“MORE THAN JUST BUSINESS”
Non-conventional assets are rapidly emerging as a category that has caught the interest of ultra high net worth individuals
An avid golfer, Rajmohan Krishnan is the Principal Founder and Managing Director of Entrust Family Of ce Investment Advisors.
In July 2017, India’s “vaccine billionaire” Cyrus Poonawalla acquired a pencil portrait of Mahatma Gandhi for £32,500 (approximately ` 27 lakhs) during an auction at Sotheby’s. The portrait shows the great leader seated, intensely focused on a chore, while in the UK for the 1931 Round Table Conference. What makes this artwork truly special is that Bapu himself has inscribed it with the words ‘Truth is God/MK Gandhi/4.12.’31’. Asked why he would want to acquire the sketch, Poonawalla said that it was an opportunity to bring a work of such historical value back to India.
Empirical evidence suggests that every billionaire reaches a point where mere returns pale in comparison to the passion stoked by an investment. Apparently, at high thresholds, the law of marginal utility becomes as relevant in money matters as mangoes.
Welcome to the world of nonconventional assets. It’s as exciting as it is amorphous. New asset classes have been deemed worthy of investing in the last few decades and the panorama is only widening. Before we begin exploring this world, we have to divide them into two broad categories: Material investments and Experiential investments.
As per a 2016 study conducted by Lloyds Private Banking, one in six investors now holds collectibles such as watches, coins, stamps and wine as part of their portfolio and the upper limit for these assets might be as high as 25 per cent of the total portfolio. Let’s have a quick round-up of the pros and cons associated with such non-conventional assets.
While conventional wisdom states that we must never be emotional while investing, recent market trends show that the return on investment (ROI) from nonconventional (some would say exotic) asset classes far exceeded that from traditional asset classes. Yes, passion is proving to be protable, as is evident in the nonconventional assets at a glance table.
True, only a small percentage of
ultra-high networth individuals (UHNIs) pursue these assets for pure nancial gains. But even the others might experience the thrill of spotting winners from a distance. This adds to the thrill of owning assets that are less cerebral and more heartfelt.
In December of 2016, legendary singer, bestselling writer, philanthropist and successful businessman Jimmy Buffett made public his desire to travel to space. He said he wanted to commemorate this exciting journey John Glenn who became the oldest space traveller in 1998. What adds weight to Buffett’s desire is his friendship with Richard Branson – the mercurial billionaire who himself is eyeing the innity that is staring at us.
Buffett is not the only ultra-rich who wants to scale this nal frontier. A citizen’s expedition to space might become a reality soon, but it’s unlikely that non-millionaires can afford this trip in the foreseeable future.
What is clear is that UHNIs want to invest in experiences, just like the rest of humanity. In the colonial era, travel to unknown destinations was left to the likes of Columbus and Vasco da Gama while the monarchs who sponsored their journeys (Ferdinand I/ Isabella II of Spain and John III of Portugal respectively) awaited word, anticipating nancial gains and delectable stories.
Today, the richest amongst us don’t have to rely on proxy narratives. They can create their own. Because they know that while lying on their deathbeds, greatest investments will show up in their memories.