For as long as people have loved beauty, spending, and indulging their passions, those who could afford it have turned to collecting.
Rising demand from the world’s growing super-rich has caused sharp rises in the price of high-value collectibles, from art, classic cars, watches and jewellery to fine wine and whisky. Private enthusiasts have been joined by professional investors, spurred by more than a decade of cheap money following the financial crisis, for whom investment gains trump exhibition or use.
This, and the growing risk of theft of collectibles, has made collections less visible — enjoyed by fewer people and more seldom. Once displayed in private homes, at public art galleries or at enthusiasts’ events, many of the world’s most beautiful and valuable objects are today gathering dust, out of view, in secure underground storage vaults.
Alexander Kraft, who today is the owner of Sotheby’s International Realty in France and Monaco, among several other businesses, is acutely aware of this change.
Ten years ago, one of Kraft’s favourite pastimes was hunting for vintage watches. On weekends, he would scour the stalls of London’s Burlington Arcade, drop in on Monaco’s select group of high-end watch dealers — all of whom he knew — search the internet for bargains, or follow up tip-offs in person with private sellers.
Often, the watches he bought were battered, lacked certification documents or needed work. “You bought something from a private person — it hadn’t been serviced, there was the risk the watch didn’t work properly,” he says.
But he took the gamble and that was all part of the fun. He was part of a selective group, doing something he loved. “I used to know all the serious collectors in the world,” he says. If he made money from it, so much the better.
The influx of investor-buyers
Today, he says the market has been swamped by dealers and investors, who snap up internet bargains moments after they list, and he finds his once-favourite hunting grounds are overrun with professional buyers.
“Here in Monaco, dozens and dozens of vintage watch stores have popped up in recent years. Burlington Arcade was once a charming mix of stalls selling cashmere sweaters, shoes, jewellery and a few watches. Today, it’s one big vintage watch fair.”
Just as the bargains have become harder to find, so has the fun. True, there are more collectors, more information, more sales and a bigger scene, but the relationships are transactional and the watches themselves have largely vanished, as robberies of high-value watches and jewellery increase in London, Paris and other leading cities.
It’s the same with classic cars, Kraft says. He will still make the long drive between Monaco and Venice for a meeting in his Aston Martin DB6 (worth about €500,000), arriving “sweaty and probably smelling of oil”.
“But there are fewer of these cars being used on a daily basis — vintage cars have become trailer queens,” he observes, referring to the practice of transporting vehicles to exhibition events. “So many new collectors aren’t passion-driven, and it’s become a rarity for them to use [their collections],” he says.
“It’s [sad] when those nice things end up in a temperature-controlled vault. For me, that’s not the point of collecting.”
For those collecting for investment, the main point is to make money; there is little upside, but plenty of risk, to displaying or using their wares.
Among hypercars — the highest-specification, limited-edition new cars that often retail for more than £2mn — the most valuable collections feature pristine low or zero-mileage vehicles that almost never leave secure garages.
“Over the past 10 years, we’ve seen the growth of this type of collection: it started in the US and has come to Europe,” says Joe Macari, who owns one of London’s most prestigious car dealerships for used hyper and classic cars.
Hidden away
A heightened risk of theft is also taking valuable works of art out of view. Marc-André Renold, director of the Art-Law Centre at the University of Geneva, says it can create a black market for art and antiques. “This is thanks to several factors, including the growing ranks of willing buyers, insufficient legal controls and the growth of online sales platforms.”
The result is that many of the most valuable paintings and sculptures are languishing in storage in the increasing number of freeports around the world — locations where goods can be stored without incurring certain taxes, such as tariffs, due in the countries they are located.
The Geneva Freeport, perhaps the most famous, is tight-lipped about the number and value of art works it hosts. According to the New York Times, an audit by Swiss officials in 2012 estimated it had 1.2mn works of art in its vaults (the UK’s National Gallery has about 2,600 works in its collection). “The fact these pieces are not publicly available entails a big loss to society,” says Renold, who points to the increasing number of “financial owners” as a growing hazard.
A surge in on-street theft of watches and jewellery, together with home break-ins, means that fewer collectors these days are comfortable showing off their pieces. “Either they’re wearing them less, or they will buy fakes to use instead,” says Sarah Willoughby, art and private client director at Ecclesiastical Insurance in the UK. She cites handbags, watches and jewellery as popular targets.
A survey by the insurer, last year, found that more than a third of very wealthy individuals had purchased replica paintings or handbags, in order to protect the originals. However, three quarters of respondents had posted details of their collections online, and one in five included the location in posts.
Rising insurance costs and storage complications
Climate change is also adding to the costs and complexities of storing or displaying high-value items.
In London, the boom in super-basements and more frequent flooding have increased the number of cases where Ecclesiastical has required clients to install special waterproofing measures, such as tanking, or to pay higher premiums to protect collections.
Several leading US insurers have stopped writing new insurance for homes and valuables contracts entirely in California, following worsening forest fires. Annual premiums for the largest homes in Miami are now as high as $620,000.
