The demand for passion investments among high net worth individuals increased in 2010, largely driven by the emerging economies, with the overall value of some categories of such investments rising, although asset allocation remained largely flat, according to the Merrill Lynch/Capgemini World Wealth Report 2011.

Passion investments, which range from the purchase of luxury collectibles such as yachts and jets to art and purchasing sports teams, are no longer considered acquisitions merely for emotional appeal and aesthetic sensibilities but are viewed as wealth preservers and portfolio diversifiers in their own right, the report found.

In terms of asset allocation luxury collectibles remained the most popular, with HNW individuals globally allocating 29 per cent in 2010 (2009: 30 per cent). This was followed by art, which remained flat at 22 per cent, and jewellery, gems and watches, also at 22 per cent (2009: 23 per cent). Next was the other collectibles category which includes antiques, wine and coins at 15 per cent (2009: 14 per cent), then sports investments, which remained flat at 8 per cent. Finally the miscellaneous category, which includes such things as club memberships, travel, guns, instruments, rose to 5 per cent (2009: 3 per cent).

Regarding luxury collectibles, demand for luxury cars rebounded broadly in 2010, says the report, but most evidently in Asia-Pacific, Russia and the Middle East. As an example, Mercedes-Benz sales in China and Hong Kong jumped by 112 per cent and Ferrari named Greater China as one of its top five international markets.

In the art market the share was higher among European HNW individuals (27 per cent) but highest in Latin American investors at 28 per cent. The report said 42 per cent of advisors say they believe their clients invest in art primarily for its potential to gain value, showing that this market most obviously straddles the financial and passion investment classes. Notable sales were a Giacometti painting (sold for $104.3 million) and a Picasso (sold for $106.5 million) - both world record breakers. Chinese demand was reported as strong for both domestic art, such as the works of Liu Ye, and European and fine art. The report estimated the total sales of Chinese arts at just over $4 billion between 2000 and 2009.