What is an Alternative Investment?
It is said that money should never sleep; that it should be hard at work rather than languishing in an account somewhere. When running through a list of things to invest in 2023, it can be tempting to head straight for typical investments, such as stocks and shares. However, these types of investments are tied to the markets with their performance intrinsically connected to global money markets.
The financial outlook remains unsettled. Despite the receding pandemic, fuel prices and cost of living crises across many different territories worldwide are creating an uncertain landscape for any investments that are tied to the market.
Smart investors have always had their finger on the pulse of alternative investment opportunities. They have a solid understanding of alternative investments are on offer, and they are savvy enough to be able to tap into the opportunities that these can offer them. Free from market ties, these alternative assets change the motivations for looking for the best shares to buy now and encourage investors to widen their horizons when it comes to best investments in 2023.
KNIGHT FRANK WEALTH REPORT 2023
A great starting point for understanding where the movement is in terms of investment ideas 2023 is the Knight Frank Wealth Report. This is an annual report that charts the performance of money around the world. It identifies the hot spots for property investment globally, shows wealth distribution around the world and seeks to uncover where the smart money is being spent and what on. Useful for an investor looking for the best assets to buy in the UK, the Knight Frank Wealth Report takes the temperature for Ultra High Net Worth Individuals (UHNWI) and sets the scene for best alternative investments for any given year.
Also known as investments of passion, the Knight Frank Luxury Investment Index (KFLII) tracks the value of 10 such investments, including wine and classic cars. The Index offers easy analysis of the performance of alternatives investment, looking for trends and highlighting outstanding results in each category. Overall, these alternative investments rose by 16% in 2022. Not only does this outperform most mainstream forms of investment, including equities, it also clearly beats inflation.
The best alternative investments
The index assesses the types of investment for their “collectability”, with more than five of the assets analysis witnessing growth in double digits last year.
Art has emerged as one of the best investments for 2022, with a rise of 29% on the previous year. Much of this improvement can be attributed to the outstanding prices paid for several pieces by extremely wealthy collectors, which shows an appetite for pieces that would not be out of place in a world-class museum or gallery. The prices fetched at auction are relentlessly record-breaking and creates the idea of a ‘safe space’ around art investment as a viable investment for 2023. The trickle-down effect from the sales of just five separate pieces fetching over US$100 million is keenly felt by investors.
Classic cars as one of the key alternative assets also improved on their previous performance by securing a rise of 25%, which marks their greatest growth in nine years. The drivers for such a strong performance can also be traced back to key record-setting sales, with a Mercedes-Benz Uhlenhaut Coupé attracting a US$143 million price tag. As an alternative investment, classic cars had paused for breath during the pandemic with many sales going on hold. However, the sector is very much on the up once more.
In terms of alternative asset management, fewer assets are easier to take care of than watches. Perhaps this helps to explain its third place ranking Knight Frank Luxury Investment Index, with watches enjoying an increase of 18%. With no requirement for special storage and an asset that appears to benefit from a history of owners, watches continuously prove their worth as one of the best investments in 2022. The watch market is currently steered by the performance of a few watch models, with three in particular in demand – Patek Philippe Nautilus, Audemars Piguet’s Royal Oak and Rolex Daytona. While demand far outstrips supply, watch investors can be tempted into investing in other models from the same brand, which propels the entire luxury watch market. It’s telling that, in 2022, over 40 watches secured a sale price of more than £1 million. This is an increase of 12 on 2021.
With several stellar performers in 2022, there is a core of assets that offer an alternative to invest in. Our overview of investment alternatives sets out what’s worth a closer look and why.
What are the best investments in 2023?
Art Investments for 2023
Art has always been viewed as a solid and very viable alternative to conventional investments. Art’s value lies in the value the collector places in it. In addition to the fact that art investment is free from market performance, it most often remains unimpacted by the economic climate globally. Currently, art is not only displaying continued appreciation over time – charting a decade-long increase – but art has always been regarded as a credible investment. Each year is marked by a top performing piece at auction and 2022 was no exception. Andy Warhol’s Shot Sage Blue Marilyn sold for £158 million in May 2022, which not only topped the year’s performance but also 20th-century most valuable artwork ever.
Investing in art can also represent a smart move for hands-off investments. Many high value artworks are never displayed, instead being held in secure storage. With art incurring taxes – and shipping costs – during movement, the some art investors purchase their pieces and leave them in storage. Art holds its value, ready for release on sale or a secured loan against the asset’s value.
Best Alternative Investments – Fine Wine
As an investment idea for 2023, fine wine warrants close inspection. With a resilient performance through the pandemic, early figures show that initial prices, from the negociant, had risen by 11.5% from 2021 to 2022, with the UK release price sitting with a higher increase of 15.6%, due to the weaker Sterling.
