Market jitters drive investors towards physical assets

LONDON • Alternative investments such as a Ferrari 335 S Scaglietti, a rare blue diamond or a case of Romanee-Conti Grand Cru wine from Burgundy are going mainstream as investors grapple with ultra-low interest rates and volatile stocks.

Spooked by the end of a 30-year bond bull run and bouts of money printing which have pushed stock values out of kilter with economic reality, high-profile investors are turning to fine wines, classic cars and jewels, research and index data show.

Even legendary bond investor and former Pimco boss Bill Gross said last week he now favoured real assets like land and gold over more traditional investment classes.

Rare coins, collectible jewellery and classic cars joined fine wine among the top performers in the year to end-March, the latest Knight Frank Luxury Investment Index (KFLII) showed. Fine wine saw its largest positive monthly movement since 2010 in July with the Liv-ex Fine Wine Investables index, which tracks around 200 Bordeaux red wines, up by 4.5 per cent. It is up 13.8 per cent so far this year, compared with 6.9 per cent for the S&P 500 and 8.9 per cent for the FTSE 100.

"Fine wine tends to perform well in periods of uncertainty... and is not linked to the prices of other assets in most circumstances," said Mr Andrew della Casa, founding director of The Wine Investment Fund.

While the KLFII index rose just 5 per cent over the year to the end of March, the lowest annual increase since the first quarter of 2010, returns on classic cars jumped 17 per cent, coins generated 6 per cent while jewellery delivered 4 per cent.

But over a five-year period, cars, coins and jewellery returned 161 per cent, 73 per cent and 63 per cent respectively, eclipsing Britain's FTSE-100 stock index, which has risen 15 per cent since the start of 2011. Investor interest in classic cars helped the Historic Automobile Group International Top Index rise more than 500 per cent in 10 years, encouraging many to restore a rusting chassis to its former glory.

Specialist funds offering a stake in rare diamonds, meanwhile, have continued to catch the eye of investors seeking ways to hedge against currency, stock and bond market risk, with the Sciens Coloured Diamond Fund up by about 5 per cent in the second quarter of this year.

Gold, another so-called safe haven from top-of-the-cycle bonds and expensive stocks, is also enjoying good times, BlackRock research shows.

Analysts at Unigestion describe the gold price rise as a "classic" market response triggered by Britain's decision to quit the European Union and fears of negative rates but it was difficult to predict how long these circumstances supporting a rush into gold might last.


A version of this article appeared in the print edition of The Sunday Times on August 14, 2016, with the headline 'Market jitters drive investors towards physical assets'. Print Edition | Subscribe