Car fund offers alternative returns

Car fund offers alternative returns
22 January 2012

ECONOMIC woes, notably in the Eurozone, have been felt on a global scale, thwarting potential returns on everything from stocks and shares to low-risk government bonds.

Unsurprisingly, investors are seeking out safe havens. Historically, they have looked for asset-backed securities and commodities, such as precious metals, most notably gold.

While gold has proven a strong long-term investment of late, there are other options. Here, cashy speaks to Ray Bellm, chairman of IGA Management, which believes rare and iconic classic cars offer a new safe haven for investors...

Is this a growing market?

The evolution of the HAGI index, an index created by Dietrich Hatlapa, which tracks classic cars prices across a range of classic car types, is evidence of the increasing awareness of the investment opportunity for classic cars.

This data is published in the Financial Times and on Bloomberg. While the IGA fund will target the very top end of the market, the HAGI index nevertheless demonstrates and supports the investment thesis of the IGA fund.

What are the fundamentals for investing in classic cars?

Wine and art funds have proven the investment case for limited supply and increasing demand assets, establishing themselves as alternative investment classes.

The principle behind the IGA fund is the same. By identifying the iconic cars of tomorrow, our investment team will carefully invest, using years of knowledge and experience, into automotive masterpieces such as Ferrari, Bugattis, Alfa Romeos and Aston Martins.

We understand the metrics of our marketplace and know that an ever increasing demand coupled with a finite and long-finished production supply generally can mean only an upward pricing trend.

No investment is risk-free though...

We strongly believe our fund will not only deliver healthy returns to investors, but also will not suffer from the extreme volatility of the financial markets.

However, car selection is crucial in this investment space and understanding what is driving the price is equally as important.

Once the IGA fund has been raised and the capital invested, investors will also have something quite unique, which an investment in a stock or bond can’t give – a share in a collection of some of the world’s most iconic and rare automobiles.

How will you try to protect investors?

Some private investors in classic cars have made fundamental investment mistakes.

In the past, when classic car prices suffered, private individuals used leverage to part-finance their investments. The IGA fund will not use leverage against its portfolio.

Simply put, an investment in an automobile should principally be seen as a capital growth strategy; there is no income to service bank loans. And in a downturn, when personal income is limited, and enforced sales occur, this leads to depressed pricing.

Some private investors also bought for passion, holding onto cars for too long and not selling when it made sense to do so.

Equally, another downfall was buying cars they hankered after in their youth, but which failed to meet the first and most fundamental investment criteria – limited supply and iconic cars of their era. While the latter may be subjective, it is this skill that our investment team believes will help us drive superior returns for fund investors.

Pic credit: M-Pics/ FreeDigitalPhotos.net

Do you fancy investing in iconic cars? What other tips do you have for 'safe haven' investing?

Comments

  • Colin
    Colin
    2012-07-01T20:48:45

    It seems cashy were ahead of the curve again. A new study by Barclays which "looks at the trends, differences and motivations for holding treasure assets,"  shows high net worth individuals want to diversify their 'treasure assets' and increase investments in classic automobiles. An interesting investment sector and it would appear a growing one.

  • bermuda97
    bermuda97
    2013-02-26T16:24:49

    Last Saturday in the FT the issue of cars and other asset classes over the last 10 years was discussed. The investment in cars over that period as measured by the HAGI Index was up by 395%, followed by rare coins at 248% and my favourite stamps at 216%.

If you are registered you need to log in to comment, if not, please sign up.

Author
Freelance editor and journalist
mediahill Ltd
Facebook Feed
Related articles