For some, investing in watches, wine, or stamps, beats stocks and bonds
- POSTED: 22 Aug 2014 22:57
- UPDATED: 22 Aug 2014 23:31
Alternative assets are gaining in popularity with a certain group of investors, but experts advise that such collectibles are by no means risk-free.
SINGAPORE: With conventional investments suffering from a low interest rate environment, alternative assets like including watches, fine wine, and rare stamps have grown in popularity.
One investment option is a Bulgari Daniel Roth watch, which can tell you the time by the number of chimes it makes. There are only 30 pieces of this particular model in the world, and if you are prepared to fork out S$400,000 for one, a watch investment fund manager says the return can be as high as 10 per cent after just one year.
Mr Dominic Khoo, a partner in The Watch Fund, explains how his business works: "We pre-select watches, we buy them first, we give them out to investors when investors come in, and then the investors hold on to them, until one fine day the shoppers buy from them. The Watch Fund takes a fee every time a buyer and a seller is made."
Alternative assets also include collectibles like investment-grade stamps that are very rare - only about one in 100,000 stamps falls into this category. This June, stamp-investing made headlines when a British Guiana One-Cent Magenta postage stamp from 1856 sold for a record US$9.5 million (S$11.8 million) at Sotheby's.
If you invest through a trader like Stanley Gibbons, a portfolio of five to seven stamps can cost at least S$30,000. Starting with an office in Hong Kong in 2011 and one in Singapore in 2013 - Asia now makes up a quarter of the business for the 158-year old British firm.
Mr Marco Kaster, Investment Director of Stanley Gibbons, says the firm has different indices that have shown compound annual growth rates that range from 5 to 13 per cent, depending on the year. However, he notes, "the interesting thing about investing in rare stamps and coins is that it's completely uncorrelated with what happens in the economy. So in 2008, when pretty much the whole world collapsed, three out of our four indices on Bloomberg actually went up by 35 per cent.”
These alternative investment firms and structures also can help clients exit or monetise these investments, by selling on their behalf, or matching them with buyers. Wine investors, for instance, can tap on the expertise of wine merchants, auction houses, and wine exchange forums if they want to monetise their cellar, says Mr Ian Lim, Business Manager and Chef Sommelier of The Straits Wine Company.
Alternative investments come with associated risks however, and experts say these assets remain the domain of private wealth clients and professional investment managers. Some fund managers believe alternative assets should only make up less than 5 per cent of one's portfolio. Including private equity funds and hedge funds, this proportion could be bumped up to 15 per cent.
Said Mr Jack Wang, a partner at Lexico Advisory: "Some of these asset classes are only suitable for private (bank) clients, and accredited investors. For retail clients, I think they should not look at some of these asset classes because it's too risky and they may not have the skill to evaluate." Instead, ordinary retail investors looking for exposure to some of these assets can consider exchange-traded funds and mutal funds, he suggested.