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Classic Car Performance Boosts Luxury Investment Index

16th October 2013 Paul Andrews

Classic cars have shown the strongest growth across all asset classes.

Continued price growth in the classic car sector and an upturn in the performance of investment-grade wines helped to boost the value of Knight Frank Luxury Investment Index (KFLII) by 7% in the 12 months to the end of June 2013.

This matches the increase in the value of residential property in prime central London over the same period and is in stark contrast to the 23% fall in the price of gold since June 2012. The FTSE 100 index of UK listed equities performed slightly better, rising by 12%.

Over a 10-year period, however, KFLII (+174%), has significantly outperformed the FTSE 100 (+55%), although gold still remains the top mainstream-asset performer (+273%).

Looking at the individual asset classes represented within KFLII, there has been a wide variation in performance over the long and short term. Across every time period classic cars, according to the HAGI Top index, have shown the strongest growth, rising 21% over the past six months and a remarkable 430% over 10 years – better even than gold.

After a significant correction in 2011 and 2012 following an overheating in the market for certain wines favoured by Asian buyers, the Liv-ex100 index, which tracks the performance of investment-grade wines, has returned to growth.

The art market, by contrast, remains volatile.  Although certain artists retain their cache and are achieving record results at auction, buyers are generally bidding more cautiously and selectively.

Stamps and coins have maintained their longterm growth trend and are now marketed as genuine investment asset classes. But furniture continues to lose ground as antique styles decline in popularity with homeowners.

The performance of KFLII shows that investing in a broad range of collectable assets can be a useful – and enjoyable – way to spread portfolio risk, especially when more mainstream asset classes such as equities are under pressure.

Over the past 10 years, there have only been four six-month periods when the value of the index has fallen. Even then the drop was 1% or lower.

However, those considering investing should bear in mind that individual asset classes can also be highly volatile – wine and art are actually more volatile than the FTSE 100. This is not only due to economic conditions, but also to changing trends and fashions within the luxury collectables market that can quickly create and deflate bubbles.

This means index results for an asset class may not necessarily reflect the performance of individual pieces or works of art. Entire asset classes, such as antique furniture, may also see their value decline for long periods as tastes change.

Markets are also often less liquid and less transparent with higher dealing costs than publicly traded and quoted investments such as stocks and shares.

Download a pdf of the latest Knight Frank Luxuring Investment Index below.

 

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