When Wealth Management and Passion Meet Our investment expertise is there to allow you to build a long-term passionate investment which has a solid downside resilience. We seek to find under-recognized opportunities that are also beautiful and desirable in your eyes. We want to understand your needs and make sure that you will enjoy these cars as well as making a good investment with them.
Introduction
With the growing uncertainty in financial markets and Investing in collectors’ cars, apart from being solid financially, decreasing absolute returns, investors have started looking at has the added benefit of providing the collector with the a wider range of real assets to provide uncorrelated returns to satisfaction and pleasure of owning and driving these classic their portfolios. These real assets are less impacted by political automobiles. Similarly to trophy real estate properties, classic intervention, central bank action and other events linked to cars are an investment you can touch, but better than a financial markets. Therefore, adding a pocket of these assets building you can drive your investment and take weekend in the context of a portfolio provides diversification through tours out to the countryside and cruise and weave through the uncorrelated returns. The classic and collectors’ car market is lanes. Furthermore, these investments are far less legally one such asset. constraining than real estate and do not carry nearly the same concentration risk. They are investments you can make for the Classic and collectors’ cars have seen steady and continued long term and enjoy on the way. growth in value for well sought out models. Limited stock and availability as well as history makes for rarity, which sets aside In this context, our investment expertise is there to allow you a model from others and provides a strong downside to build a long-term passionate investment which has a solid protection in value. However, finding such models as well as downside resilience by finding under-recognized opportunities avoiding traps and mistakes takes time and experience. This is that are also beautiful and desirable in your eyes. This process where our support comes into play. can take time as we want to understand your needs and make sure that you will enjoy these cars as well as making a good investment with them.
Market Comments from Various Experts
We have seen the classic car market go through a significant and it’s likely that will continue as buyers can afford to be rally in the past few years with a much-needed correction in more selective.” certain segments in 2016. Some types had seen their price “While there have certainly been some price adjustments surge on the back of a few exceptional models being brought for various marques and models across the board, as to market and all owners of such cars then jumped onto the reflected in results from the early 2016 sales in Arizona and bandwagon to sell at this new-found level. This artificially Paris, there is no reason for alarm; the collector car market increased offering prices but at the same time the volume was is alive and healthy, and we’re continuing to see an much greater and in consequence buyers were in a position to enthusiasm from collectors and strong money for rare, choose higher quality for the same price. This has now high-quality cars that are offered fresh to the market.” partially come back to pre-bubble levels but buyers are fewer and always in search of the highest quality on offer. “For investors, classic cars are never a substitute for more traditional types of investment; they are always To open the discussion, here are some quotes from a number complementary to other assets in a portfolio. It’s possible 1 of automobile experts : they are now looking elsewhere, although the stock market does not appear to be very fruitful in terms of return on “Today’s collectors are more educated and savvy than ever investment at the moment, either. The fact remains that before; they do their homework and are more selective, the vast majority of people operating in this market are meaning there’s a growing gap between the so-called enthusiasts, whether they also have an eye on potential ‘average’ cars and the very best.” investment or not.” “Cars that are repeatable and often of average quality To avoid the obvious traps and possible flaky or “rusty” have quite rightly cooled off. In contrast, we’ve negotiated investments we have teamed up with auction house experts the sale of four significant cars since Rétromobile 2016, and auctioneers to provide an accurate valuation on cars we and I can tell you that each was sold for a sum far greater hold and additional advice on potential acquisitions. This will than when it was sold last, when the market was also help us identify undervalued cars and segments that are supposedly at its peak. From our point of view, this upper less likely to suffer from bubbles or crashes and will rise in sector of the market is holding up rather well, and will value over time and provide you with access to a larger continue to do so as long as cars are priced accurately.” number of potential opportunities. “The data is telling us the value gap between a good example and a great one is becoming more pronounced,
1 Source : Hagerty Automobiles website
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2016 Market
Overall – the collector car market lost traction in 2016, 130 Hagerty Top Index (LHS) printing down about 4.8%. For us, it seems to be a healthy 120 contraction, looking at the overheating we noticed on some 110 specific segments like Classic Porsche or Ferrari in 2015. 100 Indeed, those segments gained value very rapidly in 2013-15 in a pattern that looked somewhat speculative, forcing us to 90 adopt a cautious stance. 80 70
