Many of China’s richest people are now diversifying their investment assets by focusing on one asset class which is bringing in incredible returns.
The Hurun Report, published by a monthly magazine, has revealed that 64% of China’s millionaires are now piecing together a collection for their own enjoyment.
The country’s high net worth individuals (HNWIs) are focusing on classic cars, coins, art and memorabilia.
The HNWIs say they are not being motivated by the potential profits of their collective investments but they have taken to their task with relish.
Like many rich people in the west, the Chinese have also realised that smart investments in collectibles will bring their own rewards.
Collectors outperform FTSE
A recent wealth report by real estate firm Knight Frank revealed that over the past 10 years there were nine collecting markets which saw prices grow by an average of 175%
That performance far exceeds the 32% return seen in the Dow Jones index and the 54% growth in the UK’s FTSE 100 in the same period. The collectibles market is far more profitable even when paid dividends are taken into account.
Rachel Pownall, a finance professor at Tilburg University, Netherlands, said: “The value of collectibles tends not to fluctuate, as do stocks and bonds. They hold their values during periods of inflation to offer an alternative form of portfolio diversification across assets and the economic cycle.”
Making money out of the collectibles market is not just the domain of HNWIs but choosing the right investments is crucial.
Many analysts are pointing out that there has never been a better time to enter the collectibles market since the number of HNWIs is set to soar in the coming years, especially in the world’s emerging economies.
Even without targeting a collectible asset class which will be popular with HNWIs, figures prove that collectibles bring better long-term returns than investment in equities.
Experts say that the most popular assets will be classic cars and art as these investments are more likely to make buyers the envy of their peers.
However, potential investors are being warned to avoid assets which are popular with buyers in the Asia Pacific market such as wristwatches and timepieces since these are generally available in large quantities.
That’s because, as the Hurun Report reveals, the average Chinese HNWI now owns at least six luxury watches though particularly rare items still command a high price.
Instead, potential investors should aim for items for which there are buyers whose heart rules their head such as unique jewellery which has an historical element to it.
One recent example includes the engagement ring given by Napoleon to Josephine which managed to beat its £13,000 reserve by an impressive 8,400% to realise £1.1 million at auction.