The demand for collectibles is on the rise to feed a growing appetite for recession-proof hedges against inflation.
Faced with an uncertain market environment and record high inflation, investors are increasingly pushing into niche assets such as wine, baseball cards, sneakers, and diamonds. Reality TV star Kim Kardashian is among those contributing to the trend «Financial Times» (behind paywall) writes.
The influencer provided the highlight of this year's Met Gala in New York with an original dress of Hollywood icon Marilyn Monroe. Kardashian wrapped herself in the famous glittery dress that Monroe wore in May 1962 during her appearance for then-President John F. Kennedy's birthday. Normally, the dress is kept in an exhibition.
The appearance of the dress, normally part of an exhibition, alerted Wall Street to how much the dress has appreciated in recent decades. The dress sold for $1.26 million in 1999 and $4.8 million in 2016 when it again changed hands, a 300 percent gain in price. By comparison, the US benchmark S&P 500 index gained a comparatively meager 138 percent over the same period.
Another famous dress worn by Monroe was a pink number in the film «Gentlemen Prefer Blondes», where Monroe famously sang «Diamonds are a girl's best friend». It seems she was onto something. Pink diamonds have averaged an annual growth rate of more than 11 percent; they have increased by more than 300 percent since 2008, according to FCR Research.
Hedge Funds Buying
Interest from investment companies has fundamentally changed in the last six months, explains Darren Julien, founder of Julien's Auction House, which handled the second Monroe auction. Hedge funds and professional investors are putting more of their money into collectibles, he says with investment firms accounting for about a third of the buyers. And it is a trend that is accelerating in light of high U.S. inflation, with Julien expecting a record season.
In recent years, collectibles have become lucrative. According to the LiveTrade Bordeaux Index trading platform, whiskey has seen an average growth rate of 19 percent over the past decade.
Investing in Wine
For retail investors, the collectibles market is becoming more accessible. But liquidity remains a problem in some areas of the market. Funds, on the other hand, that bundle collectibles for retail investors are still in the early stages, although there are signs that the market is expanding.
Bordeaux wine is popular with retail and institutional investors alike. According to brokers, family offices account for nearly half of the market.
Hitting a Homer
Valt, an alternative investment start-up, for example, bundles collectibles for investors who want to own shares of Babe Ruth baseball cards. An index tracking baseball cards is up 1,000 percent since 2021 alone.
A 1952 baseball card of baseball player Mickey Mantle purchased for $50,000 in 1991 is now up for sale with bids exceeding $6 million, according to a «Washington Post» story. The auction closes on August 27, so there is still time to submit your winning bid.