In 2015, while the Index was globally flat, the winners were
Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
80s & 90s classics, affordable classics sub-$150,000, and the Jan-07
Sep-07 Sep-09 Sep-11 Sep-13 Sep-15
May-08 May-10 May-12 May-14 May-16 best of the best – so not much has changed. Data source, Hagerty Automobile website
Modern Deals
One of the features of the market this year has been modern buyers diversify and look for points of differentiation. classics – some of them so modern that the term classic does Opportunities abound in this sector. Our tip – AMG. not apply in the eyes of many. Low mileage, limited edition manual supercars are the order of the day. Cars like the Aston Porsche will remain strong. Aston Martin will continue to Martin DBS manual – which five years ago weren’t flavor of flourish. The best Ferraris will continue to thrive – the rest the month because of the stick shift. may well find themselves back home on the continent. We tipped Maserati to gain last year and we are still waiting for it Sports cars from the noughties have arguably the best blend of to happen. Land Rover is still enjoying strong interest. reliability, usability, drivability, sex-appeal and political (and Mercedes are increasing in popularity (and price). environmental) incorrectness of any sports car era. They are also good value right now – so get in while you can. How For the smaller tickets there is also the possibility to find some about a Lamborghini Murcielago or Ferrari 599 for a shade recent Ferraris such as the 348 GTB or GTS which have been over $150,000 – or a Gallardo or 430 for even less. Porsche staying under the radar. Their younger cousin the 355 has 997 Turbos are also looking like a steal. already seen some appreciation off the lows but can still be found for a decent price and is a great car to drive. A BMW We expect the sub-$150,000 market place to be vibrant in 635CSi in good mechanical condition is also a steal: 2017 and we’re sure we’ll see some surprise auction results as considering what the 2002Ti has done, it may be following the same upward trend from here.
2017 Outlook
Looking ahead to 2017, we expect to see a consolidation of increased interest in 80s and 90s cars will continue to prices on a somewhat lower base for models that have seen grow.” too rapid a growth in 2015 and 2016. These models have seen “I think, with the increased popularity in electric cars and a correction in the order of 15% to 25% to what is now closer modern technology, a turn of attention to the more raw to the longer-term average growth rate. These models should and enjoyable driving experiences of cars from the late 60s nonetheless find a solid floor around the current levels and and early 70s is on the cards. We drive technology laden start appreciating again from here. For the very high end vehicles doing 98% of the work for us so when we buy a pristine quality models, this correction has not happened and classic we want to re-engage with the real driving buyers’ increasing capacity to wait for the right model to come experience. I think these will bubble to the fore in 2017.” to market means that when they do appear there is enough capital on the table to keep the prices rising steadily. “More modern sports cars that are flying low on the radar: Maserati 3200/4200, Lancia Delta Integrale – and other The same expert panel has provided the following comments boxy 80’s & 90’s cars! on what to expect: I think the Porsche 996 GT3, V12 Jaguar XJS and the BMW 850 all still have some way to go.” “More of the same. The shift from the 1950s and 1960s classics to more modern cars will continue. The very top “Modern Classics are hot news as are cars with traditional end of the market is extremely healthy. I also think the manual gear change and limited production number cars – this is where we predict the most growth in 2017. For
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classic Ferrari sub $500k watch 365 BB and 365 GT 2+2, value increased based on racing pedigree which may be more both are low production numbers and fun to own.” down to the driver than mechanical superiority. These biases will remain strong in 2017 and may even grow in importance “A BMW 3.0 CSL is still undervalued at about a quarter the in the future as these become more about collection and value of a Porsche 911 RS Touring of the same year. Also, a symbolism and less about utility. Jensen Interceptor when compared to Aston Martins of a similar vintage looks great value for money but finding a Classics often appear in models that were significant to the good one can be difficult. 80s & 90s performance icons collector population at the time of their youth. This means such as Integrales and 911 Turbos did well in 2016 and I that 30s and 40s classics have probably come near the end of think this is set to continue in 2017.” their investment paths and this has moved to 50s and 60s Clearly the car market is not homogeneous or even models. With this thinking it would be suitable to consider fundamentally fair. It is driven strongly by emotions and using what were the icons and dreams of future collectors in order basic numerical analysis is probably not the way forward. This to find good investments - certainly the Ferrari 355 with a market requires a good deal of research, discussion and a manual gear box fits in this category and so does the less well share of good fortune or unexpected publicity. A seemingly regarded Ferrari Mondiale T. The Porsche 944 Turbo anonymous model may suddenly gain status due to an Convertible also had some keen followers that may well come appearance in a movie or a less performing car can see its back to the fore as is the case with the Viper GTS.
