Alt Investments

Collectibles Move to the Mainstream

Alison Steed 19 April 2007

Collectibles Move to the Mainstream

The traditional lure of fast cars, fast women and property are having less of an impact it seems this year, as young professionals are more likely to invest in collectibles.

Bonus season has come around again, and serious amounts of merger and acquisition activity has led to another bumper year for the City’s finest. Yet the traditional lure of fast cars, fast women and property are having less of an impact it seems this year, as young professionals are more likely to invest in collectibles, according to home insurer Zurich. First edition comics, paintings and prints, stamps and medals and good old vinyl records are favourites among young professionals. Others are opting for cigarette cards – such as the 1909 one which sold in the US for £1.2 million, said Zurich – exclusive glassware and pre-1950 football programmes are also de riguer for anyone looking to trump their counterparts in the office. Of the 50 per cent of people who collect, just one in six do so because of the increase in value, said Zurich, and one in 10 put their collections on the same par as investing in stocks and shares. Martin Hall, head of personal lines underwriting at Zurich said: “It seems that old valuables are the new investments for modern professionals these days. Our research shows they’re more interested in, and profiting more from, antiques and collectibles than any other generation before them. However, we would advise anyone with a collection of valuable items in their home to keep their insurance company or broker up to speed to make sure they’re covered in the event of accident, loss or theft. “In the past five years these collectors have spent an average of more than £2,000 each on classic collectibles such as paintings, sculpture, furniture, books and coins. The perception of these collectors is that they will also bank a hefty 190pc profit each, forecasting their collections’ value to have rocketed to £6,123 over the same period. “Men in particular are more lured by investment opportunities than aesthetics. One in four scour antique markets for pure value-add potential compared to one in six women. But female collectors are much more likely to buy second-hand classics because of their unique status – 17 per cent like the fact that they’ve got something different to their friends, compared to only 9 per cent of men. “But it’s Northerners who are hoping to cash in the most on collectibles, with an average £3,791 per buyer invested over the past five years.” Given the recent interest in a number of shows at Christie’s, there is little doubt that bonus money is being used to fuel the passion of collectors of all sorts – although it is far from being the only factor. For example, in the first week of February, Christie’s had a record-breaking £200 million of auctions of art sales – the highest ever in Europe – and a 41 per cent increase on the sales achieved in June 2006, which had the previous highest total of £141.5 million. Some 42 lots were sold for more than £1 million, and Francis Bacon’s Study for Portrait II sold for £14.02 million – the second highest price for a post-war work of art at auction. Last year was also a record breaking year for wine sales, with a global total of more than £32.3 million worth of sales on the back of 44 sales in America and Europe. These included record-breaking figures for individual lots “reflecting a global demand for wines of excellent quality and provenance”, said Christie’s. Matthew Paton of Christie’s, said that although the bonus payments of those in the City will have an impact on the prices of collectables at present, it would not necessarily dictate them. He added: “The most notable factor is the internationalisation. The Russian and ex-Soviet states are now competing with the traditional markets of America and Europe, so we now have representatives from every continent at auctions, which increases competition and sales. It has made it a much more global market, and it is certainly growing in the Middle East. “Instead of being a narrow market, it is now very wide. The more spending money that is about, the more it is going to be spent, so bonus payments do have an influence, but it is more about the collectors in Russia and Asia.” Wine’s record year last year was helped partly by the tax relief you can get on it as it is a depreciating item - the same goes for classic cars, said Mr Paton, which are also seeing a revival. Strong prices encourage people to buy, he said, as they think they are going to get good value. Of course, having this as part of your portfolio is no bad thing, but like any investment, it can be very risky if you put all of your energy, effort and money into one area. Paul Ilott, an independent financial advisor, said: “It is a viable option as the returns on these items will not coincide with equities, bonds and cash, so they do provide diversity. It is an alternative, but if you need to realise cash it is less easy to get your money, as you have to find someone to trade with. The price that counterparty may trade at will depend on supply and demand, especially as for many of these collectibles, there is no exchange. “You would need to be an expert in your market to determine whether you are getting good value or not for your investment, there is no definitive benchmark.” There are other expenses associated with holding such assets too, like storage costs if specialist storage facilities are needed, and insurance in case the worst should happen. Mr Hall said: “Worryingly, however, 40 per cent of those we surveyed haven’t told their insurance company about their collection’s worth. Surprisingly, even though they’re spending an average of £1,020 on their most valued item, one in four don’t think home contents insurance is necessary. A further 28 per cent are putting their valuables at risk because they just ‘haven’t got round to getting them covered’.”

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