Alternative Investments: Breaking Down How They Rank Globally

When it comes to where people are placing their money these days, the trend is clearly shifting away from your traditional stocks/shares, bonds, and so forth in favour of assets with more explosive growth potential. At this stage of 2021, you’ve probably grown weary of hearing about cryptocurrencies and NFTs. But have you ever considered other kinds of alternative investments? As in the luxury kind.

What is an alternative investment?

An alternative investment is a financial asset that cannot be categorised as a conventional investment, i.e. stocks/shares, bonds, cash. According to Investopedia, this may encompass anything from private equity or venture capital, to hedge funds, managed futures, arts + antiques, memorabilia, commodities, derivatives contracts, and sometimes even real estate.

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The Pros

• Counterbalance to your more conventional assets
• Portfolio diversification – not all your eggs will be in a single basket
• Inflation hedge – protects you against money’s decreasing purchasing power
• Potentially high reward

The Cons

• Difficult to value & not clearly priced
• Illiquid – harder to move, try selling off just 10% of a vintage car to pay off the Amex
• Unregulated & often without the usual avenues of recourse if things go south
• Potentially high risk

The Current Landscape

Knight Frank surveyed over 600 private bankers, wealth advisors, and family offices last year for its 2021 Wealth Report.

Art reigned supreme all around the world, proving to be the most popular in just about every region with the exception of Africa and Asia (where it still placed a respectable second). In terms of total value, the global market is estimated to be worth as much as US$64 billion / AU$82.5 billion (as of 2019).

But if we’re really talking about value, art needs to step aside for rare whisk(e)ys, which holds the most impressive 10-year rate of appreciation. That’s more than classic cars, watches, even diamonds. In other words, you might want to hold off on cracking open that Macallan and save it for a rainy day instead.

Here’s a break down of the categories as per the Knight Frank Luxury Investment Index…

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Global Average Ranking of Luxury Alternative Investments (Popularity)

1. Art
2. Classic Cars
3. Watches
4. Wine
5. Jewellery
6. Rare Whisk(e)y
7. Furniture
8. Coloured Diamonds
9. Coins
10. Handbags

Global Average Ranking of Luxury Alternative Investments (10-Year Growth In Asset Values By %)

1. Rare Whisk(e)y – 478%
2. Classic Cars – 193%
3. Wine – 127%
4. Handbags – 108%
5. Watches – 89%
6. Coins – 72%
7. Art – 71%
8. Jewellery – 67%
9. Coloured Diamonds – 39%
10. Furniture – 22%

Now check out how each category ranks based on geography below.

Source: Visual Capitalist