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The Treasure Trend and Passion Investing | Signs of the Times?

Jun. 27th, 2012 | Comments 0 | Make a Comment   
A thing of beauty is a joy for ever:
Its loveliness increases; it will never
Pass into nothingness...


When John Keats wrote these lines in 1818, he did not know how right he was, and just how much that his words anticipated an emerging cultural and fiscal trend 194 years later. In May 2012, Edvard Munch’s The Scream sold for a record USD$120 million at Sotheby’s in New York after a period of bidding lasting just 12 minutes, which really means before many could sit down and get settled, the work of art had been sold. It became one of a very few paintings that have exceeded the USD$100 million. Others in this club included Picasso’s Nude, Green Leaves and Bust, selling for for USD$106 million in 2010.

In 2011, a painting by Roy Lichtenstein sold for almost USD$40 million. Thirteen years previously, its owner purchased the artwork for just USD$2 million. In 2011, Gimcrack on Newmarket Heath by George Stubbs sold in London for USD$36 million; the painting had been previously purchased in 1951 for USD$20,000. Such stories of sales and purchases of these collectibles allure a certain kind of investor, especially when broader financial markets seem so capricious. 

These are just a few examples of an economic trend and type of investor that has emerged in recent years, whose motivations have been explored by Barclay’s Bank in their Wealth Insights series. On June 11 of this year, the fifteenth volume called Profit Or Pleasure? Exploring The Motivation Behind Treasure Trends was published, with the research conducted by Ledbury Research. This report looks at how high net worth individuals globally are holding or are seeking to hold what Barclay’s calls ‘treasure assets’—jewelry, fine art, classic cars, and antiques. Many of the statistics underscored the deeper significance of passion investing, especially and understandably prevalent during this time of economic uncertainty. (Photo courtesy of Sotheby's)

First, some of the conclusions of the Ledbury Research:

1. Currently, wealthy individuals hold an average of 9.6% of their total net worth in treasure assets although, in some countries, this share is as high as 18%.

2.Precious jewelry, fine art and antiques are the most popular categories in terms of the number of people who own them. The most costly pursuit is the ownership of classic cars. 

3.Relatively few wealthy individuals own treasure solely for its financial characteristics. Just 18% of the treasures that survey respondents own are held purely as an investment and only 21% are believed by their owners to provide financial security if conventional investments fail.

4. The emotional motivations for this type of asset can be grouped into three categories: enjoyment, social, and heritage. 

According to Ledbury research, enjoyment is by far the most important motivation for owning treasure. Almost two-thirds (62%) of the treasure owned by respondents is held because of the pleasure that it brings them. The enjoyment motivation comes out on top everywhere with the exception of Saudi Arabia, India and Qatar—where financial motivations are more important. It is also particularly strong amongst older respondents.

Dr. Greg B Davies, Head of Behavioral Finance at
the Wealth and Investment Management division
of Barclays, says, “We have seen evidence of wealthy investors moving closer to their home markets when investing and into simpler financial instruments. The increased focus on treasure assets is part of that same trend and represents a general move toward simplicity, familiarity and tangibility. Treasure is important to people first and foremost for personal reasons, not financial ones. Owning these items is largely about enjoyment of life and has far less to do with financial motives or the achievement of financial goals.” (Photo courtesy of Metropolitan Museum of Art)

Yet, owning treasure assets can also be socially motivated, certainly an adjunct of the enjoyment motivation. About one-fourth of the treasure held by the survey respondents is held for social purposes, like sharing with friends and displaying interested others. Also, wealthy individuals acquire treasure for its heritage value. These individuals enjoy their assets, and want their descendents to enjoy them also.

If the results of this research need immediate external validation, it appeared to come this week with an article in Reuters that was reprinted in Luxury Society. The headline was 'Anxiety Rises And Wealthy Rush To Swiss Banks.' The intriguing article dealt with how many Swiss banks were, for the first time, running out of safe deposit boxes for the customers to store their precious assets, some of the “treasure” using the Barclay’s term. Written by Catherine Bosley, she quotes Bruno S. Frey, Professor of Economics at the University Of Zurich: "So much money has been pumped into the system that people are worried about inflation down the road, you counter that by buying real assets of material value."

I wrote an article for Luxist on September 20, 2010 on Passion Investing, and mentioned many websites that deal with this type of asset engagement. I quoted Dr. Jim Taylor, whose words still ring very true. At the conclusion of his keynote speech at the 2010 American Express Publishing Luxury Summit he said, "For our customers, the purchase of a luxury good is not a casual act. Its sends a message about who they are...in that regard, luxury is not a category. It is the point in virtually every category, from soup to systems, that distinguishes the sublime from the merely excellent. There's a moment of sublime luxury where the product symbolizes the way we feel."

It seems even more true now, two years later, that the trend of treasure acquisition, one of whose roots may be passion investing, is creating a redefinition in the asset management lexicon, engaging those investors to rediscover, through the simplicity of enjoyment, the sublime from the merely excellent. (Photo courtesy of Smithsonian)
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