Why Classic Cars in a Portfolio?
Classic cars have proven to be a diversifying investment in a HAGEGERM Index (German Collectibles, LHS) 1200 HAGEFERR Index (Ferrari, LHS) 120 portfolio context. They also reduce volatility and significantly Sentiment Index (RHS) increase Sharpe ratios (risk-adjusted returns). A simple 1000 100 800 80 comparison below shows how over the last 10 years, investing 600 60 only 15% of a balanced portfolio (made up originally of 40% 400 40 MSCI World USD Hedged and 60% Global Aggregate Bond 200 20 Index) in classic cars results in a total return of 59% vs. 36% 0 0
without. The risk/return ratio increases from 0.49 to 0.92 as
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Sep-07 Sep-09 Sep-11 Sep-13 Sep-15
May-10 May-12 May-14 May-16 well which illustrates the much-improved portfolio behavior May-08 this produced. The maximum drawdown over 2008 is reduced from -15.4% to -11.8%. Data source, Bloomberg
Balanced Pfo 40/60 From June 2007 to June 2008, The HAGEMUSC index lost 190 Balanced Pfo 40/60 + 15% Hagerty BlueChip nearly 40% in value when the Ferrari index only gave up about Balanced Pfo 50/50 170 Balanced Pfo 50/50 + 15% Hagerty BlueChip 10%. This illustrates also that the classic car market is not Balanced Pfo 50/50 + 15% HFRI immune to severe moves driven by the global economic 150 environment and that, to have long-term appreciation, one 130 needs to keep in mind the specific models bought as well as 110 the timing of purchases. 90 Thus, a conventional approach to portfolio construction 70
misses these idiosyncrasies and standard risk/return metrics
Jul-11 Jul-08 Jul-09 Jul-10 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16
Jul-07 only tell part of the story. This is exactly why an expertise in
Jan-09 Jan-14 Jan-08 Jan-10 Jan-11 Jan-12 Jan-13 Jan-15 Jan-16 Jan-07 alternative investments, as well as a history of buying, selling Data source, Bloomberg and valuing cars, are some of the essential building blocks required to build diversified portfolios. Obviously, every portfolio of such investments is unique in nature and returns over time can vary wildly. The Hagerty 260 Hagerty Blue Chip (LHS) HAGEMUSC Index (US Muscle Cars, LHS) 120 BlueChip contains 25 collector cars ranging from the 1965 HAGEBRIT Index (British Cars, LHS) Shelby GT350 to the 1973 911 Carrera RS 2.7 or 1963 Ferrari 210 Sentiment Index (RHS) 100 250 California. 80 160 Also, some segments have outperformed others over the 60 110 same period. If we look at the best performing Hagerty index 40 since 2007, it is the Ferrari Index, up 550% as of the end of May 17 that clearly paved the way for heavy gains, while the 60 20
US Muscle Car index was up only 18% over the same period.
