Often considered collectibles rather than investments, assets such as wine, art and watches are increasingly seen as safer than traditional asset classes such as stocks and bonds, suggests new research from London-based law firm Fladgate, which commissioned research from more than 300 investors and 170 advisers to identify attitudes towards investing in passion assets. The investor population is split into three groups: equity investors (with investment portfolios of up to £250.000), high net worth investors (£250.000 to £1 million) and ultra-high net worth investors (over £1 million). The complete research highlights that many people are passionate about luxury goods, whether cars, watches, jewelry, wine, collectibles (including art, books, coins, and stamps), or the like, and these may constitute at least a part of their personal portfolio. Others may not realize that their hobbies and passions could also contribute to their financial future.
But what are investors looking for?
Investors are keen to understand passion assets better and invest more. In particular, they want to understand the costs of these types of investments, as well as the medium- to long-term benefits and any implications for their tax position. While returns are the most important factor – 53% of investors said returns drove their interest in investing in passion assets – some may not be aware of benefits such as portfolio diversification and inflation hedging. This is another important discussion point for advisers to promote further benefits of investing in passion assets.
The importance of diversifying
Diversification is seen as a key element of building an investment portfolio, with passion assets proving to be less correlated with traditional investments such as stocks and listed bonds. Nearly a third of investors (31%) and over 40% of advisers cited diversification as a key factor. More than three in five (68%) of respondents to our investor survey strongly believe that passion assets are safer than other asset classes. As we will see, this makes it more likely that investors will want to explore passion asset investing as the economic outlook remains uncertain, with nearly three-quarters of respondents agreeing. Investors believe that diversifying their portfolios with passion assets can help them secure their financial future and weather periods of economic uncertainty.
Over a third of investors (38%) plan to increase their allocations to passion assets, more than any other asset class, while a further 32% plan to maintain their exposure. While a third (33%) believe they will be more active in passion assets, a greater proportion (39%) plan to be more active in traditional assets such as stocks and bonds. Whether due to advisor uncertainty or unfamiliarity with these assets, this discrepancy must be addressed to ensure investors have a realistic outlook for their passion portfolios, but also to ensure advisors are responding appropriately to their clients’ desires.
What are the most interesting assets?
