A recent wealth report published by the international property company Knight Frank pitches alternative assets or investments of passion against the more traditional investment portfolios and is a very interesting read. It charts performance over the last 10 years and is a very clear indicator that when people invest it is a combination of head and heart that motivates their decisions.
Knight Frank concentrated on HNWIs with £30million of disposable income and noticed that areas seen as relatively safe havens such as luxury properties in key locations had thrived. Driven to find secure locations for their assets has also favourably impacted on the 'investments of passion' particularly in the arenas of art, fine wines, classic cars and jewellery. These niche opportunities combine the pleasure of luxury spending together with collecting and investing.
The wealthy have always enjoyed collecting rare and important pieces, but with the rapid growth in emerging markets this pursuit has become even more widespread with China's Hurun Report citing that 64% of the country's millionaires are currently building collections. Luxury property developers, always quick to spot an opportunity, have even started to incorporate display cabinets for art and collectables into the architecture of the apartments. However, it seems that these "emotional assets" still seem to occupy a minimal part of a portfolio - on average 4% - and are as important in adding status and pleasure as they are to real investment.
When interviewed about the most collected passion investment all regions chose art as the number 1 and spending in this area has increased globally by 19%. The next luxury asset chosen was watches, in fact in watches are the most collected asset overall. In November 2012, an Asian collector bought a platinum chronograph Patek Philippe wristwatch once owned by Eric Clapton for $3.6m.
At a 10 year glance the outstanding performer has been the classic car industry with prices rising by +395%. Next in line are Coins and stamps that rose by +248% and +216%, respectively. Fine art (+199%), wine (+166%) and Jewellery (+140%) all continue to prove worthy of attention and Chinese ceramics (+85%) and watches (+76%) are worthy of a flutter.
Perhaps the best thing about this report is the reassurance that buying what you love really does pay dividends both in your bank account as well as in your home.