Article published in Emirates247.com (United Arab Emirates)

December 7, 2014

Are you happy with the returns on your investments in stocks and/or property? Now read this. If you’d invested, say, Dh100,000 in an antique car in 2004, you would be sitting on an investment worth about Dh569,000 right now, or an increase of 469 per cent in 10 years.

On the other hand, had you invested the same amount in the Footsie (the FTSE 100 Index), which is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalisation, you would have a kitty of just Dh151,000.

Even if you’d invested the same amount in a Grade A luxury home in London, you’d have not more than Dh235,000 to show off.

Returns on collectibles could turn out to be worth much more than traditional assets such as property or stocks, especially during times of economic turbulence, maintain experts.

However, that's not always the case - an investment of Dh100,000 in 2004 in antique furniture, for instance, would have lost almost a quarter of its value in 10 years' time and be worth Dh76,000 today.

Nevertheless, collectibles are not just 'emotional assets', or 'investments of passion'. They could prove to be a 'better' source of investment in turbulent times, if you consider return on investment.

Investing in collectibles of high value is particularly popular among high net worth individuals in the UAE.

A Barclays’ report in 2012 estimated that global high net worth households hold an average of 9.6 per cent of their wealth in collectibles but it was much higher for the UAE at 18 per cent of net worth.

With a pretty high figure of 18 per cent, the UAE’s millionaires invest in many things that can be classified as collectibles, and these investments of passion can still outperform more mainstream asset classes, according to the latest results from the Knight Frank Luxury Investment Index (KFLII).

The value of the global Knight Frank index, which tracks a portfolio of nine collectables, rose by 6 per cent over the 12 months to the end of June 2014. Growth during the past five years has been 44 per cent and over the past 10 years, 182 per cent.

This compares with a 10 year rise of 135 per cent by the top of the luxury London residential market. Only gold, with growth of 254 per cent, has done better, but its performance has been far more volatile.

 

 

“This strong growth shows why collectables such as art, classic cars and stamps, are increasingly being seen as an investment as well as just something desirable to own,” says Andrew Shirley, Editor, The Wealth Report, Knight Frank.

But he has a word of caution here. “People should not automatically assume that everything will go up in value, particularly sectors where fashion and tastes change,” he says.

“Antique furniture, for example, has seen its value consistently eroded over the past 10 years, mainly because it no longer fits with the contemporary design aesthetic of modern homeowners.

“Our index can give an idea of a how a particular asset class such as art might be performing, but it will only reflect a slice of the market.

“The HAGI classic car index that we use, for example, tracks the performance of the world's most desirable cars. Not every old car will have risen in value to the same extent,’ he added.

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