Stanley Gibbons is one of the world’s oldest stamp traders. Located on London’s Strand, the firm has been practicing for 150 years and has just launched an office on Hong Kong. Here Keith Heddle, director of group sales and marketing, discusses how Asian investors have been taking a shine to the rare collectible that can be traded in the open market. A longer version of this story first appeared in the Art Fund Tracker published by Fine Art Wealth Management.

At a recent presentation to a group of high net worth individuals and ultra high net worth individuals in Singapore at I spoke about the strength of the market - not a bear market, nor a bull market, but the ‘tortoise market’.

Most investors are driven by the elusive dream of ‘get rich quick,’ the timely investment that galvanises fortunes overnight Most financial analysts and experts know, however, that the markets are cyclical and often unpredictable and that it’s often about treading a long, steady road. That’s where the tortoise comes in. We all know the fable about the tortoise and the hare, where the tortoise wins the race with slow and steady progress.

That sums up the rare stamp market; uncorrelated with other mainstream, more volatile asset classes, but showing relentless, steady growth over decades. Even in the turmoil of the recent crash the stamp market remained healthy and in fact the GB30 Rarities Index, the Bloomberg-listed index of rare GB stamps, grew almost 39 per cent in 2008 and has shown a compound growth of just short of 11 per cent for the last 40 years. That’s the sort of impressive investment performance unheard of in many other asset classes.

One more thing that attracts investors - the ‘pieces of paper’ they own if they invest with us are not share certificates, giving them a virtual slice of a business whose fortunes they have no influence on. Each piece of paper is a little piece of history, a tangible, heritage asset with a true value, whether it’s a rare Victorian or Edwardian stamp or a signed manuscript.

It’s why Stanley Gibbons are not just looking to take their investment and heritage proposition to new markets (principally China, SE Asia and the US), and also to diversify into other premium collectible assets. Already a purveyor of rare, signed documents, from Henry VIII to Mozart to Marilyn Monroe, we have recently successfully marketed rare coins and military medals.

The combination of the sustained low interest rate environment and the equally sustained volatility of the financial markets have pushed increasing numbers of investors to look at alternatives to secure their wealth and diversify their assets.

It has been well documented in financial circles that one of the principal reasons so many investors have found their wealth decimated in recent years was not just because the global markets crashed, but because the majority of investors were investing in the same places. The lack of diversity in most portfolios led to the endemic loss of wealth; what people needed at a time like that was (and is) a safe haven to act as an anchor against such falls.

Stamps are a tangible asset and are actually the world’s most valuable commodity by weight; by investing in a stamp portfolio you own a real, rare collectible that can be traded on the open market. They are not volatile – yes, you lose the ‘thrill’ of stock-picking and you can’t play the market using your ‘skill’ to monitor rising and falling trends, so thrill seekers need not apply.

It is the reliability of rare stamps that provides an anchor over the medium to long term. As an indicator of the strength of the rare stamp market, in Summer 2010 Stanley Gibbons sold the rarest British stamp, the 6d IR Official for £375,000 (around $615,000). This one stamp alone trebled in value since 2005 whilst the world was gripped by a global economic crisis and stock markets crumbled. It increased in value by 150 per cent in the last 3 years and shows no sign of stopping. Why?

Because this is a market driven by a steadily increasing group of dedicated (sometimes obsessive) collectors and now investors seeking out items of great rarity and premium quality. With investors from Asia now entering the market, demand is heating up further.

Stamp values are also backed by solid historical data, with stamp prices charted annually back to the 1880s, so increases are transparent and can be tracked. This price data is behind investment indices such as the GB30 Rarities Index.

The index provides a telling snapshot of the value of rare stamps. Over the past 40 years (1970-2010), the index grew 6403 per cent, giving a compound average annual increase of 11 per cent. Annual returns beat inflation by an average of 4.5 per cent per annum.

We have not seen the value of premium stamps fall in decades; on the contrary, prices have risen steadily.

We offer investors a balanced portfolio of rare stamps in our Capital Protected Growth Plan (CPGP). As its name suggests, the plan provides 100 per cent capital security; whatever sum is invested will be fully guaranteed, so clients are assured of never experiencing a reduction in their capital. On the plus side, should the stamp market continue to show healthy growth, the returns are not capped in any way, so the potential upside is unlimited. The investment can even benefit from an immediate capital gain of 11.1 per cent – we offer two discount bands to give CPGPs a head start, depending on the amount invested.

Since rare stamps can remain stable for a time and then jump up in value in steps (as collectors and investors chase particular items or a major stamp show looms), we recommend a minimum holding period of 5 years and ideally 10 or more. However, early exit options are available any time after one year.