It isn’t everyday that your finical advisor suggests a garage full of classic cars for your portfolio. For those lucky enough to have made good money investing in hedge funds, it might be time to take a second look at that cool ’69 Porsche in the neighbor’s driveway. Investing in classic cars may bring a higher rate of return. According to a study from the Knight Frank Luxury Investment Index, classic cars far outperformed all other luxury investments for the 2015 fiscal year.
With luxury items like colored diamonds, art, wine, and jewelry on the list, the classic car investor realized a whopping 490 percent ten-year return on investment with wine (241 percent) and coins (232 percent) rounding out the top three returns on investment.
When compared to the last ten-year hedge fund average of 7.83 percent, it is easy to see why classic car investors and sellers are rushing to auction houses to buy and sell classic cars they hope will show the same rate of return.
According to Fritz Kaiser, an executive of a wealth management firm, now is a good time to buy if you are a classic car collector, but don’t bank on showing a 100 or 200 percent return on a 1965 Ford Mustang in two years. The classic car buyer needs to be prepared to shell out a large chunk of money initially, but with two-year returns reporting at 17 percent and five-year returns at 162 percent, many find the lure of a significant gain too much to resist.
There are pros and cons to investing in each type of market. Investors buying classic cars like Porsche 959, Mercedes 300SL, and Ferrari GTO’s are investing more wisely and outperforming their hedge fund competitors. Taxes, registration, storage, and maintenance fees still total less than the cost of a hedge fund manager’s steep fees.
Some savvy hedge-fund managers have now launched investment partnerships that use collectable classic cars as the main asset in the fund. Classic Auto Funds Limited (CAF) allows investors to buy a piece of a classic car, along with other investors who cannot afford the hefty price tag of a collectable classic car.
Robert Minnick, the Senior Managing Partner of CAF states, “Many investors are recognizing the rising returns in specific classic cars as a low-risk asset, but they do not have the expertise to buy the right cars, nor do they wish to store and maintain them.”
Hedge fund companies like CAF buy, store, maintain, and sell classic cars for the fund stakeholders. They currently have a team of restoration experts who are refurbishing several classic cars: a 1964 Ferrari 330 2+2, a 1964 Maserati Mistral 3.5, and a 1971 Ferrari Dino 246 GT. A normal investor may struggle with finding the funds for one classic car, let alone having the knowledge to successfully restore one of these pricey Italian beauties.
CAF recognizes that investors often invest in what they like. So, they also plan on member benefits like special VIP access at special events that surround the classic car lifestyle. It is rare that those who invest in a hedge fund can also enjoy their investments.
As more and more investors come to realize that not all hedge funds are alike, the popularity of particular “niche” hedge funds will continue to rise; especially the ones that show fantastic gains like the classic car market. What fun it must be to combine a passion for cars with making money. But, if most investors had to choose, they would agree that it is much more fun tearing down a highway, going around hairpin turns in a 1963 Porsche 356 B 2000 GS Carrera 2 Coupe, than it is watching a hedge fund grow.