Clas­sic cars as an as­set class

Finweek English Edition - - On The Money Motoring -

The col­lec­tor car mar­ket has evolved from a hobby made up of col­lec­tors and en­thu­si­asts to a high­pro­file in­dus­try now recog­nised by so­phis­ti­cated col­lec­tors and in­vestors as an al­ter­na­tive as­set class.

Aside from buy­ing a clas­sic car out­right, frac­tional own­er­ship or in­vest­ment into a car fund port­fo­lio have emerged as plat­forms for ac­quir­ing or shar­ing in a clas­sic or col­lectable car and its po­ten­tial pro­ceeds.

But clas­sic spe­cial­ists are quick to cau­tion about con­fus­ing “col­lect­ing” with “in­vest­ing”, the down­side of which they say can be sig­nif­i­cant. “Some­times what you don’t know [about the car as an in­vest­ment] is more im­por­tant than what you do know” [about the car as an ob­ject of pas­sion], says a car fund spe­cial­ist.

Leon Strüm­pher, port­fo­lio man­ager with San­lam Pri­vate Wealth, says lux­ury items like art and clas­sic cars are an im­por­tant part of di­ver­si­fy­ing the port­fo­lios of high-net-worth in­di­vid­u­als (HNWIs).

“Lux­ury in­vest­ments like art and cars have a very spe­cial place in a port­fo­lio. They need to be looked at and taken se­ri­ously,” he says. But, he adds, if a lux­ury “in­vest­ment” does not re­turn some­thing bet­ter than prime plus in­fla­tion, then it’s not an in­vest­ment.

In­vest­ing in a clas­sic car can be a bit of a ride into the un­known, so in­dices like HAGI and Hagerty that mon­i­tor val­u­a­tion trends in the clas­sic car world are vi­tal for pro­vid­ing re­li­able data for would-be col­lec­tors or in­vestors.

Bet­ter than gold?

The growth in the val­ues of clas­sic cars has been stag­ger­ing over the past decade. Over the last 10 years, clas­sic cars have topped the Knight Frank Lux­ury In­vest­ment In­dex post­ing a re­turn of 362%, out­pac­ing the 195% posted by gold and 82% by eq­ui­ties (JSE All Share In­dex).

Per­for­mance, though, has plum­meted over the past 12 months. Still, while the Porsche mar­que dropped 0.1% in value in the last 12 months to May 2017, the Fer­rari and Mercedes-Benz mar­ques have grown by 1.6% and 16% re­spec­tively, ac­cord­ing to HAGI.

Ex­perts ex­pect the val­ues of spe­cial, iconic cars (per­haps 1% to 5% of the mar­ket) to con­tinue to rise due to their fi­nite numbers and in­creas­ing de­mand for them.

Car funds

Car funds, like those of­fered by Chrome Strate­gies Man­age­ment, in­vest in some of the world’s most iconic cars, re­ly­ing on ap­pre­ci­a­tion in value to gen­er­ate re­turns. The min­i­mum in­vest­ment re­quire­ment of many funds − gen­er­ally $100 000, €100 000 or £100 000 – is daunt­ing for non-HNWI in­vestors. Of more con­cern is the lack of trans­parency around many so-called car funds.

“There are plat­forms that call them­selves funds but are not in a true sense ac­tively man­aged port­fo­lio funds,” says Tommy Roes, man­ag­ing di­rec­tor of The Carfind­ers In­ter­na­tional.

Un­like coun­tries like the UK and US, South Africa does not cur­rently have a car fund that al­lows for par­tic­i­pa­tion by lo­cal in­vestors. But one is in plan­ning. In devel­op­ment is the TCF Pri­vate Eq­uity fund, an op­por­tu­nity for lo­cal and in­ter­na­tional in­vestors to par­tic­i­pate, with lim­ited li­a­bil­ity, in an ac­tively man­aged, re­turns-based port­fo­lio of col­lectible cars. ■

*Knight Frank Prime Cen­tral Lon­don Res­i­den­tial In­dex **Knight Frank Lux­ury In­vest­ment In­dex

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