Fine wine often plays a part in a portfolio where diversification features. While a good vintage from a well-regarded chateau will impact prices, wine as an asset is in a constant state of decrease. With every bottle of fine wine opened and drunk, it pushes the price of the remaining bottles up further. It’s worth revisiting your collection to assess the value held in your cellar as the 10-year performance of fine wine currently sits at an increase of 162%.
Liv-Ex, the wine price index, have noted a slight turn in the performance of fine wines, but they also make it clear that this is after a 7-year period of growth. Burgundy had enjoyed an extended period of growth before prices levelled out, however Liv-Ex have noticed a slight buoyancy in Burgundy, with the 2.0% noted as the smallest across all regions*.
Despite the oscillations between vintages and year on year prices, wine is predicted by experts to grow to the value of £368 billion by 2028.
Best Investment 2022 – Watches
When a Rolex Daytona can fetch $17.8m at auction in 2017, watches more than secure their place as a good investment for 2023 for UK investors. While the Rolex Daytona had once belonged to Paul Newman may have been a factor in its success, it can’t explain away the interest and performance across other luxury watch brands. In 2016, a stainless steel Patek Philippe 1953 secured $11m at auction, these brands and models remain star turns at auction. Luxury watches are cited as securing 18% growth in 2022, with the most expensive watch sold at auction last year a 1957 Patek Philippe 2499 which sold at Sotheby’s for £6.21 million. High end watches, and Swiss watches in particular, will always attract interest and hold their value because they both represent an effortless statement of wealth but also showcase craftsmanship and immense skill.
The sale of the Patek Philippe 2499 demonstrates that other, less-well known models will attract attention in the absence of better-known models.
Beat the Best Funds 2022 – Go for Gold
While even the best investment platforms in the UK in 2022 and onwards may continue to signpost crypto-currency and NFTs for investment, many investors are still wary of recent performances and increased instability.
Rather than hedging your bets with intangible investments, the solid presence of gold reassures many investors. In the main, gold holds its value in the longer term and notwithstanding occasional fluctuations. When the pandemic struck, the value of oil plummeted while the price of gold soared. Gold has a long history of surviving economic downturns and remaining stable through recessions, proving to be a reliable investment when stocks and shares go into freefall.
Gold’s liquidity marks it as an asset that can be transformed into cash very quickly, from selling jewellery to taking a secured loan on your gold.
Was Jewellery the Best Investment in 2022?
While high end jewellery encapsulates the genesis of success, it seems to appreciate over time, especially if your jewellery has been produced by one of the great houses, such as Tiffany & Co., Cartier or Boodles.
Investor interest in jewellery remains piqued, with buyers as equally keen to purchase single gemstones as iconic pieces, such as Cartier Panthère or a Van Cleef & Arpels solitaire diamond ring. 2022’s record was set by the rare natural pink Williamson Pink Star diamond, weighing 11.15 carats, which fetched £46.5 million at Sotheby’s, securing the stone’s place in the most valuable gemstones ever sold at auction.
Classic Cars – The Best Investment in 2022?
Classic cars, for many, represent the more enjoyable side of investment and bring together collectors’ passion investments and smart decisions making. Classic cars may be considered experimental in portfolio diversification, however, recent performances show that it is a risk that seems to pay off. With a 10-year increase in value across classic cars and 25% growth in the last 12-months, classic cars can make a very fun and very astute investment.
Whether classic cars take their value from their design and engineering or from their place in pop culture – consider Mr Bond’s Aston Martin DB5 – it pays to know what makes and models are worth the investment. While supercars are sold from the forecourt with million-pound price tags, preowned vintage and classic cars are securing hundreds of millions at auction, with a 1955 Mercedes 300 SLR fetching over $143 million in 2022.
Handbags – The best collectables to invest in 2022?
Deemed “recession-proof” by finance experts Credit Suisse and Deloitte, designer handbags by makers, such as Hermès and Chanel, can appreciate significantly over time. Appreciated 74% over the last ten years, with a 15% increase the last year alone, the designer handbag market is estimated to reach £80 billion by 2026. As with high end luxury watches, the majority of the growth in designer handbags will emerge from a small handful of producers, especially Hermès.
Last year’s record was also the all-time record when Sotheby’s secured £290,000 for a Himalayan Kelly 25. This is a dramatic increase from Sotheby’s own reports that a new Birkin bag could fetch between $12,000 and $23,000. While many people buy handbags for the pure love and aesthetic pleasure, a well curated collection could be worth hundreds of thousands.
Release the value in your alternative investments
At Suttons and Robertsons, we have experts that excel in many of the alternative asset markets, whether that be a watch, a work of art or a classic car. If you have a luxury asset that you would like to release funds from, simply walk in or make an appointment we can have a valuation for a loan offer with you in 24 hours.