Advisers and wealth managers have spent the past two years moving client money out of equities and into “safe haven” and alternative asset classes that are uncorrelated to financial markets.
“The sophisticated investor’s love affair with equity-only strategies is well and truly over,” said one fund manager at a recent forum on the effect of the eurozone crisis on investment portfolios.
Sharp swings in global equity markets and the eroding effect of high inflation have pushed more investors to hunt for real returns in land, art, fine wine and gold.
But the characteristics of esoteric asset classes have confounded certain expectations.
Gold prices, held up as the weather vane for risk appetite, are down from a peak of $1,900 an ounce in 2011, despite continuing concern for the health of the global economy.
And prices for investment-grade Bordeaux wine, prized by China’s seemingly insatiable super rich, slowed down at the end of 2011.
“Investors aren’t always aware that demand for esoteric asset classes can be driven by more than one factor, rather than the intrinsic value of the asset itself,” said Adrian Lowcock, analyst at financial adviser Bestinvest.
Investment in art is recovering after a sharp fall in the wake of the credit crisis in 2008, and prices across the world rose by more than 10 per cent in 2011, outperforming equities, according to the Mei Moses All Art index, which tracks international trades.
Over the past decade the Fine Art Fund, one of six art funds run by the Fine Art Group, produced an annual return of 24 per cent on assets sold.
But the weight of demand for rare works of art from newly created millionaires and billionaires in emerging markets is not reflected at the lower end of the market and not all advisers are convinced that managers rushing to set up art funds have the skills necessary to pick the collectables of the future.
Investors interested in exposure to the growth in English farmland values also have more options for investment than ever, but over-optimistic expectations have been tempered by a recent slowdown in prices.
According to Knight Frank, farmland values edged down at the end of last year, rising a modest 4 per cent over 2011.
The boom in agricultural commodities has made farmland one of the top performing assets in the UK, tripling in value over the past 10 years.
Andrew Shirley, head of rural research at Knight Frank, expects values to rise by 10 per cent in the first half of 2012. The central belt of England, down from Birmingham through the Cotswolds and into Hampshire, is expected to prove most in demand.
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