As if there was ever any doubt, the Knight Frank Luxury Investment Index (KFLII) has continued to grow in value in the 12 months to the end of second quarter 2013, posting a 7% increase.
The index, launched this year as part of Knight Frank’s The Wealth Report 2013, tracks the value of nine collectible asset classes over the past 10 years.
You may be taken aback by my confidence in stating that there was never any doubt that the index would rise, but the simple fact is, collectibles have been on the up for years.
While the UK’s FTSE 100 index may have performed slightly better with a 12% increase, the 7% rise seen by the KFLII stands in stark contrast to the 23% fall in gold prices since June 2012.
Moreover, the FTSE 100 only stands triumphant in the short-term, with the KFLII consistently outperforming it over a 10-year period. The FTSE is up 55%, compared to the KFLII’s comparatively huge 174%.
As Knight Frank states: “KFLII clearly illustrates the growing popularity among HNWIs for investing in tangible objects that can also be enjoyed or treasured by their owners.”
Classic cars to slow down before crash
You may remember that I reported on the Knight Frank Wealth Report when it was launched back in April, and the story largely remains the same: classic cars have seen the greatest successes, rising in value by 21% over the last six months and an outstanding 430% over 10 years.
Taking its figures from the respected HAGI Top Index, which reached a record high in July, the KFLII also shows that classic cars have shown the strongest growth over every different time period.
Yet, while the market is strong, recent figures are quite simply the result of a bubble in classic car buying, which was triggered by the sale of Juan Manuel Fangio’s Mercedes W196 setting a new world record for any classic car at $29.6m at Bonhams in July.
Even HAGI doesn’t believe that the growth rates are sustainable long-term, stating that the index “will likely normalize as the year progresses”.
Yet this normalization looks to be already underway, with RM Auctions seeing lackluster results at its London auction in September. Following the event, expert Dave Kinney of USAppraisal.com told Bloomberg:
“After the excitement of record auctions in the summer, the estimates got ahead of themselves. This is a good sign that people aren't prepared to pay crazy prices for everything."
Art and wine a heady mix
If, like me, you like your investments to progress more steadily, take a look at these volatility figures:
As rightly stated in the report, “The art market remains volatile. Although certain artists retain their cachet and are achieving record results at auction, buyers are generally bidding more cautiously and selectively.”
Wine is also notoriously volatile, with a buying frenzy in 2011 leading to a sharp correction in 2012. The market appears to be reaching stability, but it will be a long time yet before investor confidence returns.
Yet look at rare stamps and coins. These mainstays of the collecting world are a perfect example of the kind of asset with which I would (and do) place my money.
For example, since 1995, the GB30 Rarities Index of British rare stamps has grown in value by 10.3% a year.
Likewise, coins increased by a relatively modest yet still attractive 9% over the past 12 months, with a 225% increase over the past 10 years.
The reason for this consistency? Not only are these two of the largest hobbies in collecting, meaning that they are bolstered by legions of dedicated collectors around the world, ensuring liquidity and popularity, but they are also backed by the most powerful force in today’s collecting market.
Enter the dragon
At least a third of the world’s 60 million stamp collectors are now in China, and the country (including Hong Kong) has become something of a centre for stamp sales, with at least six auction houses in Hong Kong and four major houses on the mainland regularly selling.
Now I know Stanley Gibbons better than most, I used to own the company, they now state that Chinese buyers now make up 5% of the firm’s investments by volume, but by value, they total 18% - put simply, Chinese buyers spend a whole lot more.
If you have been following my articles for NuWire Investor, you’ll know that the Chinese collecting market was subject to a major correction in 2012.
We’ve seen from the classic cars market that booming prices can’t be sustained forever, yet the Chinese market has remained resilient and is back on its feet already, with China Guardian – the country’s leading auction house – witnessing a 23.6% rise in value during its spring 2013 auctions compared with the same period in 2012.
A forgotten favorite
But there is another asset class that is being consistently overlooked. Like stamp and coin collecting, it is one of the oldest, most established and widely collected of all categories, yet we seem to pay it little mind.
The PFC40 Autograph Index, which tracks the performance of 40 of the most sought-after autographs, is up by an average of 14% pa since 2000.
An autograph doesn’t just mean a simple signature in an album either. It can be a signed photograph, autographed letter or almost anything a famous name has put their hand to.
With today’s celebrity culture at an all-time high and Asian countries becoming more and more exposed to western influences, it’s hard to image that the PFC40 Autograph Index is going to decline anytime soon.
We can be equally sure that, with autographs rarely attracting headline-grabbing sales like classic cars, the asset class will remain free from bubble markets and inflated prices. Get on board now, join the market for autographs as it becomes another booming sector in the thriving world of collecting.
See our autographs for sale for the perfect start to your portfolio.