Jan-15 Jan-07 Jan-09 Jan-11 Jan-13 Jan-17
Sep-07 Sep-09 Sep-11 Sep-13 Sep-15
May-10 May-12 May-14 May-16 Clearly the 2008 financial crisis had a bigger impact on the US May-08 market as every asset that could be sold to cover debts was Data source, Bloomberg liquidated whatever the price.
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Our Offer in Context
In the context of starting or growing a collection, our passion New collection: We provide the platform to create a collection for cars along with over 15 years of combined investment in line with the wishes of the investor/collector. Once the experience in traditional and alternative assets put us in an theme/type/specificities have been determined we will use ideal position to advise and assist you in your investment our network and knowledge of the automobile market to build process. a balanced portfolio with the long-term growth of the collection in mind. We will also help to establish storage Existing collection: We provide valuations, advice on additions options and help to find specialist mechanics to maintain the or sales based on market opportunities to optimize value and cars. returns, as well as support to maintain and manage an existing collection. Following the collector’s guidelines, we will seek to manage and potentially expand a collection.
Thinking of Starting a Collection?
Have you ever thought about building a collection of low- mileage 10-20-year-old hot hatches? Ford RS – from Racing Puma through to today’s Focus RS? Japanese performance heroes – Tommi Makkinen Evo, Impreza RB5, Integra Type-R?
Coherent collections add value and the hot hatch – and other less well established market segments – offer a lot of potential. Micro-collections might just be the next big thing.
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FAQ
Storage, Insurance, Maintenance costs?
Of course holding a physical asset that requires maintenance and storage involves different costs than simply holding an equity portfolio. Maintenance and storage are certainly the most important. Cars are assets that keep their value by remaining in pristine condition. To do so requires regular maintenance as well as actual driving on a regular basis to avoid the various engine parts and general mechanics from deteriorating. Actual costs will of course depend on the make and model but taking a Porsche 964 Jubilee as an example, the average maintenance and insurance cost runs at approximately 5’000CHF per annum.
Valuations?
We have partnered with an independent valuation expert with over 20 years’ experience in the auction business valuing cars for sales and auction houses. These valuations complement comparable market transactions where necessary.
Can I still drive these collector cars?
Not only can you drive them, you absolutely have to. It is important to regularly run the cars to ensure the engine parts and gerenal mechanics do not deteriorate.
Where to store my collection?
If you have closed garage space available this will be the first option to store the vehicles, away from the natural elements. If the number of vehicles is such that more space is needed, there are a number of locations where professional storage is possible. These locations are often operated by garages and can also provide the regular running the engines require.
How much is a reasonable amount to start building a collection?
In effect any amount that will allow you to buy a car is enough to start. The amount will depend on the specifics of the collection you are thinking of building. A classic Ferrari collection will be much more onerous than a classic 80s hot hatch collection for example. Nonetheless both are viable collections and can provide the returns and diversification we seek.
Buying a salvage car and restoring it
Buying a severely deteriorated vehicle is also a way of finding rare models in poor condition. This then requires a full restoration to return the car to working and even collector condition which means finding the parts and rebuilding what is missing. Examples of such rebuilds are costly and time consuming but sometimes are a collector’s treasure.
