Alternative Investments

Wine, art and cars: alternative investments that could give your money a boost

Investors are turning to assets they can sip, hang on their walls or even take for a Sunday drive.

By Oliver Rahman

Wine, art, vintage cars and ethical funds have all become popular ways of investing capital that, left in a savings account, would be at the mercy of economic downturns and in-terest rates.

Alternative investments like these can hold or increase their value. And often have a tangible appeal that investments like ISAs simply don't. Although, remember that the value of your investments can fall as well as rise and you could get back less than you invested.

Ethical portfolios are also attracting some investors, with products such as those offered by Wealthify seeing competitive returns.

The art of wine investment

Tom Gearing, managing director of Cult Wines and a former Apprentice contestant, believes more people than ever are considering non-traditional assets.

"Keeping your money in the bank isn't necessarily keeping you above inflation. With the current Brexit situation as well as things going on in the US, things change very quickly."

He adds that one of the many benefits of wine investing is that there's already an established marketplace.

"On a day-to-day basis these wines are trading and this is being recorded and people can see the prices." He argues the barrier to entry can be much lower than other assets.

Tom says it may be easier to break into the top tier of wine investments than it is for classic cars, for example.

"There aren't many other asset classes where you can say that. You can buy Domaine de la Romanée-Conti, you can actually buy the names that are associated with the pinnacle of wine-making. How many people can actually afford say a classic Ferrari?"

Cult Wines' 2018 Alternative Investment Report 1 reveals that wine saw returns of 9.2% in 2018, compared with -13.8% for commodities and -4.8% for hedge funds. 

The report also highlights how alternative investments have become more established. 

For example, the world's second largest university endowment, The Yale Endowment, went from allocating 35 percent of its capital in alternative investments in 2001, to 50 per-cent"

Tom attributes this increased interest in alternatives - in part - to the 2008 Financial Crisis' impact on investors.

"I think the real nadir for wine and other alternative markets came when a lot of investors lost confidence in traditional asset classes."

Alternative investment: A fine art?

Fine art is an established alternative for investors seeking a tangible asset that can be displayed and enjoyed. And while in the past art may have had a high barrier to entry, investment platform Maecenas harnesses blockchain tech to offer investors part ownership of artworks.

"A more recent trend with technological advances that came with electronic trading is that dealing with certain types of traditional investments is not so attractive anymore," says Marcelo García Casil, Maecenas CEO and founder. 

Marcelo says that blockchain eliminates concerns that some investors may have about ownership of assets.

"When it comes to mobile assets that you can move around that don't have a central register, then you potentially have a trust issue. Blockchain is something that can be trusted and gives investors confidence - it's a central register of ownership."

He argues that it's a more democratic channel for investors who would otherwise have been forced to invest in lower-value artworks.

"The value proposition that we bring is we allow investment for a wide range of people with different budgets- anything from maybe a grand to £50,000. It's opening up this very interesting and potentially lucrative market to a wider audience."

He advises investors considering art to see it as a way of diversifying a portfolio - not as the basis for an investment strategy.

"It's mostly a capital appreciation play. With recessions coming and going, art can be a good shield against the systemic risks that are created by the shifting economy."

Investing in ethical

While in the past ethical investment may have struggled to appeal to investors, research by Wealthify 2 revealed that 54 percent of investors are now looking for "ethical credentials". The research also reveals ethical investments could bring in new investors, as 32% of people who had never invested before said they would consider investing ethically.

Alternative and ethical investments can also be used as a basis for pensions, too. Aviva now offers ethical pension investments based on the Aviva Stewardship Funds - the UK's first ethical funds.

Classic cars: a road to riches?

Collecting classic cars isn't just for enthusiasts - it can be a road to riches for some buy-ers.

Clive Robertson, a solicitor with experience collecting classic cars as well as having raced at Caterham, says they have the potential to offer fantastic returns.

"A starting point to consider is that in the last ten years, classic car values have risen by 289%, which compared with any other category is significant," he says.

However, some investors simply love the fact that they can put their money into an assets they can enjoy.

"I think the decline in money values has led people to, in part, crystallise their pension funds because the returns are so poor," says Clive. 

"A lot of people have thought, well, if I buy a classic car with my cash I take out of my pension, I'd rather have some fun out of that and drive it, and it might even go up in value."

He says  one of the more recognisable examples is British classic the Jaguar E-Type.

"So if you bought an E-Type ten years ago you might have paid £50,000 for it and you might have sold it ten years later for £100,000."

So what kind of vehicles are sought-after and which ones are more likely to leave first-time investors out of pocket? 

"I think there has been a considerable rise in 50s, 60s and 70s cars being seen as quite glamorous and fashionable," says Clive.

He adds that rare classic Ferraris are continuing to hold or increase their value. Whereas more numerous vehicles like Austin Healeys and Jaguars can be less sought after. 

"I know some people who've done very well out of classic racing cars and so on - they can dramatically increase their value over time."

However, for first time investors without expertise, buying a vehicle can be a risky pro-cess.

"If they're not expert buyers and they don't do their research, the chances are they might buy at the wrong price or they might by something that's not what it's purported to be."

Clive advises investors considering a classic car to do their due diligence before making a decision.

He also says that many prospective buyers are feeling cautious in the current political climate.

"I think Brexit has put dampers on a lot of things. A lot of people are watching and waiting for the market to settle, to work out when it might be a good time to start thinking about buying again. But that will hopefully happen in the near future."

Take a look into alternative investments alongside the more traditional. You may find they offer a better shelter for your money in these uncertain times.