US$71.2 million at Sotheby’s Hong Kong last year. In 2016, a rare and internally flawless 10.10 carat blue diamond (De Beers Millennium Jewel 4) sold for HK$248.28 million (S$41.6 million) at Sotheby’s Hong Kong. The Blue Moon of Josephine, a 12.03 carat cushion-shaped fancy vivid blue diamond, was sold to an Asian collector at Sotheby’s Geneva for US$48.47 million in 2015.

While attractive, investing in coloured diamonds requires a much higher level of entry. “The per carat record prices of both blue and pink diamonds, for example, have gone up exponentially in the past fi ve years, with the blue standing at over US$4 million per carat, and the pink at over US$2 million per carat, both achieved at Sotheby’s,” shares Quek.

The Pink Star, a 59.6 carat pink diamond, was acquired by Hong Kong jeweller Chow Tai Fook for US$71.2 million.

PHOTO SOTHEBY’S

CHINESE COINS

Coin collecting probably begins more as a hobby than an investment. But the right collection could garner significant returns in time. “The world of coins comprises an enormous field and it’s important to concentrate on specific periods, countries, categories and denominations,” advises Johann Leibbrandt, senior valuer, Spain Bonhams.

It is also important to note the difference between numismatic coins and regular bullion coins. Bullion coins are typically made from highgrade precious metals like gold or silver and are purchased primarily as an investment as their value is based on their gold or silver bullion content. However, “numismatic coins are essentially rare or valuable coins with more external value above that of the precious metal”, explains Leibbrandt. “If you’re going to buy rare gold or silver coins for their numismatic value, it’s important to consider quality and rarity. You may want to hold them for at least 10 years before selling.” 

However, there are instances when one doesn’t always have to hold on that long to see returns, with the right collection. New growing economies like China see huge differences in prices in very short periods of time, says Leibbrandt. “We see more and more Asian investors looking into coins for big returns. In fact, Chinese coins have gone up very much in terms of value and that’s simply because there are more and more wealthy Chinese people. However, the coin industry in Asia still has a long road to maturity compared with the US market, given the fact that collecting started only in the last 20 to 30 years.”

To start a collection, Leibbrandt suggests looking at old denominations, in particular classical Chinese coins which are “on fire”. The Zhou dynasty (c. 1056BC-256BC), which reigned for 700 years, was the first to mint coins. Those bronze and copper coins are China’s earliest forms of currency. Modern panda-era issues such as a series of panda-themed silver and gold bullion coins issued by China, are also gaining steam, says Leibbrandt.

Less is also more. “Go for quality rather than quantity,” says Leibbrandt. “Even if it’s just one or two coins. It would be far easier this way to defend the value of your investment and to make a good profi t out of it afterwards.”

China’s national animal graces this 2006 set of panda bullion gold coins.

BEYOND BURGUNDIES

According to Wine Searcher, the top 10 wines of Burgundy appreciated in value by almost 17 per cent last year. While Burgundies are still the go-to wines for investors and continue to be a major area of growth, William Kelley, a reviewer for The Wine Advocate covering Burgundy, California Central Coast and Washington State, predicts a growing interest in lesser-known producers who also make high-quality wines. “Only six or seven years ago, it was possible to buy the Cote-Rotie from Domaine Gentaz-Dervieux for US$30 to US$40. Now, a bottle is typically US$3,000. But only the astute saw that coming.”

Another notable arena for growth are wines from the best producers of Barolo and Barbaresco in Northern Italy, which have been rocketing in value for a year or two, says Kelley. He also collects wines from producers who no longer make wine due to retirement or demise, for instance the wines of Henri Jayer and Jacky Truchot, as these generate extremely high demand.

Despite the promising trajectory in the wine world, he cautions: “Valuable and collectible wines are increasingly priced at market value when they leave the producers, so it’s not as easy to make large and guaranteed profits as it was a few years ago.”

Wines from the private cellar of the late Burgundian producer Henri Jayer.