The demand for investments of passion among high net worth investors is expected to increase this year, according to the World Wealth Report released yesterday by Merrill Lynch Global Wealth Management and Capgemini.
Cautiously making their way back into the market, high-net-worth and ultra-high-net-worth investors are seeking an interest in reclaiming their share of passion investments. In 2009, the global demand for these investments declined dramatically in a variety of categories such as tangible luxury collectibles, such as art, jewelry, gems, automobile, and watches. But towards the latter part of 2009 and into 2010, an increase in the demand increased along with the broader market.
“The demand for passion investments overall is likely to increase in 2010 as wealth levels rebound, evidenced by the fact that auction houses, luxury goods makers and high-end service providers all reported signs of renewed demand,” the report stated.
Even with new traction for these high-end investments, the report highlighted some differences among the spending patterns. Luxury collectibles, such as autos, boats and jets, accounted for the largest share of passion investments in 2009 at 30%. This was up from 27% in 2008. Trailing slightly behind in second place was jewelry, gems and watches at 23% (up from 22% in the previous year); and art was the third category at 22% (down from 25%).
The researchers behind the report said there was also a difference developing between developed and emerging economies. Outside of the U.S., financial advisors use passion investments in a more regular manner, said Ileana Van Der Linde, principal in Capgemini’s Wealth Management practice and manager of the World Wealth Report initiative. And that is likely to just increase their usage. “Now passion investments are in modern markets and it’s growing…the increase in collectibles and real estate will continue.”