Whether or not these assets are directly influenced by economic cycles will continue to be debated. Evidence gathered from the most recent financial crisis seems to suggest that in the case of art, for instance, ‘if’ the work is of historical significance buyers were willing to pick up the price tags. Also, when demand for wine slumped in some regions it held up in others … ‘as millionaires and billionaires are unlikely to stop drinking such wines’. Some investors view cyclical downturns as an ‘opportune’ time to make acquisitions and potentially profit from distressed sales. Yet others have consciously decided to spread their risks and have since increasingly turned to ‘real assets’.
Although the source of risk might not be entirely decorrelated from economic prosperity and wealth creation, investing in collectables such as art, wine, vintage cars, stringed instruments, etc., have, if chosen ‘correctly’ and in keeping with their premise of investing for the medium to long term, consistently performed. According to a report from the FT on which investments had been the best performers of the previous decade, a single case of 1982 Chateau Lafite which began 2000 at GBP2613 and ended at GBP25 000 topped with an increase of 857 % – a compounded annual growth rate of 26 %.100
Largely driven by idiosyncratic and rarity, risk transfer – investing in collectables – depends on identifying the right ‘object’, verifying its provenance, securing it at the ...