Knight Frank Wealth Report 2021 appraises luxury asset performance during Covid-19 era

The Knight Frank Wealth Report 2021 provides its annual appraisal of the investing interests of Ultra High Net Worth Investors (UHNWIs) worldwide in luxury assets with the backdrop of the Covid-19 pandemic.

Despite the challenges of Covid, Knight Frank reported that global wealth remained firm last year:

  • Globally UHNWIs numbers grew by 2.4% in 2020 – albeit this represents a third of the growth of 2019
  • Asia and Australasia, where the Covid controls were strongest saw most growth in wealth
  • Some countries and territories have seen the number of UHNWIs in the population shrink

Regional UHNWI population change in 2020:

REGIONAL GAIN GROWTH REGIONAL LOSS LOSS
Asia +12% Russia & CIS -21%
Australasia +10% Latin America -14%
Africa +5% Middle East -10%
North America +4%    
Europe +1%    

Source: Knight Frank Wealth Report, March 2021

The Knight Frank Attitudes Survey findings within the report found that those individuals whose wealth had increased in 2020 had benefited from diversified portfolios with long term investment strategies allowing for any losses to be off-set by growth in other assets.

“More than ever this year has been about timing in the capital market and if you got that wrong, the chances are you got it expensively wrong. Not so for wine.”

Commenting on the resilience of the fine wine market during Covid-19, the Report reviews the collection of ‘passion assets’ that comprise the Knight Frank Luxury Investments Index (KFLII). These include fine wine, classic and super cars, Art, rare vintage watches and in the last few years whisky has stormed into the ranking, however Covid hit the rare ‘dram’ hard. The table sets out the average price growth performance for the KFLII constituents in 2020.

KFLII Asset Performance – to end Q4 2020:

Rank Asset 1 Year 10 Years
1 Luxury handbags 17% 108%
2 Fine Wine 13% 127%
3 Classic Cars 6% 193%
4 Rare vintage watches 5% 89%
5 Furniture 4% 22%
6 Coins -1% 72%
7 Coloured diamonds -1% 67%
8 Rare Whisky -4% 478%
9 Art -11% 71%

Source: Knight Frank Wealth Report, March 2021

Covid wreaked a massive impact on logistics in global markets in 2020. The sale of luxury collectibles reliant on auctions to attract investors stalled as shipments of goods ground to a halt and lockdowns prohibited physical gatherings. Sotheby’s and Christies saw the volume of their sales reduced by 26% and 46% respectively compared to 2019. Of course, online sales have become increasingly important and business plans and consumer patterns have shifted into a new way of operating as Covid has accelerated the adoption of necessary new practices.

Hermès-handbag-hunting wealthy fashionistas, primarily driven by online auction sales in the Asian market, pushed luxury handbag prices to an average 17% growth in 2020 and to the top spot of luxury collectibles in the KFLII. Some might argue Covid comfort purchases for the uber-wealthy and a relatively affordable entry point for a luxury collectible inspired this growth.

Fine wine is not reliant on auctions to facilitate trade, with a mature global trading system and mechanisms such as Liv-ex providing an exchange function, delivering pricing transparency and efficiencies that makes it the most “liquid” luxury asset – excuse the pun.  That said, extremely rare fine wine auction sales tend to grab the headlines and 2020’s most expensive took place in December. Baghera /Wines auctioned The Kingdoms, a parcel of six extremely rare Methuselahs (6-litre bottles) of DRC from the Enoteca Pinchiorri Collection in Geneva raising CHF900,000 (c.US$982K).

Top Luxury Asset Sales in 2020

ASSET Luxury investment Sale detail Price
Art Francis Bacon 1981 Triptych, inspired by the Oresteia of Aeschylus Sothebys NY June 2020 US$84.6M
Coloured diamond Spirit of the Rose 14.83 Carat – largest rare purple-pink diamond to be auctioned Sotheby’s Geneva  Nov. ‘20 US$26.6M
Car Bugatti Type 55 Super Sport Roadster Bonhams

March 2020

US$7.1M
Watch Rolex Daytona, previously owned by actor Paul Newman December 2020

New York

US$5.5M
China Chinese Yongzheng period (1722-1735) vase May 2020

 

US$4.9M
Fine wine Kingdoms Collection – Domaine Romanée Conti x 6 Methuselah (6L) Baghera/Wines, Geneva Dec 2020 US$982,343

CHF900,000

Whisky Yamazaki – 55 year old Japanese Whisky Bonhams

August 2020

US$795,000
Handbag Hermès Himalaya Niloticus Crocodile Retourné Kelly handbag Christies HK

December 2020

US$437,330

Source: Knight Frank Wealth Report 2021, Wine – Baghera/Wines

The fine wine market was extremely robust in 2020, with Liv-ex reporting record levels of trade across the year; its key benchmark, the Liv-ex 100 reaching its highest level since 2011 in January 2021. Knight Frank records key drivers for growth in 2020 as the rare older vintages of Super Tuscans, which saw an average uplift of 18%, Champagne 14%, and traditional sector leaders Burgundy delivering 11.5% and Bordeaux 5.8% respectively. These trends are consistent with the wider performance as recorded by Liv-ex.

The 2021 KFLII records 13% average one-year growth in fine wine and 127% across ten years, with data provided by Wine Owners ranking it second. Classic cars climbed the rankings from 2019, following a challenging few years, to third place at 6% growth, its longer-term performance is still very strong. Rare whisky reported a -4% decline in 2020 but this was heavily influenced by the performance of a few key bottles of Macallan, the market is still so small and illiquid that this can be the affect, but the longer term performance is strong (478% increase across ten years). Art was particularly hard hit by Covid, down -11%, and largely due to the impact on reduction of auction sales by the key houses.

Knight Frank’ Wealth Report provides an interesting insight to luxury investments, what is on trend and which assets are proven to be long-term sources of capital gain and wealth protection. Download the Report’s Appraisal on the impact of Covid-19 on Luxury Investments here

For more information on fine wine investment speak to a member of our expert team on 0203 384 2262.


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