‘Passion investing’ skyrocketing in popularity
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Is there anything better than putting your money where your heart is? This form of investing – the so-called 'passion investing' is growing in popularity across the globe as increasing numbers of people choose to allocate their wealth to something that pulls at their heartstrings.
The classic car arena, one of the high-value collectible sectors that has been enjoying a real boomtime, has been outpacing art and wine by more than 100 per cent over the last 10 years, according to the Knight Frank Luxury Investment Index. Picking up rising amounts of attention from investors thanks to the almost 500 per cent returns that have been enjoyed in the last decade, classic cars are that ideal mix of profit and passion. The best car brands saw a 16 per cent in 2014/15, according to the Historic Automobile Group International's 'Top Index', which looked at data from the top 50 collectible cars in the world.
Enrique Liberman, partner at Bowles Liberman & Newman, specialising in luxury asset investment funds, told CNBC that 'passion funds' such as those who invest in art, have been in existence since "about 2006," with classic car passions funds entering the fray around five years ago. "Ten years ago, classic cars were looked at as collectibles, but now people are recognizing them as an asset class, said Mr Liberman.
Mr Liberman reported that there had been rising interest in new car funds of late, with a high level of interest coming from dealers, classic car collectors and first-time fund managers. While some prefer to buy only a certain brand, such as Ferrari and then choose to sell on in another country for a higher price, others buy only what they love and look at the vehicle as a long-term investment, keeping it close to their hearts – and their home.
Steve Linden, co-founder and fund manager at Chrome Strategies Investments, agreed with Mr Liberman that classic cars were becoming a hot new investment vehicle. "In my decades of doing this, I've never seen collector cars recognized so universally as alternate assets and works of art. We are seeing record prices set at major auctions and a record-setting run-up in values, with cars going to every imaginable point across the globe," he told CNBC.
Potential classic car investors are advised to opt for cars of limited production – such under 500 units – that may have some sort of significance, be that mechanical, historical and engineering. A detailed and well documented history is also useful, classic car experts advise investors.
Mr Linden also advises looking at specific car attributes that others may be overlooking, in order to secure a strong deal. "I've seen trends come and go, and we don't want to focus on one particular marque," he said.
The time is clearly right for this type of investment vehicle, with the volume of global purchases and shipments skyrocketing over the last three to five years, driven mainly by new investors exploring the asset class. Mr Linden also advises investors to develop a diversified portfolio product. "If you think you can invest in one car, that's gambling. It's like buying just one stock," he said, adding that this could lead to a risky, rather than reliable, future.
In terms of which cars make the best investments, classic Aston Martins, Ferraris and Porsches always seem able to hold their own amid a sea of competition. In 2014, a 1962 Ferrari 250 GTO sold at auction for a staggering $34.65 million, making it the most expensive car in history. Classic jaguars are also said to be solid investments, according to a well-known luxury investment index.
Potential investors are also warned to be certain they are receiving advice on which car to add to their portfolios from a reputable source. Dave Bentson, founder and principal of Precision Automotive Group,
said: "You've got to know who your car guy is, whether it's an insurance agent, car dealer, broker or mechanic. How are they compensated, and what are their limitations and experience?"