Annex
Hagerty Blue Chip
1967 Chevrolet Corvette 1957 Mercedes-Benz 300SL Gullwing 2dr Convertible 8-cyl. 427cid/435hp 3x2bbl L71 2dr Coupe 6-cyl. 2996cc/240hp Bosch FI
1966 Shelby Cobra 427 (CSX3300 - CSX3360) 1965 Shelby GT350 2dr Roadster 8-cyl. 427cid/425hp 2x4bbl 2dr Fastback 8-cyl. 289cid/306hp 4bbl
1969 Toyota 2000GT 1959 Maserati 5000GT Frua 2dr Coupe 6-cyl. 1988cc/150hp 3x2bbl DOHC 2dr Coupe 8-cyl. 4941cc/380hp 4x2bbl
1958 Ferrari 250 California LWB 1954 Lancia Aurelia B24 2dr Spider (closed headlight) 12-cyl. 2953.21cc/240hp 3 Weber Carbs 2dr Spider America 6-cyl. 2451cc/118hp 2bbl
1972 Iso Grifo IR9 Can Am 1970 Plymouth Cuda 2dr Coupe 8-cyl. 6998cc/400hp 4bbl 2dr Convertible 8-cyl. 426cid/425hp 2x4bbl Hemi
1958 Bentley S1 Continental Coachbuilt 1964 Alfa Romeo TZ-2 2dr Drop Head Coupe 6-cyl. 4887cc/178hp 2x1bbl SU 2dr Coupe 4-cyl. 1570cc/112hp 2x2bbl
1963 Mercedes-Benz 300SL 1953 Chevrolet Corvette 2dr Roadster 6-cyl. 2996cc/250hp Bosch FI 2dr Roadster 6-cyl. 235cid/150hp 3x1bbl
1965 Aston Martin DB5 1973 Porsche 911 Carrera RS 2.7 2dr Sedan 6-cyl. 3995cc/282hp 3x1bbl SU 2dr Coupe 6-cyl. 2687cc/210hp Bosch FI
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Hagerty Blue Chip
1948 Tucker 48 1963 Shelby Cobra 289 R&P 4dr Sedan 6-cyl. 335cid/166hp 2bbl 2dr Roadster 8-cyl. 289cid/271hp 4bbl
1954 Jaguar D-Type 1958 Porsche 356A 1600 Super 2dr Roadster 6-cyl. 3442cc/250hp 3x2bbl Weber 2dr Speedster 4-cyl. 1582cc/88hp 2x1bbl
1963 Ferrari 250 California SWB 1957 Rolls-Royce Silver Cloud I HJ Mulliner 2dr Spider (closed headlight) 12-cyl. 2953.21cc/280hp 3 Weber Carbs 2dr Drop Head Coupe 6-cyl. 4887cc/NA hp 2x1bbl
1968 Ferrari 275 GTB/4 1959 BMW 507 2dr Coupe 12-cyl. 3285.72cc/320hp 6 Weber Carbs 2dr Roadster 8-cyl. 3168cc/150hp 2x2bbl
1971 Lamborghini Miura P400 SV 2dr Coupe 12-cyl. 3929cc/385hp 4x3bbl Weber
Hagerty Affordable Classics
1967 Volkswagen Beetle 1949 Buick Roadmaster Model 76S 2dr Sedan 4-cyl. 1493cc/53hp 1bbl 2dr Sedanet 8-cyl. 320cid/150hp 2bbl
1967 Volkswagen Karmann Ghia 1972 Porsche 914 2.0 2dr Coupe 4-cyl. 1493cc/53hp 1bbl 2dr Targa 4-cyl. 1971cc/91hp FI
1963 MG MGB Mk I 1971 Datsun 240Z 2dr Roadster 4-cyl. 1798cc/95hp 2x1bbl 2dr Coupe 6-cyl. 2393cc/151hp 2x1bbl
1965 Chevrolet Corvair Monza 1965 Ford Mustang GT 2dr Convertible 6-cyl. 164cid/110hp 2x1bbl 2dr Coupe 8-cyl. 289cid/225hp 4bbl
1972 Triumph TR6 1963 Studebaker Avanti 2dr Convertible 6-cyl. 2498cc/106hp 2x1bbl 2dr Coupe 8-cyl. 289cid/240hp 4bbl
1962 Studebaker Lark Regal 1970 Chevrolet Camaro SS 2dr Convertible 6-cyl. 170cid/112hp 1bbl 2dr Sport Coupe 8-cyl. 350cid/300hp 4bbl L48
