They appeal to the heart as much as the wallet and are notoriously difficult to price and chart. Even so, this has not stopped analysts trying to introduce their spreadsheets into the arcane world of investment collectibles as investors and portfolio managers demand more tools to track this diverse asset class.
"It is very illiquid, it is very opaque. You don't really know what the prices are. Prices are determined fundamentally by what someone is willing to pay, not what you think it's worth," said Mohammad Kamal Syed, head of strategic solutions at Coutts. "It is interest and passion-driven and you can't quantify passion."
Collectibles include vintage cars, fine wine, art and stamps, and the fascination in acquiring them is no longer a mere pastime. Tens of billions of dollars are exchanged each year at auction and in private deals by wealthy enthusiasts and investors, and this is spurring demand for data streams to aid price transparency and identify and profit from new market trends.
Underpinning this burgeoning market is the rapid rise of an increasingly mobile and investment-savvy network of global high-net-worth individuals. In 2012, there were 12 million individuals with a net worth of US$1 million excluding primary residence, and the largest concentration of wealth was in North America and the Asia-Pacific, consultancy firm Capgemini wrote in its 2013 World Wealth Report. These individuals owned US$46.2 trillion in assets. In 2008, the number of wealthy individuals was 8.6 million and they controlled US$32.8 trillion.
One company that recently launched an index is Liv-ex, an online wine trading platform commonly referenced by traders when quoting wine prices.
Last month, the firm started the Liv-ex Fine Wine 1000 Index to track the world's most popular fine wines.
The index aimed "to reflect the increasing breadth and depth of the fine wine market", said the firm, and it represented an evolving consumer palate as buyers shied away from premium brand name Bordeaux wines like Chateau Lafite. According to Liv-ex co-founder Justin Gibbs, the percentage of Bordeaux wine traded through the website fell from 95 per cent of all transactions in 2011 to 70 to 80 per cent today.
Backdated to late 2003, the index rose 150 per cent to December last year. Gibbs credits Liv-ex for helping bring price and transaction transparency to the wine market and reducing merchants' margins to 10 to 15 per cent from 20 to 25 per cent in the 1990s.
Stamp and coin expert Stanley Gibbons plans to launch an index to track the prices of 200 popular investment-grade stamps from Republican China and the Qing dynasty. Interest in them is led by the growing number of mainland philatelists. They make up a third of the world's 60 million stamp collectors.
Last year, the firm's Hong Kong office took HK$40 million in revenue and added 57 clients, investment director Marco Kaster said. The 200 stamps returned 11.6 per cent compounded annually over the past 23 years, he said.
Coutts has started a composite index by drawing together 15 disparate collectibles into a single trend line. It is a weighted index and includes property, watches, rugs and carpets and jewels. Over a seven-year period, the index rose 82 per cent. The idea grew out of existing client interest in these assets, Syed said.
However, data-led indices can only show the past. Knowing what price a desired collectible will fetch at auction remains an art form.
"Why do people pay what they pay? The answer is, it's not clear," Syed said.
This article appeared in the South China Morning Post print edition as: The art of measuring worth of collectibles
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