Investments don’t always need to be traditional financial assets, and there are signs that more and more investors look to these alternative investment forms as a way to diversify their investment holdings, with an added benefit of the thrill of collecting a special piece that they had always longed for, whether it’s a beautiful jewelry item or a classic car that provides that special buzz each time it’s used.

The Wealth Report: Luxury Investment Focus, is a report that was published by Knight Frank earlier in 2021 and they investigated how some of these investment categories weathered the storm during 2020 as Covid related impacts cascaded through the economy.

Luxury Leathergoods and Handbags: With a range of providers in the market, collectable Hermès handbags once again topped the Knight Frank Luxury Investment Index (KFLII). With a more than modest price increase of 17% in 2020, according to their index compiler AMR. The luxury handbag maker benefited from an established online auction presence and the appetite for relatively affordable luxury pick-me-ups that became even more important to consumers during the Covid-19 pandemic, particularly in Asia where many bag collectors are based. These tail winds helped the asset class retain pole position.

Fine Art: The collectable art market, did not fare quite so well with the auction-tracking AMR All Art Index showing a drop of 11% in 2020. This was due to many factors that impacted the market and there was no single reason for the fall in average values, says AMR’s Sebastian Duthy. “For obvious reasons one of the biggest changes was a shift towards private sales at the major auction houses. The volume of all sales that were publicly auctioned at Sotheby’s and Christie’s last year was down 26% and 46% on 2019, respectively. The problem was compounded by the slowing in supply of quality works as consigners who could afford to wait preferred to sit it out at home”.

Coloured Diamonds: The coloured diamond market was also somewhat stymied by the pandemic. “The logistical lockdown simply made it impossible to conclude transactions in a timely manner,” says Miri Chen of the Fancy Color Research Foundation. “It took much longer for sellers to ship diamonds overseas, and for buyers to transfer funds and to ultimately receive custom-made items in a piece of jewellery.” Prices remained flat consequently, but this year could see a bounce. Over the past 10 years the average price of coloured diamonds tracked by FCRF – pink, blue and yellow – has risen by 77%, but this disguises significant variations between the colours. Pinks have been the top performers with growth of 116%, while yellows have underperformed increasing by just 20%. Blues meanwhile were up 81%.

Classic Cars After a sluggish 2019, where the value of the HAGI Top Index – which we used to track the value of classic cars fell by 7%, 2020 saw cars race back up to third place in KFLII with growth of 6%.

Ferraris revved up particularly strongly, with the HAGI F Index rising 14%. One of the main impacts for this asset class was that Covid 19 impacts and travel restrictions saw many events cancelled, and sales postponed or moved online. However, it’s predicted that volumes should normalise further in 2021.

Good prices were paid for cars at all the major auctions, such as Paris, Scottsdale and Amelia Island, that took place before the lockdowns started to take effect, with examples, including a 2003 Ferrari Enzo that made USD2.8m (RM Sotheby’s), a 1914 Rolls-Royce Silver Ghost that went for USD2.2m (Gooding & Co) and the year’s top-seller so far - a USD7.1m 1932 Bugatti Type 55 Super Sport Roadster (Bonhams). The recovery of the Classic Cars market remains to be seen with the duration of Covid related interruptions remaining a consideration for sellers taking their precious collectable cars to market.