Listen to this article
Ferraris and Porsches have comfortably outperformed many leading global hedge fund managers over the past decade, with returns from the world’s top marques driving classic cars to triple-digit returns.
According to the Knight Frank Luxury Investment Index, investors in luxury cars saw returns over five and 10 years to March 31 2016 rise to 161 per cent and 467 per cent respectively. Figures from Preqin, the data provider, reveal the average hedge fund over the same periods reported returns of 4.75 per cent and 7.83 per cent.
While individual fund managers posted higher gains over 12 months than alternative investments, classic cars nonetheless reported returns of 17 per cent, compared with a drop of almost 2 per cent in the average hedge fund.
Auction prices have also remained high for many luxury cars. In February, a 1957 Ferrari 335 Sport sold for more than €32m (£24.7m), a euro-denominated record for the most expensive racing car purchased at auction.
Yet while the market for high-end marques remained relatively strong, experts warned that supply was fast catching up with demand and returns had started to slow. In the year to date, luxury cars posted growth of just 1.06 per cent.
“The number of cars that are being offered has risen significantly,” said Dietrich Hatlapa, founder of the Historic Automobile Group International. “We have more auction houses and more auctions. One-day auctions are now over two days, and the number of dealers has more than doubled over the past five years.”
Buyers were paying greater attention to provenance, Mr Hatlapa added. “People are into originality — and that’s what they will pay a high price for.”
He cited one recent example: a 1953 Jaguar XK120C C-Type sports-racing, two-seat roadster that sold at Bonhams in Monte Carlo for €7.25m in May this year.
Fritz Kaiser, executive chairman of Kaiser Partner, a Liechtenstein-based wealth manager, advises clients on alternative assets and collects cars himself. Among his collection are a 1956 Mercedes-Benz 300SL Gullwing and a 1959 BMW 507.
Since some of the froth may be coming off the market for investors, these have become good times for collectors, Mr Kaiser said. “If you think that you will buy a Ferrari and it will double or triple in price over the next to two or three years, I’m not sure that would be the best advice. But if you are a collector, then now is a good time to buy.”
Investors in other luxury assets would have also seen their portfolios rise. Over 10 years, wine has risen 245 per cent, while over five, coins are the second-highest performer, returning 73 per cent. Art has performed well over the decade, posting gains of 206 per cent, but, reflecting the slight downturn in the overall market, has returned only 16 per cent over five.
Andrew Shirley, the wealth report editor at Knight Frank, warned that classic car investors and collectors had become more selective in recent months. “It is reflective of any market that has been going up for a long time: prices reach a level at which people will step back a little bit,” he said.
“You have seen it in the art market, where you have had very high prices at auction but now people are not willing to pay those prices unless they are for the very best works of art.”