The global financial crash of 2008 was a stark reminder to investors that stocks and shares are volatile investment methods. While it is easy to appreciate the gains in times of buoyancy, there is now an increasing trend to make safer alternative investments like that of art to diversify investment portfolios and safeguard against another dramatic financial collapse. The start of the new decade is undoubtedly a time of political uncertainty in the UK, with the country reeling from a December general election and the chaos of Brexit. With this in mind, savvy investors are looking to alternative investments as a means of shielding their investment portfolio from the uncertainty of political unrest. As the end of 2019 is now upon us, here is our guide on considered alternative investments for the new decade.
#1 Art as an alternative investment
It should come as no surprise that we value fine art not just in aesthetic terms but as a tool for investment success. Fine art succeeds where traditional investments don’t as it holds very little correlation with the stock market, thereby navigating the wild fluctuations of stocks and bonds with little impact.
Art is already a thriving investment market, with £1.35 trillion invested in art and collectable wealth in 2018 according to Deloitte Art and Finance Report. The 2019 report found a strong consensus amongst 86% of wealth managers, art collectors and art professionals that art should be included in any wealth management service, the highest percentage since the report was established in 2011.
Investing in art allows the buyer to tailor their collection to their own tastes, appreciating it for beauty as well as financial gain. An investor may look to devote their collection to the tradition of the Old Masters or Classicism, or focus on the contemporary and genres such as Pop Art. Investors may wish to stick to household names in art such as Andy Warhol or take a canny risk with up and coming stars such as Miss Aniela. Art investment has the advantage of being a global phenomenon, with tastes differing around the world. Those looking to make quick return on their safe alternative investments would do well to pay attention to current trends around the globe. While one area may fall out of fashion in one country, you can be reassured that it is likely to be enjoying a renaissance in another part of the world.
The impact of art as a long term, sustainable investment cannot be underestimated. The 2019 Deloitte report found that 88% of Contemporary and 80% of Impressionist and Modern works held for over 10 years had a resale price higher than their purchase price and was subject to less volatile Compound Annual Returns (Deloitte 2019). Once the preserve of the super-rich, there is now the opportunity to make a return on a relatively modest investment with a good understanding of the art sector. Of course, there are other factors to consider beyond the purchase price and investors must take framing, insurances and storage costs into account (Smith and Partner offering 12 months free storage with Martin Speed). While there are incredible investment stories out there, like the record-breaking sale of a DaVinci for £341 million originally purchased in 1968 for a mere £45, these stories are highly unusual but moreover highlight the benefits of holding on to a piece over a period of time.
As we launch into a new decade, the impact of increasing technologies could be a real boon to the art industry. New technologies will greatly aid collectors in proving provenance and traceability, eradicating many of the uncertainties surrounding forgeries when investing.
#2 Wine as an alternative investment
Investing in wine is not a new phenomenon, with the trading of wine traced back as far as the ancient Greeks, Romans and Phoenicians. However, once investors in the Far East began to take notice of wines from the Bordeaux region the industry took off and the market became truly global in the mid 1990s.
A 2012 survey by Barclays Wealth and Investment Management found that 28% of high net worth individuals has a wine collection, and it is true that at the top end of the market there are some phenomenal gains to be had. Data from Liv-ex reveals the number 1 performing investment wine to be a 2011 Petit Moutin which saw a 165% return on investment, the cost of a case rocketing from £690 in 2012 to £1831 in 2017. As supply cannot increase of limited vintages, fine wines will retain its premium status for as long as it remains in good condition.
Gone are the days of buying dusty bottles of wine from dark cellars, now there are sophisticated platforms to help you invest. Liv-ex is a global trading platform for fine wines, providing a buyer with access to over 15,000 products spanning 42 countries. With instant transactions and a comprehensive database of information from real merchants transactions, buying your wine from an investor linked to Liv-ex allows you to make considered purchases. There are also options available for the less informed purchaser, Berry Bros & Rudd offering a Cellar Plan of around £250 with a dedicated account manager to assist you in making choices that will perform well in the future.
However, there are numerous things that can jeopardise your return which may prove too high a risk for many. A poor harvest in one year can push prices of certain vintages up – good news if you are an already established buyer but makes it difficult for anyone new to the industry, or those wanting to increase their collection. This mishandling of bottles can also be catastrophic, wiping out whole collections in one go. The ideal temperature range of wine is between 45° and 65°, with 55° being classed as optimum. The investment in professional grade storage is costly yet necessary to ensure your wine lasts the distance. Added into the equation is the changing public perception of alcohol and the fact that alcohol consumption is falling the UK (World Health Organisation 2018) which may impact on the resale value of wine in the coming years.
#3 Cars as an alternative investment
For those with a need for speed, investing in cars is the opportunity to indulge in a fantasy. The nostalgia surrounding cars that were around in your youth or those that have iconic status means that investing in classic cars can be a pleasurable purchase, as well as one that reaps financial rewards.
There is clearly a receptive market for the classic vehicle, as last year’s record breaking sale of an Aston Martin DB4GT Zagato for over £10 million proves. Investing in cars provides the chance to get in on a limited supply which adds to their saleability. Classic Ferraris were made in short supply and their overall market is estimated at $5.9 billion. For those with more modest budgets, the trend to buy the hot hatches of the 1990s and early 2000s can make savvy buys, such as a Peugeot 205 GTI and Nissan Skyline or a Mk1 Volkswagen Golf GTI.
Investors in the U.K don’t have to pay vehicle tax on cars made prior to 1st January 1977 and car insurance for classic cars can make running costs more reasonable. However, the expenses of owning and maintaining a classic vehicle can be vast, with restoration costs sometimes running into thousands of pounds before it’s even drivable. With Brexit on the horizon the cost of importing classic cars is yet another unknown, although if this can be done it undoubtedly makes the vehicle all the more coveted once it lands on UK soil.
Investing in cars as a hobby is no doubt an enjoyable one, and the mechanically minded individuals can take advantage of more simple engineering than today’s modern vehicles and repair and restore vehicles themselves without garage costs. Selecting the right car is crucial to reaping the biggest return but there is a buoyant market waiting for those willing to take the time to do it well.