The return of uncertainty fuels demand for real assets

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‘Real’ assets are have become increasingly attractive through the early part of 2013 as investors have gone into a period of uncertainty following strong gains by a number of other asset classes over the previous year.

The fine wine market is unusual in that the majority of stock in existence is not held for resale but for eventual consumption. TWIF estimate that of a global stock of fine wine of around £6bn, only around £1bn – about 17% of the total – is held by funds or private individuals with a view to resale.

The remainder is held in collections or cellars for eventual consumption (although it may be sold if the price rises significantly). This helps provide stability to the wine market and protection from large speculative flows and rapid price movements.

High-end collections are another possible route to greater security and strong returns, encompassing anything from rare autographs to celebrity memorabilia, coins or stamps. Sellers describe a market in tangible assets, offering low correlation to stock markets, and supported by strong demand from emerging economies such as China and India.

Bristol, UK-based Paul Fraser Collectibles notes: “The items…are getting rarer by the day as their counterparts are lost, damaged or pass into museum collections.” He cites the sale in New York of renowned PIMCO fund manager Bill Gross’ 1847 and 1851-1856 issue stamps, the first sale from his collection. Presented in 375 lots, it is expected to realise between $1.5m and $2m.

Autographs hunted

Securitisation of such assets continues apace. The PFC40 autograph index details the 2000-2012 price performance of the most sought-after autographs, both celebrity and historical. The values within the index are for genuine, fully authenticated items, of museum grade quality.

Over the period 2000-2012, the average increase in the value of an autograph in the index was 383.3%, or an average compound increase of 14.03% per annum. The top performing autograph, up 1,310.3% in 12 years, was Beatle George Harrison, while Nelson Mandela’s is the world’s most valuable living signature, rising +391.7%.

Fraser acknowledges all concerns about authenticity, liquidity and valuation of collection-quality items. He cites the example of Napoleon’s engagement ring, which arrived at auction in Paris with an estimated $20,000 estimate. It eventually went for $1.2m. “The wealthy buyers outbidding each other in the last moments of the auction were not thinking about the ring’s investment potential,” he remarked. “

They wanted to own it for the pure enjoyment they would get from it. And when two or more bidders set their minds on owning a piece, prices can escalate quickly.

Classic cars are another asset which increasingly attracts serious investor interest. The World’s Greatest Collector Car Auctions at Scottsdale in generated nearly $109m in gross sales of rare, high-end collectible vehicles, according to the The Classic Car Fund.

A record number of cars were sold, with a 17% increase in sales versus 2012. The total sales figures from Artcurial Motorcars Retromobile Auction 2013 was the highest ever for a collector car auction staged in France, beating Artcurials own records set at the same event last year.

See: www.thewineinvestmentfund.com; www.paulfrasercollectibvles.com; www.etfsecurities.com