Stamp collecting might be a niche investment, but the sheer size of the market in Asia is striking and an example of how the alternative assets sector is continuing to thrive.

What do Bill Gross, Queen Elizabeth, Maria Sharapova, and 18 million Chinese people have in common? According to Stanley Gibbons, it’s a shared hobby of stamp collecting.

“Stamp collecting is extremely popular in Asia. A recent stamp exhibition in China attracted an estimated 750,000 visitors, and in the Indian sub-continent, philately is a well-respected hobby among the burgeoning middle classes,” said Marco Kaster, the collectibles firm’s Asia investment director, in an interview.

While stamp collecting has an established fan base, with approximately 50 million collectors worldwide, stamp investment is a more recent phenomena.

“Investment in stamps is a relatively new concept, in particular in Asia where we have only recently opened an office in Hong Kong (and will soon open one in Singapore). The driving factor behind opening offices in Asia is the growing interest - as prior to entering Asia with a physical presence, we already had three of our largest investors in the region, coming from Australia, Hong Kong and Singapore,” said Kaster.

Alternative investment

There are a number is reasons why these commodities are becoming hot property on the alternatives investment scene.

They are a source of “consistent and sustained growth” said Kaster. According to the GB250 Rarities Index (quoted on Bloomberg Professional), the average annual compound return for Great Britain’s stamps with individual values of £10,000 ($15,000) and above comes in at 13.9 per cent for the last 10 years.

Additionally, studies show that the value of stamps, currently the world’s most expensive commodity by weight, is uncorrelated to economic performance, making this asset class stand out against a volatile market backdrop.

Some serious records are being set, especially when China’s big spenders are in town. When it comes to the Mainlanders’ tastes, Kaster said there seems to be a focus on buying back Chinese heritage pieces after stamp collecting was banned under Mao until 1976, for being considered “bourgeois”.

“The record price paid for Chinese stamps currently stands at HK$8,970,000 ($1.16 million) for a corner block of four ‘1968 Mao's Inscription to Japanese Worker Friends’ from the Cultural Revolution era, which was sold to a Hong Kong collector in February 2011,” said Kaster. However he warned that there is a risk of the Chinese market overheating as it is relatively immature, compared to Great Britain, which “may be the safer option in terms of investment”.

For instance, the nation’s 1d Black (Penny Black) is an old favourite among Chinese collectors - likely because of its historical significance as the world’s first adhesive postage stamp.

In the spotlight

As a firm, Stanley Gibbons has big ambitions to further expand its Asia footprint, and to add to its (Asia) portfolio of stamps worth £6 million, currently stored in Hong Kong. While the brand itself puts forward an interesting sales-pitch including zero management fees, a guarantee of authenticity, royal clientele and “catalogues that are considered the ‘Bible’ for collectors”, it’s often the success stories that investors want to hear.

Bill Gross did Stanley Gibbons “a favour” by sharing his fruitful experience. The co-founder of PIMCO, which manages hundreds of billions of dollars in assets, spiked up a few ears when in 2007 he famously sold his collection of British stamps purchased during the preceding decade - he made a cool $10.5 million at auction, quadrupling his initial investment of $2.5 million. “It’s four times profit…It’s better than the stock market,” Gross said at the time.