Collectibles are in increased demand by U.S. high net worth investors, but is love or money driving the market?
Interest in "treasure assets" such as precious jewelry, fine art, antiques, classic cars, precious metals has risen among these households in recent decades, fueled by high profile sales. Last month, a version of Edvard Munch’s iconic The Scream sold for an unprecedented $120 million at Sotheby’s in New York after a period of bidding that lasted just 12 minutes. It is one of a handful of paintings that have exceeded the $100 million benchmark, among the Picasso’s “Nude, Green Leaves, which sold for $106 million.
In 2011, a Roy Lichtenstein painting its owner bought 13 years earlier for $2 million sold for almost $40 million, These are fairytales come trie and the world of collectibles thrives on them, notes a new Barclay’s Wealth Insights series report.
But with the exception of previous metals, these collectibles are more likely to be held for emotional rather than financial reasons. Eighty-two percent of high net worth households said that they hold their collectible treasures in part for enjoyment, while less than one-quarter (23 percent) hold them for purely investment reasons. Just one-fifth (21 percent) hold these assets as security or protection in case of the failure of conventional assets.
Almost one-third (32 percent) of respondents said they will reduce the number of types of collectibles they hold over the next five years in a desire to liquidate assets, realize returns or carry out estate planning. Emotional attachment, however, will thwart efforts to “declutter.” This factor impacts the sale of collectibles with U.S. investors requiring an average price of owning an asset to trigger a sale, Barclays found.
The report detailed regional differences in collectibles:
· U.S. high net worth investors in the West hold 9.7 percent of their total in wealth in collectibles, the highest concentration across the four regions.
· Precious jewelry, fine art pictures and fine art tapestries hold the most interest
· Southern investors prefer precious jewelry, fine art pictures and antique furniture, and hold only 7.9 percent of their total wealth in collectibles, the lowest concentration.
· Southern investors are also more likely to report financial motivations compared with other regions, with 11 percent of their treasure held for pure investment or as financial security.
· Thirty-nine percent of Northeast investors’ treasure is held for heirloom motivations and 38 percent for cultural motivations.
But it’s not just the high net worth who have an interest in collectibles. According to fourth quarter wealth level studies conducted by Millionaire Corner, collectibles are also the most popular of alternative investments for 19 percent of households with a net worth between $100,000 and $1 million (not including primary residence). They are most popular with baby boomers ages 55-64 and seniors (20 percent each).
The most sought-after collectibles amongst these investors include currency or coins (which might include previous metals), followed by art and automobiles. Older investors, our research found, go for artworks and currency or coins, while investors under the age of 55 are fielding collections of sports memorabilia, which generally, cost less than the average Warhol or Picasso.
One exception is automobiles, which have a profound hold on the American psyche and are. most popular with the under 55 crowd as well as seniors, perhaps trying to recapture the heyday of the American muscle car.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.