Illiquid assets

GLOBAL INVESTOR 1.15 — 57
“All successful
buying must
be based on confidence,
whether
in a dealer or
in oneself, and
the only basis
for confidence
in oneself
is knowledge.”
Robin Duthy “Alternative Investment” –
Founder of Art Market Research
Drawing attention: The rise of
Chinese contemporary art
In 2007, art collector Howard Farber sold Wang
Guangyi’s “Great Criticism: Coca-Cola (1993)”
for USD 1.59 million at Philips, having claimed to
have paid just USD 25,000 ten years earlier.
The painting was sold in late 2007 as the market
neared its peak for 63 times the reported acquisition
cost. After 2005, the auction market for
Chinese contemporary art entered a phase of rapid
development. Two years later, Charles Saatchi
was noted for selling off some of his younger
German artists collection in order to fund his
interest in Chinese contemporary art. The painting
“1998.8.30” by Lijun sold at Sotheby’s Hong
Kong in 2010 for over USD 1.2 million. Last year,
his “Publication 2 No. 4” sold for over USD 7.6
million. AMRD’s methodology enables comparison
with other art sectors, for example, as represented
by the AMRD Contemporary 100, a leading
benchmark. Set against an overview of sales of
contemporary artists across the globe, the index
reveals that sales of top Chinese contemporary
artists have been outperforming the competition
for the last five years.
Chinese Contemporary Art
versus Contemporary 100
The index, calculated on a 14MMA basis, shows
that the Chinese contemporary sector has grown
29% in the last 14 months and is back to where it
was in early 2007.
12,000
10,000
8,000
6,000
4,000
2,000
01.05 01.08 01.11 01.14
Chinese Contemporary Art top 25%
AMRD Contemporary 100 top 25%
Chinese Contemporary Art bottom 25%
AMRD Contemporary 100 bottom 25%
Investment vehicles:
Italian classics in pole position
Most of us past a certain age are likely to have
owned and subsequently lost a prized possession
that has gone on to become a valued collectible.
It seems that a combination of rekindling one’s
youth and the empty nester’s disposable income
enables enthusiasts to purchase rare items,
and this is nowhere more obvious than in the
classic car market. Prices for some classic cars
are going through the roof, and it is the Italians
that continue to lead the market. Ferrari’s
1959–1982 models have seen a 1,350% increase
in the last ten years. Maseratis produced between
1958 and 1982 have also seen some action in
the last six months, having increased in value by
over 23%. The 1946–1977 era British Triumphs
have almost flatlined in comparison, but have
continued to rise slowly, with a compound growth
rate of 3.9% over the last ten years.
Classic Cars
Ten years of market growth on a 14MMA basis
shows Ferrari outperforming Maserati by 55%
and Triumph by 84%. The Classic Car Index was
rebalanced to 1000 in 2003.
17,000
15,000
13,000
11,000
9,000
7,000
5,000
3,000
1,000
01.04 01.06 01.08 01.10 01.12 01.14
Ferrari 1959–1982 Maserati 1958–1982
Triumph 1946–1977
Watches
Growth by brand from January 2004 to December
2014 using the central 80% of data from the
AMRD Watch Index, calculated on a 14MMA basis.
The index was rebalanced to 1000 in 2003.
2,000
1,800
1,600
1,400
1,200
1,000
800
01.04 01.06 01.08 01.10 01.12
Patek Philippe Cartier Rolex
01.14
Some watches ticking upward
Luxury items tend to be one of the first things
to suffer during tough economic times. The last
financial crisis was no exception, with the highend
watch market taking a steep plunge. The Swiss
watch market is especially sensitive to economic
depressions, regularly having to target new money.
High-end wrist watches are generally a poor
economic investment. People buy them for their
beauty, but not because they think the watches
will hold or increase their value. Yet Patek Philippe,
Rolex and some Cartier watches can be exceptions,
as they have shown solid value retention.
A person buying a new Rolex or Patek Philippe
watch today has a reasonable chance of losing
little or no money on selling it in a few years.
There is a healthy auction market for vintage Rolex
and Patek Philippe watches, and a few rare models
do fetch very high prices at auction, such as the
sale of a Patek Philippe 1933 “Henry Graves
Jr. Supercomplication” pocket watch, which sold in
2014 at Sotheby’s in Geneva for CHF 23.2 million
(USD 24 million). This set a new record for any
timepiece ever sold at auction.
Pearls are a girl’s best friend
Jewelry has performed extremely well in recent
years, with the emphasis being on signed pieces,
colored gemstones, and pearls in particular. Names
like Cartier, Van Cleef & Arpels or Boucheron are
sought after as such a source usually ensures good
quality design and manufacture, as well as having
a signature and normally a unique number. This
emphasis on signed pieces is a reaction to the large
quantity of unsigned and recently made pieces on
the market imitating vintage European pieces.
Pearls have increased in value more than any other
gemstones. Historically, the world’s best pearls
were collected along the Persian Gulf especially
around what is now Bahrain by breath-hold divers
until oil exploration in the 1930s disrupted the
oyster beds. The fact that no more natural pearls
are being harvested, combined with strong interest
from the Gulf States, which value the acquisition
of heritage objects, has forced pearl jewelry prices
up to unprecedented levels – increasing by 405%
in the last ten years. With world records being
set every year, the finest jewels and gemstones
continue to be objects of desire, having the advantages
of displaying wealth, wearability, portability
and scarcity value.
Jewelry
AMRD Pearl Jewelry Index vs AMRD General
Jewelry Index on a 14MMA basis over ten years.
The index was rebalanced to 1000 in 2003.
5,000
4,000
3,000
2,000
1,000
01.04 01.06 01.08 01.10 01.12 01.14
Jewelry (general)
Pearls