Commercial and residential property group Knight Frank has published its Wealth Report for 2017 detailing one asset that the world’s richest people are beginning to stockpile. According to the Knight Frank Luxury Investment Index (KFLII) – which reveals what liquid assets the world’s billionaires are spending their money on – investment grade wine has finally beaten classic cars to the winner’s podium. The Knight Frank Fine Wine Icons Index, compiled by Wine Owners, recorded growth of 24% in 2016, compared to a relatively lacklustre 9% increase in the value of the HAGI Top Index, which tracks the performance of the world’s most desirable classic cars, noted the report.
Wine’s stellar performance was driven by exceptionally strong growth in key areas across the world and in particular the resurgence of the top Bordeaux chateaux, which form the backbone of most investment cellars, said Nick Martin of Wine Owners. “In 2015 we saw growth of around 8% for the whole of the Bordeaux region, off the back of steep declines in 2012 to 2014 following the bursting of the Chinese-induced Bordeaux bubble in late 2011.” “But 2016 was completely different. The top Bordeaux blue chips drove the entire market, growing 9% to the end of June,” he said. “Brexit turbo-charged the market due to the devaluation of sterling, feeding more positive sentiment into a market that had already been gathering significant momentum. The first growths rose a further 18% between June and November 2016, resulting in an annualised performance of over 30%.” However, despite wine’s sudden and explosive popularity there were also other familiar investment assets that the world’s richest spent their money on over the past year.
“Despite a year of slowdown, classic and luxury cars still boasted an annual growth rate of a very respectable 9%,” said HAGI’s Dietrich Hatlapa. “But set against total growth of 151% over the past five years, it is clear that the market has dropped down a few gears. Those who were in it just for the money have moved on. The market is now more in the hands of the collectors and specialists, which I think is good news for the real enthusiast,” said Hatlapa.
Several of the other asset classes that feature in KFLII also produced some record breakers in 2016, even though their overall performance was relatively muted, noted the report. The jewellery world was most notably in the spotlight this past year due to the sale of the Oppenheimer Blue, a vivid blue 14.62-carat diamond sold by Christie’s Geneva for the equivalent of almost $51 million (R660 million), making it the most expensive jewel to ever sell at auction. “This has certainly been the year of the Kashmir sapphire,” said Jean Ghika, Head of Jewellery for Bonhams UK and Europe. “They have performed well at our auctions in London, New York and Hong Kong and are among the most highly prized gems for serious collectors.”
Despite growth in wine, the KFLII, which tracks the performance of 10 collectable investments of passion, still posted annual growth of just 2% – its weakest performance since 2009’s 2% drop. The biggest contributor to last year’s slide was art, which dropped by 14% according to auction data analysed for The Wealth Report by Art Market Research. There was, however, a marked variation in performance across different genres. European Impressionist painters, such as Matisse and Cézanne, saw the largest annual drop in the value of works sold at auction, while 19th-century artists like Constable and Turner rose by 19%.
Modern and contemporary works, which have previously been the standout performers in the art index, recorded drops of 8% and 2% respectively.