The Art Of Investing In Alternative Assets

Lego,
instruments, classic cars and baseball cards are among the
alternative investments University of Auckland finance
lecturer, Gertjan Verdickt, discusses in his new book The
Passion Portfolio: Investing in Style.

Co-authored
with Jürgen Hanssens (senior manager at KPMG Belgium and an
avid Lego collector) the book details the mechanics behind
the world of ‘passion’ investing.

The researchers
offer readers an understanding of how the prices of passion
investments evolve, along with the factors that drive these
changes.

“We want to help people navigate these often
opaque markets, where transactions are infrequent, and where
in some instances, exclusivity, rather than transparency, is
both the norm and the value driver,” says Verdickt, whose
investment portfolio includes wine.

Verdickt and
Hanssens discuss the pros and cons of various investments:
wine, Lego, whisky, watches, bags, jewellery, art, stamps,
instruments, vintage cars, precious metals and baseball
cards.

They provide average historical annual returns
by examining at least twenty years of data for each
object.

Of all the investment options, whisky comes
out on top with an average annual return of 17.52 percent.
In second place is baseball cards, which posted an average
annual return of nearly 13 percent compared to the stock
market’s 10 percent.

Research suggests that adding
collectibles like whisky, baseball cards, or Lego to an
existing stock portfolio can reduce overall portfolio risk,
says Verdickt.

Each chapter of his book follows a
structured approach, examining the advantages and risks of
different asset classes, their historical returns and key
factors that influence their value. Readers can learn about
the authentication process, assess long-term investment
potential, and gain insights into platforms that track
pricing.

While passion investing can be lucrative,
it’s also less regulated than traditional markets,
increasing the risk of fraud. As such, Verdickt and Hanssens
discuss how to spot counterfeit goods. They also explore
arbitrage – where investors can take advantage of pricing
discrepancies across different markets.

A
well-documented provenance and pedigree, says Verdickt, can
significantly increase the value of an alternative
investment and, in turn, boost its likelihood of being
sold.

The finance expert says passion investments
require patience and expertise. “Unlike stocks, which can be
sold at the click of a button, luxury assets are illiquid. A
work of art is resold only once every nine years on average.
Wine appreciates over decades. These are long-term
investments that demand both knowledge and
time.

“Lego, on the other hand, is accessible to
everyone, with relatively low initial capital required
compared to many other collectibles.”

Because demand
for Lego sets remains high, while supply is relatively
limited, it’s a more liquid investment than most other
alternative assets, he says.

“The book is for
investors looking to diversify beyond traditional
securities,” says Verdickt. “It’s also for people who are
keen to put their money into something they love, something
that’s
tangible.”

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