The taxman often wants details about our investments, which now come in all shapes and sizes. And it seems the practice has reached a fever pitch — even among the middle class. Nurses, public school teachers, janitors and cab drivers are all playing the stock market, even in our post- Bernie Madoff world.
However, traditional investments — real estate, gold, currency, stocks and bonds — are increasingly being supplemented with alternatives. More and more people are managing their wealth beyond hedge funds if not carbon credits. Yet.
Real estate is the one investment considered (nearly) infallible; at some point a property’s value is going to rise. Gold and foreign currencies were popular for many decades, but both have fluctuated so wildly of late (unlikely to stop given unabated American and European financial nuttiness) they are considered unreliable. Stocks took a public relations hit immediately following the dotcom bubble and bonds tend be a long play. But there’s more out there, and you don’t need to be Li Ka-shing to dabble.
The Art of Investing
The most recognisable alternative investment is art, and as an investment it’s on the rise. One of the reasons for that is art’s growing accessibility. Outrageous wealth isn’t a prerequisite to buy a painting or a sculpture and it’s not necessary to buy original Picassos. Like any investment, art can be risky. A startup venture can go bust, wine can turn out to be a dud — a work and/or artist can fade into oblivion.
But more and more investors are willing to take a risk. “Art investment, especially in Contemporary Asian art, has been very buoyant over the last few years. With traditional asset classes being stagnant, investors are looking for new areas to invest,” says Jon Reade, managing director at investment firm Art Futures Group. “Because of the strength in China’s economy, certain artists’ works have been in demand and we have seen their artworks increase in double digit value over the last couple of years.”
The key to art appreciation is patience. Like most investments, the value rises with broader awareness of the item. Picasso has stood the test of time, as has The Peak as a residential location. But according to Reade, Chinese modern art has been outperforming property and proven itself a tangible and profitable asset. “With new records and prizes expected for Chinese artists in 2013, the growth is expected to continue for mid-career Chinese Contemporary artists especially across the globe,” he says. But it’s not just China that’s getting attention. British artist Damien Hirst has become an investment darling and American artist Andy Warhol is still in demand.
Thirst for Alternatives
Wine has been climbing the investment ladder over the last few years for many of the same reasons as art. “Many investors were not seeing returns from the more traditional investments,” states Bordeaux Wine Investments General Manager Martin Lea. Despite not seeing property-level yields or gains, wine investing does have its advantages, stemming chiefly from the fact that there’s a finite amount of it that vanishes; wine consumption in Asia is skyrocketing and demand drives prices up. On top of that, wine trading and research service Live-Ex claims prices have been recovering since the beginning of 2012 after a rough 2011. “Unlike other investments, you are unable to produce or make more. In addition it is effectively a worldwide currency in that it can be traded in any country and funds remitted anywhere. Finally, for many jurisdictions around the world, it does not attract any tax on the gains,” Lea points out. It’s not surprising that UK-based BWI operates an office in Hong Kong, which is quickly establishing itself as a major wine centre.
With the possible exception of not seeing the investment through to maturity due to consuming it, wine has a broad variety of entry points too. Like art, “Wine is similarly very accessible,” notes Lea. “As an example, Chateau Monbousquet 1998 was available to purchase En Primeur in 1999 at £290.00. Today it trades at £670 to £695.” That’s over a 100 percent increase in value.
Bordeaux remains the primary choice for wine investors, but the sector extends past it to Burgundy, Champagne and parts of Italy. “The key with Bordeaux is that it is a structured market and this structure with its classification ensures that managing a portfolio for clients has more methodology behind it and ensures the best possible opportunity of delivering to client expectations,” Lea finishes. Also? The entry point is lower with Bordeaux than other areas.
Time is Money
A walk down Nathan Road will tell most of us all we need to know about the ravenous appetite for watches. Jewellery and watches are, like art, a tangible asset where the investment is visible every day. The more you know about a watch’s inner working the better you can choose, but as a rule, opt for new branded items by boutique manufacturers or vintage. As Bloomberg Businessweek reported, one of only 11 Greubel Forsey 2007 Invention Piece 1 models sold for a record $3.5 million at Christie’s Hong Kong in 2009.
Niche may be ideal but demand remains high for the major brands, such as Rolex and Patek Philippe, but a brand label doesn’t necessarily equate with a smart investment. Sam Hines, head of watches for Christie’s Asia, suggests taking the time to research an item before purchasing, including sales results in related fields, and consulting with specialists. “Apart from paying attention on its past and current price, important information about a specific work, such as its rarity, provenance, level of craftsmanship and material used, should all be taken into careful consideration,” he says. But in the end it’s about reconciling personal taste with budget. “The ultimate motivation for anyone to go into the art and luxury goods market has to be a passion for those items. And in return, the intrinsic enjoyment they bring can be far more precious and valuable than money.”