Soup up your portfolio.
For just €100, any Fool can jump on the running board of the Liechtenstein-based Classic Car fund launched in February by the Zurich-based Count of Custoza family office. The fund aims to buy €350m of assets -- i.e. numbingly beautiful machinery -- within five years. The fund's target annual return? A whopping 17%.
Pie in the sky? Maybe, but the prices fetched by the more exotic classic cars have increased two-fold in the last decade or so, according to UK car auctioneers Coys, so there's something going on here. Additionally, this particular fund has some heavyweights in the back seat in the form of experts from Sotheby's and Christie's.
Guernsey-based IGA Automobile Fund is another newcomer to the market. It's looking for 100 investors prepared to risk $500,000 each just to say "gentlemen, start your engines", and a further 300 investors to get the chequered flag. At that point the fund's full up. It's also got some authoritative advice aboard such as Gordon Murray, former McLaren designer.
Going global
Classic cars are a global thing these days.
In America, it was baby-boomers who kick-started the market by buying up the muscle cars of their youth such as the Mustang Boss, Chevvy Chevelle, Corvette Stingray, Plymouth 'Cuda and top-of-the-market, big-blockers like a full-blown Shelby 427 GT500 competition car.
Automobiles like these sum up an era. "Really, they're a snapshot in our history," Steve Davis, president of Barrett-Jackson auctioneers, told me. "More carburettors, more torque, more everything."
It used to be legendary European marques such as Ferrari that had a monopoly on international cachet but not as much as they did. Chinese collectors, for instance, are developing a thing for less expensive hot-rodders of the fifties and US muscle cars while Russian oligarchs can't wait to drive past the Kremlin in such a perfect example of American decadence as a Shelby Fastback. (That noise you hear is Stalin spinning in his grave.)
In short, unnerved by the waywardness of normal investment markets, wealthy people all over the world are looking for alternative assets with genuine tangible, long-term value.
Like any antique, a big attraction of classic cars is that, by definition, there's a fixed and even dwindling supply of the most sought-after models. Put another way, they're not making any more 1962 Ferrari 330 TRI/LM Testa Rossas, one of which went for €6.8m last year.
Courtesy of leading auction houses, here's a few essentials to look for in a classic car…..
- Rarity: Earlier this year a 1952 Ferrari Mexico Vignale Coupe, one of three built, sold at an RM auction for $4,290,000. But the same principle applies to muscle cars which come much further down the pit lane of desirability. Not a lot survived the James Dean era in saleable shape. Explains Davis: "They were raced, wrecked, modified, blown up."
- Authenticity: Anything raced, designed or even sat in by a legendary driver attracts premiums, like the above Caroll Shelby rocket ship. Thus detailed provenance is a prerequisite. "What truly defines value is the build sheet," explains Ian Kelleher, chief executive of RM Auctions. "That tells you how pure the car is to the original delivered vehicle."
- Condition: As with old coins, it's everything. Five-year restoration projects usually get their reward. This is why auctioneers highlight such seemingly irrelevant detail as the "Adventurer dual quad carburettor set-up with factory bat-wing air cleaner" fitted to a '56 De Soto Fireflite convertible that went for $368,500 earlier this year. To a knowledgeable collector, this stuff matters.
- Allure: Hard to define, it's in the eye of the beholder but allure is directly related to value. Mustangs increased in price recently because of their star showing in movies such as Bullitt and Gone in 60 Seconds, which explains why a Ford Mustang Boss 302 Laguna Seca went for $450,000 at a recent Barrett-Jackson auction in Scottsdale, Arizona.. And it's not even a classic car but a limited-edition of the original.
- Running costs: Garaging, maintenance and insurance appear to be the main items. As a rough rule of thumb, insurance on an exotic car comes to around 1% of the agreed value, but it depends on what you want to do with your pride and joy (er, asset). Take a Bugatti Veyron for a spin and it will cost around £2,500 a day.
The upside is that these things of beauty can produce income, for instance as transport for celebrity weddings or as attractions in fund-raisers, as well as capital gain. At least, that's what they say.
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