F. Scott Fitzgerald famously observed that the very rich "are different from you and me." To which Ernest Hemingway is said to have responded, "Yes, they have more money." A second rejoinder might be that the ultra-high-net-worth types can afford more desirable investments. Coutts, a British private bank and wealth management firm has compiled an index of "passion investments," made up of posh stuff – vintage cars, fine art, classic Rolex watches and luxurious homes – which have together outpaced the growth in value of global stock markets since 2005.
The Coutts Objects of Desire index is drawn from 15 asset classes, made up of prime city real estate (London mansions or Manhattan penthouses), leisure property (St. Tropez villas or Swiss ski chalets) and a range of alternative investments from vintage Ferraris to ancient Chinese paintings. The index has been put together with the collaboration of Fathom Consulting and with the help of experts, including Savills, the realtors and Mei Moses, compilers of a fine art value index. Taken together, the Coutts index shows a capital value increase of 82 per cent since 2005, compared with a rise of 53 per cent in the MSCI All Country Equity index over the same period.
For those of us whose investment portfolios don't extend to Impressionist paintings and vintage Bentleys, the revelation that toys for the rich might actually be good investments, as well as exquisitely ego-boosting, is doubly infuriating. However, the index is more interesting than an act of voyeurism because, although the collective value of the objects has risen strongly, there are big differences in performance among the various asset classes. For example, while classic cars and vintage watches had done very well (up 257 per cent and 176 per cent respectively since 2005), rare musical instruments are flat in value terms. In the Fine Art category, traditional Chinese painting is up more than 160 per cent, while other categories, from modern art to Old Masters, have risen more modestly, up to 50 per cent or not at all.
What the index ultimately shows is that buyers are getting richer, and that the cultural mix is changing. Quentin Marshall, head of advisory at Coutts, points to the huge expansion of investment capital in the Far East, which explains the stellar performance of traditional Chinese painting as new money chases ancestral heritage. Meanwhile, the flight of capital to prime city residential real estate is shown in the real estate segment. Billionaire homes in world cities performed poorly up until 2008. Then they raced ahead, doubling in value as equity markets recovered and the wealthy in emerging markets converted natural resources into precious art and artisanal goods.
In the end, it's all about supply and demand – an expanding wealthy class that is getting every richer, chasing a finite supply of exquisite objects of desire and the homes to put them in.
Carl Mortished