Hagerty Ferrari
1966 Ferrari 330 GT SII 1957 Ferrari 410 Superamerica SIII 2dr Coupe 2+2 12-cyl. 3967.44cc/300hp 3 Weber Carbs 2dr Coupe (closed headlight) 12-cyl. 4962.96cc/340hp 3x2bbl Weber Carbs
1963 Ferrari 250 LM 1968 Ferrari 330 GTC 2dr Coupe 12-cyl. 3285.72cc/320hp 6 Weber Carbs 2dr Coupe 12-cyl. 3967.44cc/300hp 3 Weber Carbs
1958 Ferrari 250 California LWB 1972 Ferrari Dino 246 GTS 2dr Spider (closed headlight) 12-cyl. 2953.21cc/240hp 3 Weber Carbs 2dr Spider 6-cyl. 2419.20cc/195hp 3 Weber Carbs
1972 Ferrari 365 GTB/4 Daytona 1963 Ferrari 250 GT Lusso 2dr Coupe 12-cyl. 4390.35cc/352hp 6 Weber Carbs 2dr Coupe 12-cyl. 2953.21cc/240hp 3 Weber Carbs
1960 Ferrari 250 GT 1972 Ferrari 365 GTS/4 Daytona 2dr Coupe 12-cyl. 2953.21cc/240hp 3 Weber Carbs 2dr Spider 12-cyl. 4390.35cc/352hp 6 Weber Carbs
1963 Ferrari 250 California SWB 1963 Ferrari 250 GT SWB 2dr Spider (closed headlight) 12-cyl. 2953.21cc/280hp 3 Weber Carbs 2dr Coupe 12-cyl. 2953.21cc/280hp 3 Weber Carbs
1968 Ferrari 275 GTB/4 2dr Coupe 12-cyl. 3285.72cc/320hp 6 Weber Carbs
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Hagerty German Collectibles
1957 Mercedes-Benz 300SL Gullwing 1970 Mercedes-Benz 280SE 3.5 2dr Coupe 6-cyl. 2996cc/240hp Bosch FI 2dr Cabriolet 8-cyl. 3499cc/230hp Bosch FI
1965 Porsche 356C 1600 SC 1962 Mercedes-Benz 190SL 2dr Coupe 4-cyl. 1582cc/95hp 2x2bbl 2dr Convertible 4-cyl. 1897cc/120hp 2x2bbl Solex
1972 Porsche 911 S 1956 Porsche 356A 1500 GS Carrera 2dr Coupe 6-cyl. 2341cc/210hp FI 2dr Speedster 4-cyl. 1498cc/128hp 2x1bbl
1959 Porsche 356A 1600 Super 1948 Porsche 356 Gmund 2dr Coupe 4-cyl. 1582cc/88hp 2x1bbl 2dr Coupe 4-cyl. 1086cc/46hp 2x1bbl Solex
1971 Mercedes-Benz 280SL 1955 Mercedes-Benz 300Sc 2dr Convertible 6-cyl. 2778cc/180hp Bosch FI 2dr Cabriolet 6-cyl. 2996cc/175hp Bosch FI
1962 Porsche 356B S90 1963 Mercedes-Benz 300SL 2dr Roadster 4-cyl. 1582cc/90hp 2x2bbl 2dr Roadster 6-cyl. 2996cc/250hp Bosch FI
1973 BMW 3.0CSL Batmobile 1967 Porsche 911 S 2dr Coupe 6-cyl. 3003cc/200hp FI 2dr Targa 6-cyl. 1991cc/180hp 2x1bbl
1979 BMW M1 1973 Porsche 911 Carrera RS 2.7 2dr Coupe 6-cyl. 3453cc/277hp FI 2dr Coupe 6-cyl. 2687cc/210hp Bosch FI
1979 Porsche 911 Carrera Turbo 1958 Porsche 356A 1600 Super 2dr Coupe 6-cyl. 3299cc/265hp FI 2dr Speedster 4-cyl. 1582cc/88hp 2x1bbl
1973 BMW 2002tii 1970 Mercedes-Benz 600 2dr Sedan 4-cyl. 1990cc/130hp MFI 4dr Sedan 8-cyl. 6329cc/300hp Bosch FI
Graphs and data used in this documents were obtained from the Hagerty website and Bloomberg. All data are publicly available.
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