In uncertain times, a growing number of heart-over-head investors are looking for—and seeing—returns in passion-based alternatives like art, antiques, whisky and wine.
By Nina Hendy
Whether a sign of recent market volatility or simply a trend of the heart, investment portfolio diversification is growing to include tangible items like fine art, antiques, whisky, wine, classic cars, music royalties and sports memorabilia. It is not hard to understand when you consider that the contemporary art market, for example, has outperformed the S&P500 Index by 240 per cent since 1986, riding out stock market bumps because niche interest markets tend not to follow the movements of better understood alternative asset classes such as real estate.
Investors in these niches don’t always need particularly deep pockets either: a bottle of limited-edition whisky that only cost a few hundred dollars might sell for double that a few months later. Even things like vintage toys—if insightfully collected and meticulously kept—are in the mix. In October, investors were circling a globally significant collection of toys housed at a museum in the Blue Mountains.
Considered to be the most important collection of 20th-century toys under one roof, the collection included Barbie dolls, a life-size Tintin and Snowy, original illustrations from Enid Blyton’s Noddy books and an early 20th-century Steiff teddy bear. It’s just one example of how passion can lead to profit, albeit a style of investment that colours outside the lines of conventional risk-and-return dynamics.
Picking a platform
Rising fascination with collectables has given rise to a new cache of investment platforms in the style of Yieldstreet, which offers fine art alongside commercial real estate and debt securities.
The new kid on the block is London-based Mintus, which opens up access to the US$65 billion global art market through fractionalisation. This enables shared ownership of artworks via a fund that owns and manages them until sold. Founder Tamer Ozmen explains that Mintus sources its artwork directly from collectors, artists and institutions on the basis of investment potential alone.
“In an increasingly inflationary environment, diversifiers such as fine art can be helpful in improving the risk-adjusted returns of a portfolio,” he says.
Mintus recently offered an Andy Warhol painting as part of plans to release US$150 million of inventory in the next 12 months. Having been held in a private collection since 1991, and was last exhibited in 2003, the self-portrait was independently valued at US$6.8 million just five months after its acquisition for US$5 million. The 411 Andy Warhol works that appeared at auction multiple times between 2003 and 2017 achieved an average compound annual growth rate of 14.2 per cent, according to Mintus data.
The platform aims to auction or privately sell artworks between two and seven years after the date of purchase. It also runs a Mintus Secondary Market at each biannual valuation, giving investors another potential route to exit their investment. The artworks themselves are kept in a secure, specialist art storage facility.
Beyond art
Beyond art, investors opt for a range of other esoteric investment options, spanning everything from bank notes to bottles of tequila.
Spanish-based Alts launched 18 months ago to give investors access to “meticulously chosen” cultural assets, which co-founder Wyatt Cavalier says are a fascinating way to grow your money. He says: “Everyone had more time on their hands through the pandemic, fuelling strong growth in [these kinds of alternative investments], and the genie isn’t going back in the bottle.”
“It can be a riskier proposition, so finding a way to make it more accessible for people was important for me,” explains Cavalier. He says passion-led investors tend to be men aged 20-40 who already have large investment portfolios. “They usually chase items they were into as a kid, and now they’re a bit older they see the financial value in them. Many start small with a bottle of Grange or a watch, for example.”
Some investors are buying and selling items in the same month and making decent profits. Others are hanging on to items for a year or five, Cavalier says. He points out that the value of some whiskies grew up to 40 per cent last year, while Bordeaux wine was up a similar amount. Sports cards grew six times their sale value in 2020 and 2021. “Classic cars take a bit longer for you to realise your investment too, just because there’s a lot of logistics around them,” he adds.
Money talks
New Zealand investor Scott Lancaster was working as a stockbroker for a small firm in 2000 when a client pulled out some old bank notes to show him. “I’ve always loved money, and the look and feel of it, so decided to get my hands on some myself.”
“As you get older, you start to appreciate [specialty] alternatives more, because you’ve seen their rise over the decades.” Lancaster invested in some uncirculated notes, picking up tips as he immersed himself in the world of collectable coins and bank notes. He says the passing of the Queen will push up the value of the rarest coins and notes of Commonwealth currencies. “It takes a long time to understand the retail value of coins and notes,” he adds. While he is doing more collecting than trading right now, the fun of the research and acquisition helps to answer the passion within.