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Asset Management / TechTalk / Wealth Management
Passion investment takes digital twist
Crypto fires up new generation of collectors
Tom King 10 Jan 2022

With the Covid-19 pandemic still ongoing, the financial environment remains volatile. So what is the outlook in 2022 for so-called traditional passion investments such as fine wine and exotic vehicles?

And is the year going to be dominated by the frenzy around non-fungible tokens (NFTs)? Auction house Christie's, for example, sold an NFT by digital artist Beeple for US$69 million in March 2021, setting a new record for digital art.

The Asset recently spoke with Andrew Shirley, the editor of The Wealth Report, independent real estate consultancy Knight Frank’s global publication for its ultra-high-net-worth clients and their advisers.

Shirley (pictured) compiles the Knight Frank Luxury Investment Index, which tracks the value of 10 asset classes including classic cars, art and wine, and is also head of rural research providing insight into farmland and agricultural trends.

The Asset: Will demand for rare tangible assets remain strong this year? 

Andrew Shirley: I think so. We saw some very strong prices paid in 2021 and the whole digital/crypto collectible scene has fired up a new generation of collectors.

With inflation now a given, do you expect even more investors to be looking at passion investments this year?

Tangible assets are always popular during inflationary periods so I expect a renewed focus, especially now you have the ability to combine art with cryptocurrencies, which are being touted as the new gold when it comes to safe-haven investments. 

Are passion investors based in China likely to be subdued this year and will this affect the market? 

They were very active in 2021 and despite warnings of an economic slowdown in China, there is still a lot of money held by private individuals who love to collect. Hong Kong’s burgeoning auction market scene gives them the opportunity to invest without straying too far from home.

With more governments mandating electric car usage and long-term replacement of the internal combustion engine, can we expect to see the market for exotic cars remain robust and or expand further? And do unique cars tempt Asian-based investors? 

“Proper” cars will gain even more of an allure as they become rarer. Owning one may even be seen as an act of rebellion against so-called wokism for some collectors! A lack of fuel may eventually become an issue, but I am sure synthetic alternatives will eventually be developed. As far as I’m aware Asian buyers make up quite a small proportion of “classic” buyers.

Will traditional passion investments such as collectable art, fine wine or rare whisky hold their appeal against the new digital contenders?   

For sure. What will happen is that the two will increasingly merge.

(As an example, Shirley highlighted the purchase of Alberto Giacometti’s Le Nez (1947) for US$78.4 million during Sotheby’s sale of the Macklowe collection in New York, by Justin Sun, the Hong Kong-based CEO of the cryptocurrency platform Tron. Sun said the acquisition is part of his ambition to push the fusion of finance, culture and art within the crypto community.)

Do you expect more hype around the virtual passion investments or will these new collectibles cement their place in the passion investment market this year?  

The level of innovation shown by the creator of NFTs has been eye-catching and I expect that to continue this year. We won’t really know how the market is set to perform in the long run until we see more sales of NFT art on the secondary market.

Headline-catching record prices on art can encourage people to buy trophy assets. Do you see the same trend developing with virtual passion investments? 

Absolutely, especially as it’s so easy to buy this kind of investment. That said, the world of NFTs is tied up with the wider world of cryptocurrencies and the blockchain. Many of the biggest NFT collectors inhabit both worlds so untangling the motivations of some buyers is not always easy.

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