Investments of passion
Please note: Reference to specific companies in this article is not an opinion as to their present or future value and should not be considered an investment recommendation, investment advice or a personal recommendation.
Stocks, bonds, and in the current climate, perhaps some gold too. They’re a typical blend of assets in a portfolio but when you’re looking for something different in parallel, what about investing in your passions? Anything from fine wine to fabulous art; high-value jewellery or historic sporting memorabilia.
It could be a Louis Vuitton handbag or Lamborghini supercar; or equally, today’s curios and collectibles could also be anything from a rare Pokémon card to a pair of trainers worn by 1990s US basketball star Michael Jordan.
And investing in your passions – as well as being emotionally satisfying – can also be lucrative.
According to Knight Frank’s 2022 Luxury Investment Index1, which tracks the value of the most popular luxury goods, fine wines and collectible watches saw the highest growth out of all luxury investments in 2021 – with both gaining 16%. The index also grew 9% in total in 2021, its strongest overall performance since 2018.
“The COVID-19 pandemic certainly hasn’t dented the enthusiasm of collectors who have continued to pay significant amounts of money for an increasingly eclectic mix of assets,” says Andrew Shirley, the report’s author.
At the higher and more traditional end of the scale, in the last 12 months alone a Picasso painting sold for $103.4 million, a first-edition copy of the US constitution went for $43.2m, and a “flawless” 15.81 carat purple-pink diamond was auctioned off by Christie’s for $29.3m2. And with wealth holders getting younger and tastes broadening, even the rarest Pokémon cards are today fetching six-figure sums3, while Michael Jordan’s iconic game-worn Nike trainers were recently snapped up for $1.5m4.
Why you need to do your homework
However, the value of these luxury assets can fall as well as rise and cannot be guaranteed.
“I always say, buy what you love and if it goes up in value that’s great – but if it doesn’t, you’ve still got a great classic car or work of art you like looking at, a piece of jewellery or watch that you enjoy wearing,” says Shirley, who is a senior member of Knight Frank’s global research team.
“You should really only be thinking of them as niche investments.”
Navigating the luxury investment marketplace can also be tricky. Homework should be done to determine an asset’s authenticity, provenance, and legal ownership. There are also hidden costs associated with many luxury investments – cellars to store fine wines, and garages to park your vintage cars. High insurance premiums also need to be factored in, as well auction houses typically charging lofty commissions to sell items. Potential buyers may also be thin on the ground.
In addition, markets can be small, opaque, illiquid, and fragmented – as well as being highly unregulated. And the rarity of collectibles means they’re often open to fraud or forgery.
“To determine an asset’s true value, which can also be highly subjective, you should lean on experts who have long track records in the industry – and good reputations,” adds Shirley. “Otherwise, you could end up losing a lot of money. It pays to do your research.”
Helping you invest in something you love
For clients looking to make a passion investment, securities-backed lending could be a quick and effective solution to borrow funds at competitive rates secured against their assets under management with Barclays – and this can be cash or investments.
Securities-backed lending can help eligible clients purchase their next passion investment without releasing equity from their assets, or interrupting their longer term strategy.
“Securities-backed lending helps not only with your short-term needs, but it also allows you to stay invested – so you can stay on track with your long-term goals,” says John Gilmour, a Private Banker at Barclays Private Bank.
But like with any form of borrowing, it’s important to be aware of the risks you’re taking on. So, if you’re considering making a passion investment using securities-backed lending, or want to discuss how it can be used more generally – anything from lifestyle ambitions to short-term liquidity needs, property purchases or even diversifying your investments – please do get in touch with your Private Banker. They’ll be more than happy to talk through all your options.
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