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January 8, 2014updated 11 Jan 2016 2:59pm

Coutts say investments of passion more profitable than equities

By Spear's

Classic cars, jewels and fine wines aren’t just more fun to buy and enjoy than global equities – they are also better investments according to the new Coutts Index.
Created by the private bank together with Fathom Consulting, the index follows the returns of fifteen investments of passion, such as art, fine wine, stamps, coins, classic cars, jewels and watches.

It found that, combined, passion investments returned 77 per cent between 2005 and 30 June 2013, compared to 53 per cent of the MSCI All Country Equity Index. (The survey presumably starts in 2005, when there were two or three strong years of growth ahead, since many categories have remained flat since 2008.)

Classic cars provided the biggest returns, having increased their value by 257 per cent between the beginning of 2005 and the end of June 2013. Watches rose by 176 per cent during the same period, while jewels returned 146 per cent.

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Interestingly, traditional Chinese artworks rose by 163 per cent between 2005 and mid-2013. This was largely because the rapidly growing number of Asian HNWs started investing in passion assets, the report suggested.

Thanks to data provided by Savills World Research, the index also showed that residential properties in ten prime locations worldwide rose by 100 per cent during the seven and a half years to 30 June 2013, despite a fall as the financial crisis was starting in 2007.

However, it seems that with the exception of traditional Chinese art works, classic cars, jewellery and prime residential properties, the downturn took its toll on investments of passion just as it did on other, more traditional asset classes.

Impressionist and Modern art works, for example, have stayed almost flat since the end of 2007, and so have Post-war and Contemporary pieces, while sculptures and Old Masters have lost value since the crisis.

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Holiday properties have only now returned to their 2007 value. Similarly, watches rose significantly between 2005 and early 2007, only to steadily fall in the following two years. They picked up again up to mid-2012 and have lost value again since.

Mohammad Kamal Syed, head of strategic solutions at Coutts, thinks that while alternatives have performed well, that was not the main reason why many UHNWs chose to invest in them.

‘The benefit is more than just profit. Owners can bond with like-minded people in an elite network, with assets offering escapism and a chance to re-enact history,’ he said. ‘Indeed, there is one thing that the Coutts Index, for all its robustness, can’t measure – and that is happiness. The idea of someone paying $50 million for an uncomfortable old car, with windows that don’t work and a noisy engine, seems illogical. In many ways, it is. But the happiness such a car can bring is immeasurable.’

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