Investing in passions

The Mei Moses Fine Art index, a benchmark established to reflect art market trends, reported a negative performance between 2012 and 2013.

The majority of art funds are based in China but since 2013, China’s art investment boom has slowed down with an estimated $169m (£110m) raised in 2013, compared with $529m (£344m) in 2012. This is due to stricter government regulation of shadow-banking. In 2014, a total of 72 estimated funds and art investment trusts were in operation globally, and 55 of these were in China.

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The Deloitte report on Art & Finance points to a slowdown in the growth of art funds in recent years. According to a survey conducted by Deloitte, only 8 per cent of wealth managers are currently offering advice on art investment funds, down from

26 per cent in 2012. The survey also shows 67 per cent of collectors see art investment funds as a diversification tool and a way of gaining broader exposure to the art market, while 61 per cent said art funds could offer professional management with strong investment discipline and a focus on value.

Investing in wine

Classified as a ‘wasting asset’ under the UK tax rules, investment in fine wine does not attract any capital gains tax (CGT). A wasting asset is one with an expected life of less than 50 years. This is also a reason to look at fine wine as an investment.

According to The Wine Investment Fund (TWIF), an asset-backed investment that invests only in wines from the Bordeaux region, prices of fine wine stabilised in August this year. The Liv-ex Fine Wine 100 index, which represents the price movement of 100 of the most sought-after fine wines shows performance has been on the decline since 2011. A monthly index, it is calculated using the Liv-ex Mid Price for each component wine.

Graph 2 shows the performance of Liv-ex Fine Wine 100 index from 2011 to 2015. Analysts at TWIF believe fine wine prices can shrug off the travails of the world economy and China in particular. A report from London-based research group Wine Intelligence found that the global sales of fine wine are no longer as skewed to Asia as they were.

According to the report, the USA was now the most attractive wine market, followed by Germany, Japan and the UK, with China slipping to sixth place. The countries are ranked using a combination of economic and wine market measures such as ease of doing business and sophistication of the supply chain.

“With lower volatility and low correlation to other asset classes (such as equities, gold, oil), wine offers investors risk-reducing portfolio diversification,” says Andrew Della Casa, director of TWIF. “When the investment is made through a properly constituted vehicle managed by a professional manager with a clearly defined investment philosophy and demonstrable track record, the investor benefits from the manager’s accountability and has the added advantage that the risk within the asset class is reduced though their subscription being pooled in a large, well-diversified portfolio,” he adds.