In a crunch, don’t forget the classics
Art, wine, stamps and jewellery are booming amid the economic gloom, says Gwyn Jones
Saturday 16 August 2008
First-half results this year for banks might be depressing reading, but it's a different story for the auction houses, which are notching up ever increasing sales in their best-selling categories – including art, furniture and jewellery. As equity markets plunge and rising inflation erodes the value of cash savings, alternative markets are worth a look.
World records just keep on being broken in the art market. Sotheby's art sales are up 14 per cent against 2007, Christie's up 10 per cent. The latter's Impressionist and modern art sale in London produced the highest ever sales total for an art auction held in Europe: not a market hit by a credit crunch. There's no squeeze on the finances of the person who paid nearly £41m this year for Monet's Le Bassin aux Nymphéas.
The big growth is from the world's emerging economies: China, India and Russia. But at the lower end, new markets are still emerging within the UK. Bonhams held an urban art sale in February at which 500 people turned up, battling to buy works by artists such as Banksy.
For those of us without a spare £30m or so, there is the option of art funds. These investment vehicles include the Fine Art Fund (www.thefineartfund.com), whose 30-strong team travels the world buying and selling art. So far, the fund can boast more than 20 per cent compound returns per annum. To invest in its general fund you'll need a minimum of £125,000, but that allows you to have a share in a Picasso or a Bacon, something most individual investors would never be able to do. There's even a fine art hedge fund in Guernsey.
Though art has seen some meteoric rises, that might not continue. The advantage is that there is a very limited supply. And if you can afford to buy works themselves, then you get a great painting or sculpture to enjoy – whatever the market.
Diamonds may be a girl's best friend, but they have all sorts of friends in times of economic uncertainty. With gold prices at a record high, investors have turned to another tangible commodity – high-quality jewellery. "Diamonds provide timeless elegance in a fast-moving fashion arena and, in many instances, maintain their worth," says Mich-elle Gonsalves of Bonhams.
The value of diamonds has more than doubled in the past four years; good quality, single-stone diamond rings are commanding particularly strong prices. Christie's have recorded a very strong jewellery market as well; a sale in June realised the highest total for any jewellery auction held in the UK. Jewellery has a worldwide market, which protects its value, but avoid items that are fashion dependent; classics are more likely to retain value.
A practical investment that can also be (carefully) used is antique furniture. It's been a mixed market in recent years, though. The Antique Collectors Club's furniture price index had, from its inception in 1968, always beaten other tracked investments – until 2002, when it plummeted. It is the lower end of the market that has fallen: Victorian furniture is 40 to 50 per cent down on 2001, particularly the reproduction Georgian stuff mass-produced in the 19th century.
However, like most areas of the antique world, the top-quality end, where pieces are bought more as works of art, continues to rise. Quality will always sell: the Kenure Cabinet by Thomas Chippendale, for example, sold for £2.7m in June at Christie's, a record for British furniture (in fact, at the same auction, three other works surpassed the previous record). Gonsalves recommends the somewhat more affordable firms such as Gillows, Holland & Sons and Lamb of Manchester.
Christie's is enjoying its most successful year to date in fine wine. "There has been growing demand from traditional European and American buyers, and a resurgence of Asian interest," says spokesman Rik Pike. James Reed, wine expert at Sotheby's, agrees. "We were slightly worried a couple of years ago after there was a surge of interest in wine investment funds for pension plans, and then the UK Treasury took away the tax-free status – but that didn't have an effect. The credit crunch hasn't had an impact, and we've had a very good year despite wine duty increasing and a fall in sterling against the euro."
Prices are very strong particularly for the blue-chip wines such as the five first-growth Bordeaux chateaux – Margaux, Latour, Lafite-Rothschild, Mouton-Rothschild and Haut-Brion – and the top Burgundies, such as Domaine de la Romanée-Conti. However, Reed cautions that only the top stuff is selling really well.
Buying bottles or cases isn't the only way to invest in wine. En Primeur, offered by some of the top Bordeaux vineyards, allows investors to buy wines as futures. The vineyard will offer an amount of a new vintage at a set price; if it turns out to be a fantastic vintage, then you'll make money.
It is essential, as in all specialised areas, that you invest only with expert advice. One way to do this, as with art, is to buy into an investment fund such as the Vintage Wine Fund (www.vintagewinefund.com). This spreads the risk across a huge range of wines, though there is an obvious downside – you can't drink any of it.
Over the past 50 years, rare stamps have averaged an annual return of 9.5 per cent, according to Adrian Roose, investment director at Stanley Gibbons (www.stanleygibbons.com). The company's top 100 stamps index still shows healthy gains for the first half of this year, up nearly 6 per cent. There are about 48 million stamp collectors worldwide, 18 million of them in China. British stamps are in demand as this was the first country to issue them.
Stanley Gibbons offers an investment vehicle for people who don't want to buy their own stamps. It's not a collective fund; rather, you tell the company how much to invest and it chooses the best stamps for you. It recommends only about 200 stamps – the rarest – for investment purposes.
"We can't see any reason why stamps won't continue to rise purely on a supply-and-demand basis," Roose says. "Supply is diminishing; one collector lost a £250,000 collection in a fire, for example. And we keep getting new customers. Ten years ago we had 950 new customers a year; last year, it was more than 23,000."
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