April 3: Wealthy investors turn to luxury watches amid market turbulence
During all the recent market turbulence, more wealthy families and investors are plowing their money into alternative assets — including luxury watches, the prices of which have outpaced the S&P 500 in recent years. The market for these collectables is booming, though it’s important to do your research first, Amy Guttman reports.
They’re also putting their money where their mouths are — into another luxury staple, Champagne, with some bottles fetching sizable returns and the market bubbling ever higher in 2021 and 2022.
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HANDPICKED: Wealthy investors turn to luxury watches amid market turbulence
By AMY GUTTMANN
While the stock market continues to give investors a roller-coaster ride, the secondary market for luxury watches is ticking along quite nicely, drawing interest — and investment — from the wealthy.
Overall, the market for luxury assets such as art, collectible automobiles and watches is hot, with Knight Frank’s Luxury Investment Index growing 16% in 2022.
A recent survey by Knight Frank found that nearly half of wealthy investors plan to buy a luxury watch in 2023. The survey polled 500 family offices, private bankers and wealth advisers.
While fine art remains more susceptible to volatility and cyclical trends, secondhand luxury watches have outpaced other collectibles in the past decade as a better way to preserve value. Between 2018 and January 2023, average prices for secondhand models of Rolex, Patek Philippe and Audemars Piguet increased 20% annually, despite multiple events depressing global markets. During the same period, the S&P 500 index averaged 8% annually.
Prices and sales consistently eclipsed previous records in 2019 and 2020. And despite a dip in 2022, the highest price paid globally for a secondhand luxury watch in an online sale was achieved at Christie’s in Hong Kong last month: $5.8 million for a Patek Philippe Sky Moon Tourbillon.
Sotheby’s introduced weekly online watch auctions in 2019 — a year when private sales quadrupled in value and doubled in volume. The auction house called it “perhaps the most significant shift since the emergence of the collecting category in the 1980s.”
- Demand for luxury watches such as Rolexes and Patek Philippes on the secondary market is growing.
- About 46% of ultra-high-net-worth individuals are likely to purchase a luxury watch in 2023, per a Knight Frank survey.
- In recent years, price increases for secondhand luxury watches have eclipsed the S&P 500 index.
- It’s important for new collectors to do their research to learn about the different brands.
FROM PASSION TO PROFIT
With some watches delivering total returns greater than 200%, longtime watch collectors are shifting priorities.
“Historically, it’s been about true passion and the fun of the chase and getting what you want,” said fintech entrepreneur Sid Vasili, who runs his family office from London. “Latterly, it’s been about returns and investment.”
Vasili bought his first Rolex 25 years ago to celebrate his business success. He’s one of a group of collectors who meet regularly at private members’ clubs and other discreet venues to admire millions of dollars of timepieces and discuss the market.
In late 2019, Vasili learned of manufacturer slowdowns and fulfillment problems. Using online charts to track prices globally, he could see the market was heating up.
“A Rolex that sells for $7,000 and then rises to $15,000 — it’s crazy,” he said. “I ordered six Rolexes, and I’ve ordered another three. I acquired them specifically for potential returns, and if I don’t move them on and they all end up as legacy pieces, that’s fine.”
Some family offices are taking their interest beyond just buying luxury watches as collectibles.
The family office of Kuok Meng Xiong, the grandson of Malaysian billionaire Robert Kuok, recently invested in Wristcheck, an online trading platform for pre-owned watches that recently opened a retail location at Hong Kong’s Landmark shopping mall — well-situated near a Louis Vuitton and Tiffany. Wristcheck CEO Austen Chu, who developed a huge following on Instagram with photos of his own watches, recently collaborated with Audemars Piguet on a titanium perpetual-calendar special edition for China.
WATCHES ON THE WEB
Product shortages have propelled the pre-owned market, which has also benefited from Chrono24 — the world’s leading platform for luxury-watch sales, with more than 2 billion euros (about $2.2 billion) in watches sold through the site. Analysts credit Chrono24 with connecting the global market and adding layers of transparency. Users can view current and previous price reports for different models and can choose an escrow option for payment.
Founder and co-CEO Tim Stracke started Chrono24 in 2002 and has seen a 25% to 35% increase in transactions in the past decade, with a significant acceleration since COVID.
“When COVID normalized, people were fearing inflation and the loss of stability,” Stracke said. “As stores reopened, people found empty shelves, so guess where they went? They went online. The global scarcity of desired watches fueled our growth.”
Like all asset classes, research is critical, Stracke said. Not all brands or models are equal.
“For me, it started with a fascination of the technology, and then I learned about the different brands, and then I learned that these are very stable assets,” Stracke said.
Just as important as tracking prices is staying on top of pop-culture trends. Stracke pointed to major sporting events such as the Australian Open, when Rafael Nadal won while wearing Audemars Piguet’s Royal Oak watch.
“That day was the all-time-highest traffic on our platform,” he said. “We had a customer who wanted the same model Nadal was wearing. We helped him find it.”
‘IT DOESN’T WORK FOR ALL’
Both Stracke and Vasili warned that, like most collectibles, investing in watches only makes sense if there’s an interest or passion, not simply a desire for a potential return.
