Look but don't touch: investing in alternatives

4 mins
Share via

In what feels like a former life I spent a decade in the US working in the world of single-malt whiskies. These were glorious days of being paid to drink (albeit responsibly!) and an opportunity to enjoy rare whiskies, other spirts and wines for all of the right reasons – to savour the quality, experience the flavour profiles and most of all to enjoy the fellowship with other enthusiasts.

Over those 10 years I amassed many bottles – samples, gifts, and releases I bought. Where are they now?  Every bottle is gone. Drunk, gifted or donated. What is the problem you might ask? Well, this all occurred in the ‘noughties’ just as whisky was becoming collectible, stocks were constrained, and values were increasing.

Suffice to say, before I move on to the wider point of this article, when I walk into Hedonism in London to buy a bottle, I must walk quickly past multiple locked display cabinets lest I glance upon one of the bottles I no longer have.

Earlier this year, Knight Frank published their annual ‘Wealth Report’ which includes a section on “Passions” described as “the universe of the world’s most passionate collectors”. In the report they look at 10 categories – art, cars, watches, handbags, wine, coins, jewellery, furniture, coloured diamonds and finally that category dear to my own heart, rare whisky bottles. Combined, the value of those 10 investment categories rose by 16% during 2022, managing to beat inflation and at the same time outperforming most mainstream investment classes, including equities and gold.

In 2022, art was the top performer with a growth of 29%. That art figure goes some way to explain why, in the same report, Knight Frank reveal that 59% of UHNWIs in their attitudes survey are looking at investing in art in 2023.

The $195 million auction of Andy Warhol’s 1964 silkscreen painting Shot Sage Blue Marilyn helped fuel that growth. At the same time, he reclaimed the title of most expensive American artist at auction and the man behind the second most expensive work ever to sell at auction.

Motoring on to classic cars, as the second-best performer of the index with category growth of 25%, the highlight there was the $143 million sale of a Mercedes-Benz Uhlenhaut Coupe.

And finally, in third place the watch market with 18% growth with 40 watches selling for over £1 million.

Knight Frank’s use of the word ‘passion’ is a good one. Deciding what to collect, taking much more than a passing interest in the category, educating yourself and spending time with fellow collectors is something which only enhances the experience. Passions are best when shared and that is where I think that not all alternative investment categories are equal.

You may be ahead of me already.

Cars are made to be driven (preferably at speed on an open road), watches are there to be wound, worn and displayed as we go about our business, handbags used daily, furniture sat on, oh and whisky very much drunk. The true enjoyment of all these items comes through their consumption or use. If used or owned by someone with notoriety or fame in the case of a watch or a car that could add value, but wear and tear will ultimately depress that value, especially if there are other examples in ‘mint condition’.

And then there is art.

Art is consumed only with the eyes. It is a zero-contact passion. Of course, the immediate environment will impact artwork over time but that can be mitigated, as all the while the art can still be enjoyed by tens, hundreds, millions of people each year. Exhibited in the ‘right’ place, an artwork can even gain in value: featuring in a major exhibition, hanging in a leading museum or the home of a celebrated collector are all net positives.

There is also another fact worth reflecting on, a piece of art is genuinely unique – cars, watches, wine less so. Returning to whisky for just a moment the ten year growth figure for rare whisky bottles is some 373% which addresses the chagrin in my opening paragraphs.

It is enough to drive a man to art.

Sign Up