THE 1957 Ferrari 250 GT 14-Louver Berlinetta is a beautiful car with a stunning price tag. One of just eight remaining examples was due to be auctioned at Pebble Beach Automotive Week in California on August 17th. It has a guide price of $9m-11m, and could easily fetch more if previous auctions are a guide. An index of the 50 finest and most valuable Ferraris, Porsches and other marques compiled by the Historic Automobile Group increased by 53% in the two years to July 2013.
Vintage cars are not the only collectables for which prices are racing ahead. Price indices for vintage wine, fine art, rare stamps, precious coins and even classic guitars and violins have for the most part done well, too. The Economist has collated recognised indices for each of these assets to create a “valuables index”. We have weighted each asset in the index according to rich individuals’ holdings, as reported by the wealth-management arm of Barclays: 36% fine art, 25% classic cars, 17% coins, 10% wine and 6% stamps. Instruments are not reported by Barclays but we assume every self-respecting plutocrat has at least one vintage Gibson Les Paul on his wall: the final 6% is equally weighted between guitars and violins.
Our index has shot up by 211% in nominal terms since 2003 and by 54% since the first quarter of 2009. In comparison, the MSCI World, a rich-world stockmarket index, has increased by 147% since 2003, including income from dividends (see chart on next page). Funds are springing up to meet investor demand in everything from wine, the largest collectables market, to equine bloodstock. Stanley Gibbons, which has been publishing stamp catalogues since 1881, hopes to set up a £15m ($23m) stamp fund this year. Anchorage Capital in London plans to launch a $100m fund for classic guitars.
Comparisons between these exotic items and other assets can mislead, however. Philip Hoffman, the boss of the Fine Art Fund, which manages $210m in assets for 100 clients in 23 countries, takes art indices with a pinch of salt since they only include auction sales, where prices tend to go up, and not the private sales where losses are quietly realised. “As a guide indices are useful but way off accurate,” he says. His fund buys 90% of its art privately.
Whereas the cost of purchasing and owning equities is negligible, valuables have high transaction costs and need to be insured, stored and maintained. Funds charge hedge-fund-like fees. Illiquidity is another problem. Offloading something like a 1957 Ferrari is not easy, and most funds lock in investors’ money for at least five years. Those wine funds that do allow quick redemptions invest in the most traded grapes, like Bordeaux.
At least investors can derive more enjoyment from owning valuables than they can from a framed share certificate. Art can be admired, and vintage cars can be driven—albeit carefully. Classic cars clock up only 80 miles (130km) a year on average, according to Hagerty, an insurer.