29 April 2024
For most people, owning a classic car or having a dram from one of the world’s rarest bottles of whisky might represent a lifetime ambition. But, for the fortunate few, investing in these items has become a pastime in itself.
While owning one of these items might be impossible for anyone beyond the super affluent, wealth manager RBC Brewin Dolphin said there are lots of ways investors can get exposure to the growing demand for these goods, without having to spend a fortune on fine art, designer handbags, or coloured diamonds.
Despite a tough economic backdrop, figures from Bain & Company estimate the overall global luxury market reached a record value of £1.3 trillion (€1.5 trillion) during 2023, representing up to 10% growth on 2022[1]. Part of the reason for this is the growing number of wealthy people – between 2002 and 2022 the number of millionaires in the UK increased from around 720,000 to 2.56 million[2].
In fact, last year saw number of new records set. A bottle of Macallan Adami 1926 sold for £2.2 million[3], which was a new high for rare whisky. Even more esoteric items grabbed headlines: a sword owned by 18th century Indian ruler Tipu Sultan sold for £14 million – an auction world record for an Indian and Islamic object, according to auction house Bonhams[4].
Over the long term, prices for luxury goods and collectibles have been a lucrative investment. Knight Frank’s Luxury Investment Index – a closely followed tracker of luxury goods – found an average price change of +100% across the 10 categories it tracked during the last decade[5].
However, it was not all plain sailing. Knight Frank’s index fell into negative territory at the end of 2023[6] – the second annual decline since its inception. The price of rare whisky bottles fell -9% in the previous 12 months, while vintage cars averaged a decline of -6%.
Rob Burgeman, senior investment manager at RBC Brewin Dolphin, said: “The luxury goods bubble burst a bit last year, as the cost of borrowing rose, cash became tighter, and markets for high-end products slowed – even though a few new records were set, it was not an easy time for everyone involved in these markets as Knight Frank’s index shows.
“While headlines are made by new records for bottles of wine and whisky, historic objects, and one-of-a-kind designer handbags, you have to remember these items appeal to very specific buyers and the markets are often highly illiquid – in other words, they are difficult to sell if and when the time comes. You also have to have a high degree of knowledge to know what collectors are looking for and what separates the great from the merely good.
“A simpler way of getting exposure to these markets is by investing in the shares of companies that produce these goods. That comes without the costs and complications of actually buying, owning, and selling items like a vintage car or a coloured diamond. You can either do that by directly buying shares in business aimed at the well-heeled or looking at some of the funds that specifically target these markets.
“Remember, though, that putting all of your eggs in one basket can lead to a lot of risk – even if companies that serve the super wealthy feel like a safe bet. Speak to a professional adviser who can put together a range of assets that will help provide you with exposure to these types of areas within a balanced portfolio.”
LVMH – Rob said: “LVMH owns a broad range of luxury brands, such as Louis Vuitton to Dom Pérignon. So, while it might be one company, it is really a collection of different businesses offering exposure to markets ranging from spirits and watches to yachting and fashion. It is a favourite of lots of funds that favour quality growth companies and it comes with the safety net of providing a 1.5% dividend yield[7]. The shares trade at around €800 each, which is not cheap – but it is certainly less expensive than many of its products.”
Ferrari – Rob said: “Listed on the New York Stock Exchange, Ferrari is one of the world’s most iconic car marques. It is synonymous with vintage cars, in particular, and has such a strong brand that there is a waiting list for those who want to own one. At more than $400 per share, you can invest in the company at a much more affordable price than buying one of its cars – although there is only a modest dividend of 0.6%[8].”
Compagnie Financiere Richemont – Rob said: “Richemont, the Swiss company behind iconic luxury brands like Cartier and Dunhill, is a family-spirited group which nurtures and develops its brands through exceptional management – rather than simply buying global brands, it aims to create them. As a company focussed on jewellery and high-end watches, it is strongly positioned to tap into this segment of the luxury goods market and the strong fundamentals it is seeing. And, as the luxury market slows down globally, the company’s focus should help it to weather any storms in the sector relatively well.”
Diageo – Rob said: “Diageo might not be the first company that comes to mind when thinking about luxury product. But, while it is probably better known as the owner of Guinness, Johnnie Walker, and Baileys, it also has premium spirits like Talisker among its portfolio. With more than 200 brands served in over 180 countries[9], Diageo is well diversified and doesn’t rely on any one type of customer too much. At around £28 per share[10], you can pick up a reasonable stake in Diageo for the cost of a 45-year bottle of Talisker, which retails at around £4,500[11].”
Amundi S&P Global Luxury ETF – Rob said: “If you like the sound of all these companies, they are all included in Amundi S&P Global Luxury ETF, which provides exposure to a range of luxury brands. Hermès is its top holding, followed by Richemont, and LVMH, which between them cover some of the world’s most sought-after names in spirits, jewellery, and fashion. However, the fund has underperformed its benchmark over the last five and ten years[12], which reflects the relatively high concentration of a few companies within the portfolio and the fact that it comes with a fee – albeit, a relatively modest one at 0.25%[13].”
– ENDS –
Rob Burgeman and his fellow investment managers at RBC Brewin Dolphin put together bespoke investment portfolios for clients based on their long-term objectives and their attitude to risk. The portfolios will have a mixture of hand-picked holdings in them including third party funds and individual stocks that are researched and recommended by RBC Brewin Dolphin’s in-house research team.
The value of investments, and any income from them, can fall and you may get back less than you invested., Neither simulated nor actual past performance are reliable indicators of future performance. Performance is quoted before charges which will reduce illustrated performance., Investment values may increase or decrease as a result of currency fluctuations., Information is provided only as an example and is not a recommendation to pursue a particular strategy., We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk., Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.
RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Financial Services Commission. Registered Office: 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales company number: 2135876. VAT number: GB 690 8994 69.
PRESS INFORMATION
For further information, please contact:
Peter McFarlane peter.mcfarlane@framecreates.co.uk / 07412 739 093
Siân Robertson sian.robertson@brewin.co.uk / Tel: +44 (0) 20 3201 3026
NOTES TO EDITORS
About RBC Brewin Dolphin
RBC Brewin Dolphin is one of the UK and Ireland’s leading wealth managers and traces its origins back to 1762. With £51.8* billion in assets under management, we offer award-winning, personalised wealth management services from bespoke, discretionary investment management to retirement planning and tax-efficient investing.
Our qualified investment managers and financial planners are based in 33 offices across the UK, Jersey and Republic of Ireland. They are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.
As part of Royal Bank of Canada (RBC), we are now able to draw on the strength of a global financial institution to continue to improve the service we provide to our clients and drive further innovation across our business.
*as at 31st October 2023.
About RBC
Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 94,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 17 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.
We are proud to support a broad range of community initiatives through donations, community investments and employee volunteer activities. See how at rbc.com/community-social-impact.
[1] Source: Bain & Company
[3] Source: Smithsonian Magazine
[5] Source: Knight Frank
[6] Source: Knight Frank
[7] Source: Hargreaves Lansdown
[8] Source: Hargreaves Lansdown
[10] Source: Hargreaves Lansdown