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Posts tagged Treasure Assets

Dig Deep Into “Treasure Assets”

By JJ Burns

January 15, 2013

Have you ever dreamed of owning a 1965 Aston Martin like the one driven by James Bond in the movies? Or a 17th century Stradivarius? A piece of your favorite sports team? It may not be as far-fetched as it once seemed. Increasingly, well-heeled investors are diversifying by adding a special kind of alternative investment—known as “treasure assets”—to their holdings.

Although you probably can’t afford the top items on your wish list, you may still be able to indulge your inner fantasies. In fact, some private funds allow investors to pool their money to buy treasure assets. A firm will typically charge a 2% administrative fee in addition to taking a healthy cut of any profits, but the cost may be well worth it to aficionados.

Realize, however, that these undertakings are highly speculative and not for the faint-hearted. Frequently, items are illiquid and have no real intrinsic value. And commissions and other fees can eat into any gains you might eventually realize.

Still, for some investors, pride and joy trumps other factors. In any event, treasure assets should represent only a small part of your overall portfolio. Keeping that in mind, here are three hot buttons.

1. Classic cars.

It’s well-known that most cars lose value as soon as you drive them off the lot. But vintage automobiles can be an exception to that rule. According to the Historic Automobile Group International (HAGI), vintage Ferraris rose 28% in price during the first 10 months of 2012, while Porsches climbed 15% in value. The HAGI index of the top 50 classic cars shows prices increasing almost 64% since 2008.

2. String instruments.

An auction house sold a 1721 Stradivarius violin for almost $16 million in 2011. Maybe you will have to lower your sights, but investments in other string instruments, including vintage electric guitars, are available. A 2011 study tracking violin sales showed an average annual return of about 3.5% between 1850 and 2008 after inflation adjustments, and concluded that the instruments have a slight negative correlation with stocks and bonds (in other words, violin prices tend to rise when the value of those other assets falls).

3. Wine.

This category is attracting attention as an inflation hedge with potential for growth. But investing in wine is risky enough to drive you to drink. The Liv-ex 100 Fine Wine Index, which tracks prices of 100 top wines worldwide, says it has produced an annualized return of 10% since 2002. However, the index is down nearly 10% for the first 10 months of 2012.

Other treasure assets, such as interests in major and minor league sports franchises, may strike your fancy. But be aware that glamorous investments are more likely to produce personal enjoyment than a steady return. View these offerings with your eyes wide open.