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Alternative “Lifestyle” Investments

Through our work with private clients and family offices, the traditional asset classes of stocks, bonds, property and cash, often become just a secondary interest to the alternative ‘lifestyle’ investments.

It is not unusual for us to come across significant collections of:-

  • Art, Photography, Clocks, Furniture, Musical Instruments
  • Wine
  • Bloodstock – racehorses, stallions, stud farms, etc
  • Classic Cars, Motorbikes, Planes, Boats
  • Jewellery or items owned by famous people
  • First Edition Books, Maps, Literary works, Stamps
  • Gold

As with all investments, your appetite for risk, the level of return you require, and how much involvement you want to have in the ‘work’ of investment need to be balanced out.

This can be a glamorous world to invest in, and although we do not give investment advice, there is a wise adage to only ‘invest in what you understand’.   Either that, or treat it as a sport.  

Art, Photography, Clocks, Furniture, Musical Instruments

Increasingly frequently, we have cases which revolve around large art collections. More and more people are investing in art.

The art market is an unregulated sector, but the well-known auction houses are very clued up as to how to operate in light of recent consumer-friendly legislation.

One of the great pleasures of investing in art must be to admire pieces that you have purchased every day in your own surroundings, while hoping that they increase in value.

In addition to investing in art that you ‘understand’, we would strongly recommend that you only invest in art that you ‘like and love’.

After all, if does not go up in value, it will at least be a beautiful piece for you to admire and enjoy.  

Photography is usually of value if it is of an iconic person or place or taken by a famous photographer.  Of course, much depends also on whether it is easily reproduced or not. Sometimes, it is not just static photography which is of value, but also moving images or original film reels.

In terms of clocks, they are regarded as ‘scientific pieces’ rather than art work, and can sometimes receive favourable tax treatment as such.

Many beautiful pieces of antique furniture are now being bought as investments as they are not currently as fashionable as they once were. People are investing in furniture in the hope that fashions are repeated.

Musical instruments can also be treated as investments, but more often than not are played for pleasure.  However, take for example a Stradivarius violin, which although played for pleasure, could also be worth a significant amount.

Wine

Another alternative investment which has been seen for many years is wine – perhaps even more so than art.

Again, you need to understand your purchases and investments, but generally speaking, the value of vintage wines appears to remain relatively stable, particularly in times of recession.

Apparently, when looking for a wine to invest in, you need to look for its ability to age further, and it is worth looking out for its score from reviewers.

You may need to be prepared to wait a while for your investment to go up in value, and there is always a risk that you decide to drink and enjoy the wine, but then there should be a good story to go with it!

Bloodstock – racehorses, stallions, stud farms, etc

Investing in bloodstock is not listed, not regulated, and you are investing in something which may die and be worth nothing at all.

On the other hand, it could, with the right pedigree, earn you an income in prize money or with good breeding, foals to sell on.

If you wish to invest in such an asset, you need to understand your legal protection (which will depend on how you decide to purchase such an asset) and again if you do not understand that asset class, do your due diligence.

Classic Cars, Motorbikes, Planes or Boats

Classic cars are associated with luxury, excitement and classic Hollywood iconic scenes. Classic cars can be sold at significant profits at classic car auctions.

Motorbikes are similar.

Airplanes – either big jets or little solo flight aircrafts – are also the toys of the wealthy.

Boats can be seen as a status symbol – not only for the lovers of the sea, but also those who like to display their super-yachts.

Of course, condition and rarity can affect the collectability of these assets, but also some of these vehicles can have had impressive race history or cultural significance which can add to their value.

As with all these alternative investments, you need to enjoy your purchases.  Although, the potential for one of these items to be damaged is obviously greater.   However, sometimes rather usefully, some of these assets can be classed as ‘wasting assets’ for exactly that reason.

Jewellery or items owned by famous people

Expensive or rare jewellery is another asset class which interests alternative investors.

Once more it is something to be enjoyed and worn on special occasions.

Often, jewellery is worth more if it has an interesting or celebrity filled pedigree. This is similar to other items of clothing.

Take for example, the football boots of a famous footballer, or the collection of engagement rings of an iconic Hollywood actress who had married a number of times or the memorable outfit of an iconic singer.

When purchasing these sorts of items, the more iconic and memorable the celebrity connected to that item, the more likely it is to be worth investing in.

First-edition Books, Literary Works, Maps or Stamps

The condition and rarity of these items will affect their value, as will the reputation (whether famous or infamous) of the author of the works.

Sometimes people purchase first edition books in the anticipation that after the author’s death, they will become more valuable and desirable.

Other times collectors collect many of the same text but from different eras, which can also produce a beautiful and valuable collection of interest to collectors.

Their historical significance can also affect their value.  Particularly in relation to maps or stamps – especially if countries no longer exist or have had their borders altered post-war or national political turbulence.

In terms of stamps, most amateur school-boy stamp collections do not appear to be of any value at all, but a serious collector of very rare stamps can sometimes have a very valuable item to put on the market.

Gold

Gold bars are a popular investment in times of recession, as it is often perceived as a safe haven.

When investing in physical gold, there is a great deal of choice in terms of what gold to buy and in what quantity.

It is important to use a reputable firm and do your due diligence, as well as thinking about a reputable storage company.

How we can help

Regardless of which ‘lifestyle’ asset class you choose you invest in, please be aware that:

  • Buying an asset collection or bringing one to the UK can give rise to tax consequences.
  • On the other hand, some items, such as cars and wine, can be regarded as wasting assets for some tax purposes, and tax benefits can be claimed.
  • You need to be aware of who owns these assets, ie. you yourself personally, or through a business in which you trade, or some other structure. This will affect the tax consequences significantly.
  • If you are domiciled in the UK, or if you are non-UK domiciled, but own assets physically situated in the UK in your own name, your asset collection in your estate will be chargeable to Inheritance Tax
  • If you own these assets in your own name and you wish to give them away to your children, for example, you must survive the gift by 7 years in order for it to fall out of your estate for Inheritance Tax purposes. You also must not, say, retain a benefit over it, e.g. keep it in your own home, or, if you do, you must pay a market rent for the retention of the asset, in order for it to fall outside of your estate for inheritance tax purpose on death.

If you would like any further advice, specific to your needs, please do not hesitate to contact any of the partners in the private client department, who are also greatly involved in our Family Office offering – Richard Monkcom, Roy Campbell or Helen Freely on 0207 638 9271.

This briefing was posted on 3 February 2016.