“In some instances, it doesn’t work for all,” Vasili said. “I don’t collect wine because I don’t understand it and I don’t drink, so it’s meaningless to me. If somebody wants to get into watch collecting, do your research; be very, very careful; and don’t be persuaded by the hype. Do it because you want to do it and you believe in it.”
While some reports suggest that the market could be softening, product shortages are set to continue for the next two to three years. So even if a pullback occurs in discretionary spending, analysts believe the market will stay buoyant for the long haul. And as Vasili pointed out, in the worst-case scenario, luxury watches — unlike fine art, cars or wine — are portable, durable, legacy assets. Said Sarah Willersdorf, the Boston Consulting Group’s global head of luxury, “The fact that luxury watches often hold their value over time helps justify the purchase.”
Champagne is outperforming gold and the S&P 500
By BLOOMBERG NEWS
To celebrate romance or toast a great performance, pop open the Champagne, of course. That’s why the 95th Academy Awards featured Brad Pitt’s pink bubbly Fleur de Miraval. But today, along with their sex appeal, the finest bottles also pour out heady investment returns. And as the market bubbled ever higher in 2021 and 2022, speculators pounced.
Here are the kinds of numbers that stirred them up: From January to September 2022, a case of all-Chardonnay 2012 Salon Le Mesnil soared 232%, from £3,800 to £12,600 ($4,670 to $15,485), according to Liv-Ex, the London International Vintners Exchange.
The Liv-Ex Champagne 50 Index, which tracks the price performance for recent vintages of a dozen top brands, was a runaway star, outperforming gold, the FTSE and the S&P 500, as well as the Bordeaux First Growths and even Burgundy.
Keep in mind that a decade ago, the world’s finest bubbly accounted for a mere 2% of secondary-market trades on Liv-Ex. That share climbed to make it the third most-traded region behind Bordeaux and Burgundy (at 18.7%) in November 2022 and remained in third position until U.S. wines spiked during the week of March 17-23.
When prices started cooling late last November and trended downward in early 2023, the big question was: Is Champagne’s bull run over?
No, insists Tom Gearing, CEO of Cult Wines, a UK-based fine-wine investment company. He’s positive but cautious about the Champagne market for 2023, citing continued strong global demand, as well as the region’s serious brand power and wide distribution. Vintage bottlings offer rarity, exclusivity, aging potential and a good track record during economic downturns. Lower production in 2021 and 2022 tightened supply, with some top houses running out last fall.
And prices remain high at auction, as Charles Curtis, founder of the wine advisory service WineAlpha and author of Vintage Champagne: 1899–2019, said over glasses of Burgundy’s great Domaine de la Romanée-Conti. Several of Curtis’ clients bid the high estimates listed in recent auction catalogs and still lost out because the bottles sold for much more.
Jamie Ritchie, worldwide chairman of wine and spirits for Sotheby’s, said interest in Champagne has been escalating over the past decade, including in Hong Kong, Singapore and Taiwan. The amount of Champagne lots in their sales, he said, is growing big-time. Its “Ethereal Cellar” auction in Hong Kong on April 2 will include 82 lots of rare Krug vintages and 60 of Dom Perignon. White Plains, New York-based Zachys’ March auction featured 156 lots of Champagne.
This kind of auction fever wasn’t always so.
Broad interest in Champagne investing started a few years ago when buyers began to realize how undervalued great examples were compared with the best Bordeaux and Burgundy, said Liv-Ex’s Robbie Stevens. “One catalyst was the release of the extraordinary 2008 vintage,” he said, “and then the slew of great vintages that have followed—2012, 2013 and 2014.” Investors got excited, then looked back to stock up on earlier vintages.
Another driver of demand may be anxiety over how global warming will affect the quality and style of future vintages. In other words, better buy now, just in case.
Gearing adds in yet another reason to have faith in Champagne’s continued investment potential: It remains an icon of luxury in a world where there’s been an explosion of wealth. Despite COVID, the war in Ukraine, inflation and looming recession, luxury goods boomed last year, and the 2022 edition of the Bain & Co.-Altagamma Luxury study predicted even further growth in 2023.
Druckenmiller’s family-office portfolio spikes: Duquesne, the family office of investor Stanley Druckenmiller, saw its portfolio value grow from $1.76 billion to $2.02 billion in the first quarter of the year — adding Nvidia; increasing Eli Lilly, Chevron, Lamb Weston Holdings and Meta Platforms; while decreasing T-Mobile and Datadog and dropping Amazon, Workday and Microsoft.
Rockefeller family office scoops up First Republic private wealth team: The team, led by James B. Marchetti, had been managing over $1 billion in assets in San Francisco, AdvisorHub reports. It’s the second big departure from the wealth unit of the bank, which has been rocked by the collapse of Silicon Valley Bank.
Some parents are paying consultants up to $750,000 to get their kid into Ivy League schools: It’s worth it, says Hope Choi, whose son applied to 22 schools in total and won a spot at Yale next fall. Those fees have increased as acceptance rates at the top institutions drop below 5%, Bloomberg News reports.
Help us with a story: We’re working on a story about the art market and how to make sure that families make smart decisions when it comes to handing down those assets to the next generation. If you have any comments on the topic, reach out to [email protected].1