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ANALYSIS

Passion investments soar on super-rich's emotions

London, January 11, 2014

Passion investments has returned 77 per cent (local currency terms) since 2005, outperforming shares, according to the latest report on passion investments by Coutts, the wealth division of Royal Bank of Scotland Group.

The first edition of 'The Coutts Index: Objects of Desire' released last week aims to provide the global benchmark for monitoring the performance of passion assets.

The Index, developed in conjunction with Fathom Consulting, captures the price return in local currency (net of the holding costs) of 15 passion assets across two broad categories: trophy property and alternative investments. Alternative investments can be further broken down into fine art, collectibles and precious items.

Of all the alternative investments Coutts examined for the Index, classic cars have returned the most since 2005, rising by 257 per cent, outpacing all other investments by more than 80 percentage points over the seven and-a-half-year timeframe. Classic watches have also proved they can stand the test of time, rising by 176 per cent from 2005 to 30 June 2013.

Jewels returned 146 per cent in comparison, while the standout performer in the fine art space is the traditional Chinese works of arts sector, which rose by 163 per cent between 2005 and 30 June 2013.

Over the past seven and a half years, the Coutts Index, based in US$ terms, has risen by 82 per cent – over the same period, the MSCI All Country Equity Index has risen by 53 per cent, based in US$ terms.

The Coutts Index incorporates a real estate component supplied by Savills World Research. Trophy property comprises ‘billionaire’ residential properties in the ten prime global city locations and ‘leisure’ properties in the world’s most desirable leisure destinations associated with these cities.

Both measures lost value in the run-up to the global recession, but billionaire property values have risen strongly since, rising 100 per cent from 2005 to 30 June 2013.

Mohammad Kamal Syed, the head of strategic solutions at Coutts, said: “The Coutts Index has been created to measure passion assets, or objects or desire, in terms of performance, cost of storage and currency. But while many alternatives have provided spectacular returns, there is more to investing in these assets than price appreciation. For many people, profit is furthest from their mind."

He pointed out that for many ultra-high-net-worth individuals, it is less about investing and more about purchasing – purchasing assets driven by their emotions.

"The benefit is more than just profit. Owners can bond with like-minded people in an elite network, with assets offering escapism and a chance to re-enact history. Indeed, there is one thing that the Coutts Index, for all its robustness, can’t measure – and that is happiness. The idea of someone paying $50m 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,” remarked Kamal Syed.

Coutts commissioned articles and interviewed experts for its first edition of the Coutts Index. They included Stanley Gibbons, the world’s leading stamp dealer, Berry Bros. & Rudd, and the auction houses Sotheby's and Christie's.

Quentin Willson, broadcaster and classic car specialist, looked under the bonnet of the classic car market. He wrote: “If you had bought a 1970s Ferrari Daytona for £50,000 in 2003, it would be worth £250,000 today. A 1960s Aston Martin DB5 bought for £60,000 a decade ago would now command £350,000.”

“The question is whether the classic car market has peaked. I’ve been wondering whether the bubble will burst ever since prices started to rise in 2009. But they have kept on rising and were up 27 per cent in the first half of 2013.”

Nick Foulkes, author, historian and watch enthusiast, revealed why he has been fascinated with watches since he was a child. He wrote: “I can still remember writing an article in the 1980s, saying that the price of an old ‘Paul Newman’ Rolex Daytona was about to overtake the price of a new one. Now you will be lucky to find one for under £70,000.”

“But not all watches will burn a hole in your pocket. Rolex recently launched some particularly attractive Day-Date models with brightly coloured dials. These recalled the original ‘Stella’ dialled Rolexes and are now creeping up in value, but these Day-Date models can still be purchased for four figures. And I still think that vintage Cartier watches are hugely undervalued,” he added.-TradeArabia News Service




Tags: Jewellery | HNWIs | Coutts |

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