8
HNWI ALLOCATIONS OF INVESTMENTS OF PASSION
T
he World Wealth Report
4
, previously
produced by Merrill Lynch Wealth
Management and Capgemini, now by
RBC Wealth Management and Capgemini,
covers Investments of Passion, what they
refer to as IoPs, on an annual basis.
According to the 2009 issue of the World
Wealth Report
4
, the financial crisis and
uncertainty that followed had a marked
impact on the spending patterns of high
net worth individuals (HNWI) and their
spending (and investment) on passion
assets. Although globally spending patterns
varied, on a whole this group of investors
cut back on their spending on luxury
goods and collectible items during 2008.
But the impact of this was relatively short
lived, with HNWIs “cautiously” returning
to passion investments in 2009, although
demand remained weaker than before
the crisis in many categories of assets.
Traditional mainstream investments proved
to be very volatile during the credit crunch
and subsequent economic recession,
leaving many investors facing significant
losses. Those that looked to passion
assets for diversification approached the
sector as “investor-collectors”, looking for
tangible assets as a long-term store of
wealth. Even prior to 2008, passion assets
were rising in value due to increasing
demand from emerging Asian markets –
particularly newly wealthy Chinese and
Indian investors. As the global economy
continues to recover, there are signs that
this demand is picking up once more.
The Wealth Report does not include rare
stamps in its IoP classification, but coins are
included under “Other Collectibles”. Globally
this category of other collectibles accounted
for 24.4% of HNWI’s allocation to IoPs in Q1
2013, but there is a large variation across
geographic regions. The most popular
category across all regions is jewellery,
gems and watches – assets which are likely
to be considered more mainstream.
There have been attempts to measure the
performance of passion assets, most notably
from Coutts who compile the “Coutts Index:
Objects of Desire”, and Knight Frank who
compile the “Knight Frank Luxury Investment
Index”. Both indices show strong performance
from passion assets as a whole, with both
stamps and coins proving to be some of
the most steady and reliable performers.
INVESTMENTS OF PASSION
Q1 - 2013
* Represents coins, wine, and antiques, etc. ** Represents sports teams, sailing, race horses, etc.
*** Represents automobiles, boats, jets, etc.
Other collectibles*
Sports Investments**
Art
Luxury Collectibles***
Jewellery, Gems,
& Watches
Middle East
and Africa
Latin
America
Europe
Japan
Asia-Pacific
excl. Europe
North
America
0%
20%
40%
60%
80%
100%
Asia-Pacific
Global
Average
17.1%
17.1%
7.3%
23.6%
35.0%
34.2%
31.7%
30.8%
33.5%
30.3%
31.6%
19.0%
15.2%
16.8%
29.7%
16.2%
19.6%
15.8%
10.6%
8.3%
17.7%
12.2%
11.8%
17.3%
9.4%
4.7%
19.1%
30.6%
8.0%
16.9%
24.4%
23.0%
15.4%
26.2%
19.8%
Investments of passion, or passion
assets, encompass anything that is
tangible and is not a financial asset (it is
not a collective investment scheme, the
asset is not securitised in any way and
there is no income stream for traditional
valuation models to be applied to). They
are essentially high-value luxury items
that people take pleasure from owning.
Examples of passion assets include:
Antiques
Furniture
Chinese ceramics
Vintage watches
Jewellery
Fine wine
Fine art
Rare coins
Rare Stamps
Classic Cars
Source: Capgemini, RBC Wealth Management, and Scorpio Partnership Global HNW Insights Survey 2013
Note: Chart numbers may not add up to 100% due to rounding