“One of my art-collector clients in Miami has an emergency back-up protocol when a hurricane is forecast,” says Philip Hoffman, who left Christie’s in 2000 to set up the Fine Art Group, an art advisory and finance company. “A lorry arrives and takes the collection inland to safe storage. The insurance policy requires it.”
In the art market, rising prices have increased the cost of assembling a collection and raised the bar for those looking to make a start.
When Hoffman started at Christie’s in 1989, he says there were no investment buyers besides the art dealers; today, he estimates, 30-40 per cent of art bought at the world’s leading galleries goes to investors.
“Back then, £500,000 was enough to start a collection,” he recalls. “You’d shop around half a dozen galleries across the world. You could be confident it would retain its value because they’d in effect [guarantee] to sell it on for you.
“Today, you probably need 10 times that and it’s much easier to overpay for the wrong artist or massively overpay for the right one.”
Rising gallery and auction fees and increasing insurance premiums are all adding to these costs, he notes. And buyers cannot simply lower their sights towards cheaper artworks. “Finding a work for less than £20,000 that can be relied on to hold — or increase — its value is much harder to do,” Hoffman points out.
Enjoy the collection
Rising prices also mean that passion collectors risk distraction from their collection’s original raison d’être.
Richard Hughes is a case in point. The 62-year-old law-firm partner, who has been collecting fine wines for 22 years, has more than 4,000 bottles (the value of which he declines to reveal). At the heart of the appeal is the joy of consuming them, he says. “I have a Pavlovian association between nice wine, good food and good company.”
But rising prices make an argument for leaving the wine untouched. So he finds himself at risk of the tail wagging the dog. “It does put me in a bind. I find that emotionally unresolvable — the wine lover and the collector are at odds.”
This is an enviable problem to have, he admits. And lately, his inner epicurean has been scoring victories over his inner accountant.
He is more focused on how the wine will drink than how fast it will appreciate. He has changed his will to include gifts from his collection to fellow wine lovers. The early deaths of several friends have prompted him to tuck into bottles that once he would not have touched.
“It’s about getting older, I think. I wouldn’t have considered drinking a £500 case of wine at 40 but now, aged 62, you start to think, ‘Fuck it, what am I keeping it for?’ ”
Collectors are finding different ways to enjoy their prized possessions in spite of the security risks.
A few years ago, the theft of several pieces from Kraft’s vintage watch collection resulted in only a small payout from his insurer when it turned out his policy covered just one watch out of the safe at any one time. He decided to self-insure; today, despite the growing risk of muggings, he continues to wear his watches when he is out and about, unless to do so would be too risky.
“I think I’m one of the very few who does, but what’s the point of having them if you don’t use them?” he argues.
For Chris, an ex-banker who lives in Hampshire, south-east England, developing a taste for high-value watches has pushed him towards less recognisable makes and models that are less likely to be stolen, so he can continue to show them off (he declined to give his surname for fear it would make him a target for criminals).
“I bought my first watch aged 20 to impress my friends — a Rolex Submariner,” he says. “By the time I was 30, everyone had one. I’d go round the table at a meeting and it would be: Submariner, Submariner, Panerai, Omega, Omega, Tag,” he says, reeling off names of some of the most popular luxury watch brands. “So, I got into obscure watches that no one else knew about.”
Thankfully, some collectors are too caught up in the enjoyment of their collections to fixate over maximising their financial returns, ensuring their objects remain out of storage and on display.
As well as selling classic vehicles, Macari also looks after some of the world’s leading car collections on behalf of their owners. For this group, he treads a fine line between keeping rare models in the public — and collectors’ — eye by exhibiting them at the leading classic car shows, and reducing their mystique and sense of rarity through “overexposure”.
“Most collectors are total enthusiasts who want to use and show their cars whenever possible,” he says. “Putting miles on the clock doesn’t depreciate their cars’ value; most would take them to the opening of a fish and chip shop if they could.”
Ivan Pusnik, a successful entrepreneur, originally from Slovenia now living in Switzerland, is a good example. He has just returned from the Arctic Midnight Sun event, a 14-day, 5,700km rally, driving across roads and tracks the length of Sweden and Norway with about 40 fellow classic car enthusiasts.
Initially, he considered taking his Lamborghini Countach, worth just shy of £700,000, but discounted it — not for fear of damaging it but because the clutch is too much of a handful for touring. Instead, he decided on a 1973 Saab, which cost just €7,000 but to which he has made €30,000 of improvements for rallying — with no consideration as to whether he will make the money back when it sells.
He is far more interested in finding a car he loves than one that proves the perfect investment. With a particular passion for rare vehicles, he once bought a Lamborghini Jarama dual-sunroof 400 GT, of which only a handful were made. “It was an ugly violet colour but I had been searching for years,” he says.
When it comes to using the cars, he thinks only about what he paid for them and never what they are now worth. Voicing what might be the mantra of passion collectors the world over, he says: “I’m not buying the cars because of investment. I’m buying them to enjoy.”
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs and family offices, as well as alternative and impact investment
