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Art works: Private collections and wealth management

Head of Investment at Alpian
Victor Cianni
Group 7 Article, 3 min read

Your private collection of wine, miniature dolls, vintage comics or video games might have a valuable place in your portfolio. Read on to understand how your collectibles add to your wealth.

I officially became a collector about 10 years ago. Since then, I have scoured auction houses, fairs and online marketplaces to pursue my passion. What has always amazed me is the incredible variety of things that can be collected: wine, coins, stamps, artworks, books, video games, posters, figurines, vinyl records, cards, furniture, jewels, memorabilia…militia! And I am no exception: I collect rare mathematics books from the 16th century to 1980. While there are multiple reasons that motivate collectors (acquiring social status, satiating psychological and aesthetical needs, gaining historical knowledge, making money, etc), the notion of collecting is inseparable from the one of investing.

Appraising Questions

Before an item joins a collection, a financial transaction occurs, and even if return is not always the primary objective of the collector, the better the deal the higher the pleasure. Who has never dreamed of finding a treasure (like a forgotten masterpiece) in a flea market or a garage sale? You would not be surprised to hear that some collections are worth a fortune. Some investors even became wealthy by building collections. Yet, the place of collections within wealth management is not clear. While a few financial intermediaries recognize the value of collections (for example, some wealth managers offer art financing services or valuation services), collections have not yet acquired the status of “asset class”. While they fit with the definition of asset class (an asset class is a group of assets with similar exposure to the fundamental drivers of the economy), we fail to understand how they behave and interact with other asset classes from a financial perspective. There are multiple reasons for this, but the variety of collectibles and the lack of data available (cars and artwork might be the exception) makes assessment difficult. How can we estimate potential return rates and risks associated with collections (illiquidity, price volatility, etc.)? How can we assess the degree of correlation of a given collection with other traditional asset classes?

It is often said that collectibles display low correlations with traditional investments like stock and bonds, but it could just be an artefact of illiquidity. For example, if specific collections may have specific behaviour, broad indices and proxies such as auction house results tend to correlate with the financial markets.

While investing in financial markets is all about focusing on the future, building a collection is all about not forgetting the past. A fundamental difference in their philosophies.

Collecting Insights

In the absence of data, collectors have to form their own opinion. And, I would like to share with you a few fascinating facts about collectibles:

Infographic 400% price increase 1988 Peugeot 205 GTI
  • A single collectible can experience a growth that is radically different than the growth of the manufacturer who produce it. For example, in 2017 a low-mileage 1988 Peugeot 205GTi was sold for £38,480. That’s more than a 400% increase in price. In comparison, the stock price of Peugeot SA (PSA) grew a modest 15% over the same period.
  • The value of a collection is often greater than the sum of the values of the individual elements that constitute it. And it is not because of diversification, but the opposite. The more specific the collection, the higher the effect. This is in sharp contrast with financial portfolios.
  • While investing in financial markets is all about focusing on the future, building a collection is all about not forgetting the past. A fundamental difference in their philosophies.

While none of these facts constitute a proof that having a collection will diversify your wealth, they indicate the existence of some fundamentally different economic drivers. One sure thing, if collections cannot be modelled financially, they definitely have their place within your wealth. And if not a financial one at least an enjoyable one!

Group 7 Article, 3 min read
About the author
Victor Cianni
Head of Investment at Alpian

Victor has more than 13 years of experience in wealth management. He has assisted many individuals, families, and institutions in their financial journey throughout his career, either by providing tailored advice on their investments or by managing assets on their behalf. He occupied a number of key positions within the investment divisions of CA Indosuez, Lombard Odier, and Citi Private Bank. He holds an Engineer’s degree in Bioinformatics and Modeling from the Institut National des Sciences Appliquées of Lyon, and he is a certified FRM. In his free time, Victor loves scientific readings and collecting rare books.