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Jul. 22, 2009
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Collectibles: On What the Wealthy Spent Their Money in 2008

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Luxury Collectibles Remain the Number One Passion Investment

The year 2008 took its toll on the amount High Net Worth Individuals (HNWI) spent on collectibles, with huge declines in sales of private jets, yachts, luxury cars as well art and jewellery, gems and watches. The recent Wealth Report 2009, published by Merrill Lynch Global Wealth Management and Capgemini, further details these findings along four investment areas.

  • Luxury collectibles such as automobiles, jets, yachts etc. remained with 27% of the spending as the number one area for passion investments. However, across all three main spending areas the total amount went down enormously and there no sign of recovery yet. Retail analyst Verdict predicts that the luxury sector in 2009 is headed for its worst year ever. Consumer spending on luxury good is expected to drop another 6% worldwide to $294.7 billion.

  • Fine art with 25% of the spending was the second largest field for passion investment of the HNWI (minimum investable assets of USD 1 million). For the Ultra-HNWIs with more than USD 30 million in investable assets, fine art with 27% of their spending was actually their primary field for passion investments. According to Art Market global sales of fine art auctions went down to 8.3 billion in 2008 from 9.3 billion in 2007, but it seems the art market is showing signs of recovery now.

  • Jewellery, gems and watches remained in the third place, but the amount allocated as proportion to all other passion investment increased from 18% in 2006 to 22% in 2008. This trend was led by investors in Asia and the Middle East and suggests that these “tangible” assets are regarded as safer investments in times of crisis. The International Diamond Exchange believes the worst is over and has revised their original forecast significantly upwards. Now it expects US jewellery sales in 2009 to be around the levels of 2008 and not a 10% decline, as was predicted.

  • Other collectibles (e.g. wine, antiques and coins) managed to keep an allocation of 12% of spending, but also lost out on overall spending. Six major U.S. wine auctions houses stated a further loss in sales in spring 2009, but see an increasing demand now. Same trend applies to sports investments such as in teams or racehorses, which had an allocation of 7% in 2008.

Given the experiences of previous crises it is fair to assume that basic economics of passion investments will apply once this period of economic turmoil finds its end: The numbers of HNWI will grow and so will the value of collectibles of all kind as long as they offer a considerable degree of quality and rarity. The same market mechanism applies to high-quality luxury items with a very exclusive brand name. Tougher times can be expected for “middle-of-the-road” products such as fine art of relatively unknown artists that boomed predominately due to rather indiscriminate buying behaviour of the newly rich during the last few years.

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Collectibles: On What the Wealthy Spent Their Money in 2008

Luxury Collectibles Remain the Number One Passion Investment

  Jul. 22, 2009

The year 2008 took its toll on the amount High Net Worth Individuals (HNWI) spent on collectibles, with huge declines in sales of private jets, yachts, luxury cars as well art and jewellery, gems and watches. The recent Wealth Report 2009, published by Merrill Lynch Global Wealth Management and Capgemini, further details these findings along four investment areas.

  • Luxury collectibles such as automobiles, jets, yachts etc. remained with 27% of the spending as the number one area for passion investments. However, across all three main spending areas the total amount went down enormously and there no sign of recovery yet. Retail analyst Verdict predicts that the luxury sector in 2009 is headed for its worst year ever. Consumer spending on luxury good is expected to drop another 6% worldwide to $294.7 billion.

  • Fine art with 25% of the spending was the second largest field for passion investment of the HNWI (minimum investable assets of USD 1 million). For the Ultra-HNWIs with more than USD 30 million in investable assets, fine art with 27% of their spending was actually their primary field for passion investments. According to Art Market global sales of fine art auctions went down to 8.3 billion in 2008 from 9.3 billion in 2007, but it seems the art market is showing signs of recovery now.

  • Jewellery, gems and watches remained in the third place, but the amount allocated as proportion to all other passion investment increased from 18% in 2006 to 22% in 2008. This trend was led by investors in Asia and the Middle East and suggests that these “tangible” assets are regarded as safer investments in times of crisis. The International Diamond Exchange believes the worst is over and has revised their original forecast significantly upwards. Now it expects US jewellery sales in 2009 to be around the levels of 2008 and not a 10% decline, as was predicted.

  • Other collectibles (e.g. wine, antiques and coins) managed to keep an allocation of 12% of spending, but also lost out on overall spending. Six major U.S. wine auctions houses stated a further loss in sales in spring 2009, but see an increasing demand now. Same trend applies to sports investments such as in teams or racehorses, which had an allocation of 7% in 2008.

Given the experiences of previous crises it is fair to assume that basic economics of passion investments will apply once this period of economic turmoil finds its end: The numbers of HNWI will grow and so will the value of collectibles of all kind as long as they offer a considerable degree of quality and rarity. The same market mechanism applies to high-quality luxury items with a very exclusive brand name. Tougher times can be expected for “middle-of-the-road” products such as fine art of relatively unknown artists that boomed predominately due to rather indiscriminate buying behaviour of the newly rich during the last few years.