Investments in wine, fine art and even sports teams are on the rise as a growing number of investors look to participate in, and profit from, their areas of interest, according to _Knight Frank’s Wealth Report 2012_. Philanthropy forms part of this trend, with charitable giving also on the rise.
The report notes that the proportion of high net worth individuals (HNWIs) expressing an interest in fine art investment has risen by 25% compared to two years ago, while interest in wine investment has increased by 11%. Much of this growth is driven by the Asia-Pacific region, where the percentage of HNWIs expressing interest in alternative asset classes during 2011 rose by 15% for jewellery, 32% for fine art and 29% for wine.
HNWIs in Asia-Pacific are not alone in turning to art. Thirteen per cent of HNWIs in Europe and Russia have expressed greater interest, alongside a 25% increase in Latin America. The credentials of art as an asset class are strengthening: last year the Mei Moses World All Art Index grew by more than 10% and has consistently outperformed equities since 2000. While investors continue to look at new works, the current focus is on ‘blue chip’ art — quality artists with established track records.
Wine has also performed strongly since the credit crunch. The value of the LIV-EX 100 wine index has risen by around 66% over the past five years, although it has experienced volatility, falling by 15% in 2011. Nonetheless, the Knight Frank report points out that since 1988, the index has delivered a positive return in all but one five-year period.
Sport is another area receiving growing attention from HNWIs, although interest is currently concentrated among North Americans. While buying a sports team may appear extreme or highly specialised, it is far from unusual. According to Knight Frank, all but a handful of the world’s 50 most valuable sporting franchises, as compiled by _Forbes_, are owned by wealthy individuals or families. Such acquisitions are not merely aspirational; they can also be highly lucrative. Media rights, stadium ownership and merchandise sales can all generate significant returns.
**Eastern interest**
While interest in sports ownership remains strongest in North America, foreign investors from China and Russia have increasingly explored opportunities to acquire US teams.
“Wealthy families appear to be increasingly willing to pursue opportunities wherever in the world they exist, and we expect to see rising levels of foreign ownership — in both directions.”
Knight Frank also highlights the Indian Premier League (IPL) as a clear illustration of global enthusiasm for sports investments. When franchises for the first eight IPL teams were sold in 2007, they attracted intense interest from Indian HNWIs seeking a glamorous investment, selling for a combined total of almost US$750 million. With some teams commanding potential local fan bases of more than 100 million people, the opportunities were clear.
“According to Brand Finance, the enormous interest in the competition saw the IPL brand rise in value to almost US$4 billion after just four seasons. As a result, when two additional teams joined the league in 2011, they raised more than US$700 million. When it comes to investments of passion, Asia-Pacific appears to be the region to watch.”
