New asset class threatens advisors

New asset class threatens advisors

New asset class threatens advisors It’s a disturbing trend among ultra-high-net-worth investors that threatens to limit the amount of investible assets they hand over to advisors.

Global real estate consultancy Knight Frank launched it 2015 Wealth Report Saturday in Hong Kong. One of the key highlights of the report, which focuses on Ultra High Net Worth individuals (UHNWI), is that investments of passion, especially from UHNWIs located in Asia, are expected to grow dramatically in 2015.

So, what exactly are investments of passion?

These are investments of a more tangible nature such as classic cars, art, wine, etc. According to Knight Frank’s report, 61 percent of UHNWIs are interested in becoming more involved in investments of passion in 2015.

Of the tangible assets most attractive to investors, art is number one followed by watches, wine and classic cars.

While the Wealth Report still places a focus on property and equities, investments of passion will take money away from other assets such as cash, bonds, gold and other precious metals. The declining demand will put pressure on the assets under management of UHNWI advisors.

Chris Williamson is chief economist for Markit, a global financial information services provider that trades on NASDAQ under the symbol MRKT with a $5 billion market cap. H’s got an interesting opinion regarding investments of passion.

“Even seven years after the crisis, there are still opportunities available,” says Williamson. “Alongside this, it is no surprise to me that investments of passion have performed so well of late. If you can only get a low rate of return, you might as well invest in something you enjoy. My vote is for classic motorcycles.”

Investments of passion have become so popular that Knight Frank has a Luxury Investment Index that tracks a theoretical portfolio of 10 investable luxury assets. The index itself rose 10 percent in 2014 with classic cars leading the way up 16 percent on the year. Over the past decade the index has achieved a total return of 205 percent with classic cars once again leading the way up 467 percent.

The worst performer in the index? Antique furniture, which saw a decline in 2014; and over the past decade as well.

So, if your client tells you that he or she is going out to look at cars, while you might think to point out they’re a money pit, think again, because according to Knight Frank, classic cars are where the real money is.

It’s too bad advisors can’t benefit from this trend.