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As currency and stock markets underperform, investors look to diversify their portfolio with traditionally safe assets such as gold. But for those looking to buy for pleasure, classic cars could be a better investment. Seth Rowden speaks to the founder of HAGI to see which is the better performer
Investing for pleasure is often thought to be a risky business, one of rash decisions where investors allow their hearts to rule their heads. This notion is further perpetuated by the absence of any reliable way of measuring or tracking the market. Surely it is much safer to invest in gold, a desirable commodity that is in finite supply? Well, that reasoning could equally apply to classic cars.
The classic car market has been notoriously fickle and illusive over the years, with no index to track its performance. This meant that it was only a viable investment for real classic car enthusiasts. That is, until Dietrich Hatlapa came along and founded the Historic Automobile Group International (HAGI) index in 2007.
“We noticed a lack of historic price and market analysis,” Dietrich says. “We owned a few cars and primarily wanted to find out for ourselves how the market had done in the past.” Bringing in experts and former colleagues from ING Baring Securities, Dietrich began researching the classic car market in painstaking detail.
What they discovered was remarkable. The classic car market moved entirely independently from any other index. In fact, those who invested their money in classic cars would have done better over the years than those who invested in almost any other asset, including fine art, jewellery, antiques, wine, and even gold.
Dietrich’s book, Better than Gold: Investing in Historic Cars, documents the rise and fall of both assets, comparing their performance over the decades. This research was reinforced when in 2011 HAGI announced that sections of the classic car market rose by 20pc, compared with a 10pc rise in gold prices.
Choosing which top marques to include and track in the index was a difficult decision. The index includes the ultra-rare historic Ferraris and Aston Martins, alongside modern classics from Porsche and Mercedes. “There are index parameters for inclusion or exclusion that are set and maintained by an index committee addressing such issues as price development, rarity, survivor numbers and market size.”
Even more difficult is the decision that investors face when choosing what to buy. I suppose that most investors in this market buy what they fall in love with, which is exactly what Dietrich advises. He suggests that investors should look for rarity and provenance, but above all should buy what they are passionate about.
“The Aston Martin DB6 has been considered undervalued in comparison to its predecessor the DB5,” says Dietrich. The DB5 was the original James Bond car. The DB6 is very rare, quite similar looking, technically advanced and is a lighter car, which is good for performance. Many people are not aware of that.”
Investors are also conscious of the possible demand for historic British cars in countries like China and India. The wine and fine art markets have already seen a significant increase in overseas investment. Could the classic car market follow suit? If an investor were anticipating this demand, they might invest in something traditionally British, or something that has a historical connection to the East, like a Daimler or a Lanchester.
Trying to predict this market is, Dietrich warns, a dangerous game to play. “Investing in classic cars should always be long term, because passion should not be short term. Besides, this market is illiquid, especially compared to mainstream investments.”
To really understand what the market is doing, consider attending the London auction hosted by RM Auctions. The collection up for auction includes a 1956 Mercedes-Benz 300 SL Gullwing, 1957 Maserati 250S by Fantuzzi, 007 Lotus Esprit ‘Submarine Car’ and a 1955 Jaguar D-Type. For more information, visit www.rmauctions.com.
For more information on the HAGI Index, visit www.historicautogroup.com.