March 22, 2023

Treasure Hunting: Discover The Pleasures of Passion Investing

The only asset class that is guaranteed to bring you happiness - passion investments are made to be enjoyed, and the appetite for them has never been stronger. Out-shining all other luxury collectibles, including vintage Ferraris, Rolex watches and the great Bordeaux wines, in 2022 art came out on top as the best-performing passion investment. Let’s take a closer look at the exciting, enticing world of passion assets.

Passion assets are luxury collectibles that appeal to us on an emotional level. They are often treasures that we acquire because we love to own them. These investments bring great satisfaction and pleasure to their owners.

Very few make passion investments solely for financial reasons, so what are the key motivators? From watches, jewellery, wines and cigars to classic cars and fine art, some are driven purely by passion, while for others it is a mix of head and heart. As stable stores of wealth that symbolise our passions and interests, luxury collectibles are undoubtedly the most satisfying form of portfolio diversification. And it goes without saying that it is incredibly rewarding when a personal passion also proves to be a great investment.

Damien Hirst, For the Love of God, 2007

Paper Wealth vs an Original Banksy or a Vintage Porsche

While acquiring assets that are financially valuable, intellectually stimulating and culturally significant is a tradition that dates back centuries, today passion investments are integral to an individual’s net worth. This is particularly true in times of economic instability and high inflation, when paper wealth is perceived as increasingly risky. Whether it’s an original Banksy, a vintage Porsche or a pristine Patek Philippe, the fact that passion investments are real and tangible is incredibly reassuring.

Banksy, Christ with Shopping Bags, 2004

It is this desire for familiarity, coupled with uncertainty over traditional investments, that is driving investors to allocate more of their wealth to luxury collectibles, with the figures revealing a seismic shift in investor thinking. According to Knight Frank’s recently published Wealth Report, in 2023 some 59% of Ultra High Net Worth Individuals are looking to invest in art, buoyed by the fact that the value of the art market soared by 29% in 2022.

The Pleasure Scale: Can I Enjoy my Luxury Collectibles?

Deciding on which passion assets to invest in of course depends on where your passions lie, and this is where collecting gets exciting. From acquiring a highly coveted Hermès Birkin handbag to hunting down a rare vintage of Chateau Pétrus wine, passion investments are pieces of treasure, to be enjoyed and appreciated.

David Shrigley, Wine, 2021

According to Knight Frank, which tracked 10 key passion investments for its Luxury Investment Index, all saw growth in 2022, with art the top performer, followed by cars, watches and handbags. What is often not discussed, however, is how passion investments can depreciate in value or, in the case of luxury cigars, go up in smoke, if you choose to enjoy them. Driving a classic car or wearing a watch that very few people own might rate highly on the pleasure scale, but the only way to maintain their condition is by not enjoying them, which should always be kept front of mind when contemplating the different types of passion investments.

Art: An Investment to Appreciate as it Appreciates

If all this talk of passion investments has fired up your imagination, fine art is a great place to start your journey. Dominating the world of passion assets, the art market accounts for almost three-quarters of sales of collectibles – a total of $50-70 billion, according to Deloitte.

Why are more people attracted to collecting art than any other passion asset? The reasons are myriad. Arguably the most inspiring of all the asset classes, art can offer the best of all worlds: enormous aesthetic pleasure, significant cultural value and great returns over time.

The only class of passion investment that doesn’t decrease in value through use or consumption, art is low maintenance in every way. Whether you choose to hang it or keep it in storage, with minimal safekeeping it is investment ready for immediate appreciation, unlike vintage cars, which are incredibly high maintenance, and that’s before you have to hunt out that elusive spare part.

Andy Warhol, Marilyn (F. & S. II.23), 1967

Taking up a fraction of space compared to the garages required to shelter vintage cars or cellars to store wine or whiskey casks, art is both a space saver and joy bringer. Whatever your motivations are for investing, art has the potential to appreciate in value while appreciating it yourself on the wall of your home or office, and that puts it in an investment class of its own.