Property investment specialists, Knight Frank, have just published the 2019 edition of their annual Wealth Report which is recognised as one of the few independent sources of publicly available information on private wealth investment trends and what assets interest and influence Ultra High Net Worths (UHNWs) and High Net Worth (HNW) investors around the world.
The 2019 Report looks at property and the top luxury investments’ data from the 12 months of 2018 and a cumulative ten-year performance. Consistent Fine Wine remains a top three luxury investment in terms of performance but it has to be the winner when you look at liquidity, transparency and the ability to convert to cash.
For the first time Whisky makes an entry into the Knight Frank Luxury Investment Index (KFLI), showing a 40% growth last year and 582% uplift across the last ten years. Auction sales of rare single malts have hit the headlines and the sale of the single bottle of 1926 The Macallan with the hand painted bottle design by Michael Dillon, which sold for US$1.5million, was a classic example. (Image: Chateau Pavie Cellar: photo Mr Serge CHAPUIS.)
The whisky investment trend has gathered some momentum in the last few years and new Asian consumers and collectors are a key driver of this movement. This current surge in demand may have parallels to the demand for Bordeaux through the late noughties, which drove the market in the First Growths in particular to unnaturally high values which subsequently impacted negatively on the wines of the region during the market correction in 2011 – 2014.
The extreme rarity of supply of single malt whisky with the pedigree to attract investment is initially the significant factor in terms of the values being achieved. Other considerations are that there is very little liquidity in the market, there are questions over valuations and the tax treatment is not as advantageous as that enjoyed by fine wine. That said, Knight Frank have included a sizeable commentary on whisky as an investment asset, no doubt a result of its performance last year, which may largely have been influenced by the 1926 The Macallan / Dillon sale.
Of the ten luxury assets included in the KFLI, rare coins tend normally to be a bit of an ‘also ran’, but in 2018 there was some interest in the market which produced a 12% average growth with the headline sale of the 1621 Polish 100 ducat for US$2.2million.
TOP LUXURY SALES IN 2018:
|ASSET CLASS||ITEM||VALUE||AUCTION HOUSE|
|Art||David Hockney: ‘Portrait of an Artist (Pool With Two Figures)’||US$90million||Christies|
|Whisky||The Macallan 1926, Michael Dillon||US$1.5million||Christies|
|Jewellery||The Marie Antoinette Pearl Pendant||US$36million||Sothebys|
|Watch||The 1970 Rolex Daytona ‘Unicorn||US$5.9million||Philips|
|Classic Car||1962 Ferrari 250 GTO||US$48.4million||Sothebys|
|Fine Wine||1 75cl bottle of 1945 Domaine de la Romanée Conti, DRC||US$558,000||Sothebys|
|Stamps||A 1918 Jenny Invert 24 cent. stamp||US$1.6million||Robert Seigel|
|Coins||A 1621 Polish gold ducat||US$2.2million||Christies|
Source: Knight Frank Wealth Report 2019
Fine wine is consistently in the top three luxury investments acquired by UHNWs and HNWs around the world. The asset topped the KFLI in the 2017 Knight Frank report which reviewed performance over 2016. This was, of course, the year of the Brexit referendum vote which triggered a movement in Sterling and demand for tangible assets which saw fine wine see average growth of nearly 30% in that year. Last year’s Wealth Report covered 2017 and fine wine was ranked second behind Art in the KFLI, this as a result of the record breaking sale of Leonardo da Vinci’s Salvator Mundi for US$ 450million ($500million including auctioneer’s commission). This 2019 Report’s review of 2018 activity sees fine wine ranked third, with average 9% growth and demonstrating the asset’s consistency as a top performing luxury investment.
The philanthropic investments of the super-rich and the potential impact of the application of new innovations is also touched on and the report touches on block chain which we see of particular interest when it comes to provenance and the prevention of fraud. Block chain could provide an easily consultable public record which could simplify ownership and the potential to solve some of the challenges involved with the ownership and trade of luxury collectables.
Knight Frank include an Attitudes Survey in their Report which is based on responses from 600 private bankers and wealth advisors who manage over US$3trillion between them for their UHNWI clients. Key observations from the survey which was undertaken in October and November last year in regards to luxury assets such as fine wine are that:
- a global average of 28% of their clients actively own investments of passion
- an average of 4% of their clients wealth was invested in luxury assets
- forecast this to grow by 5% in 2019
- they expect 39% of their clients to start investing in luxury assets in 2019