10 May, 23

Classic cars are the new feasible substitute for conventional investment funds!

Classic cars have risen 185% in value over the past decade.

MILAN — According to Andrea Modena, head of Ferrari’s classic car division, in 1977, a Ferrari owner sold his 1962 250 GTO because his wife complained it was too noisy. It had to be her or the car.

I’m not sure the wife would have won today.”
Indeed, times have changed. The same Ferrari model became the most expensive car ever sold at auction in 2018, fetching $48 million. Last year, a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé set a new record of 135 million euros ($149 million). These kinds of megadeals are at the forefront of billions of dollars in annual spending on classic cars. All around the world, as part of a wave of investment in this alternative asset.

According to Knight Frank’s 2023 wealth report, the value of vintage cars has increased 185% over the last decade. Totally outpacing the growth of luxury rivals wine, watches, and art, and ranking second only to rare whiskies. The market has grown beyond a small group of collectors. To include investors attracted by the prospect of high returns. As well as a lack of correlation with traditional portfolio assets such as stocks and bonds.

“We’ve been watching the market for a long time,” said Giorgio Medda, CEO and global head of asset management at Azimut in Italy. The past 30 years’ track record tells us that classic cars have become a financial asset class that we want our clients to have in their portfolios. This year, the asset manager will launch what it calls the world’s first “evergreen” fund to invest in vintage vehicles, with a limit of 1 million euros per vehicle. The fund, which is advised by Alberto Schon. The head of Ferrari and Maserati dealer Rossocorsa, says it will select vehicles with a unique history.

While Azimut’s fund has no end date and can accept new money indefinitely, Hetica Capital, a small Swiss asset manager, launched a 50 million euro ‘closed-end’ fund in 2021, calling it the first of its kind. The Hetica fund, which seeks returns of 9%-15% after seven years. They have purchased a dozen vehicles so far and plans to purchase 30-35 vehicles by the fifth year. Leaving the final two years to sell the vehicles and pay investors.

The plans are ambitious

“We’ve seen over 100 attempts to establish funds in the past. Nobody has ever built both a diverse investor base and a diverse car portfolio “Dietrich Hatlapa, founder of classic car research firm HAGI, which provides Knight Frank with sector data, agreed.

It’s also not a business for the faint of heart

Both the Azimut and Hetica funds are registered in Luxembourg and have a minimum investment of 125,000 euros.

“We get a lot of calls from people looking to invest 1,000-2,000 euros, and we have to turn them down,” said Walter Panzeri, the manager of Hetica’s Klassik Fund. Furthermore, a minor scratch or dent, or the need for a replacement part, can be costly. According to Modena, replacing just the bumper of a rare vintage car can cost up to $15,000.

Keeping The Cars Alive

According to Florian Zimmermann, who started buying vintage cars while working at Mercedes-Benz. He has since built a collection of 300 vehicles with a partner. The annual operating costs for car collections, including hefty storage and insurance fees, could easily amount to 5-6% of the portfolio’s value.

“Finding qualified mechanics to keep these cars running is becoming increasingly difficult. And you’ll have to spend a lot of money to keep all of these cars running “He stated. Indeed, investment funds that manage car portfolios can be a moneymaker for automakers’ classic car divisions. Which not only provide repairs and parts, but also certify the authenticity of vehicles for participation in shows and competitions.

According to Peter Becker of Mercedes-Benz Classic, the certification process alone can cost around 20,000 euros. Only the carmaker’s experts with access to its archives can confirm the originality of a classic model. Nonetheless, the classic car market is expanding as the number of wealthy people grows. According to Knight Frank, the value of vintage cars increased by 25% in 2022. Their best performance in nine years and second only to art’s 29% increase.

According to Hagerty, there are approximately $80 billion in collector vehicle transactions worldwide each year, including all auctions and private sales. While North America continues to be the largest auction market. With Hagerty recording $3.4 billion in auction sales in 2022 versus $774 million in 2007. Zimmermann said a growing number of buyers have emerged in recent years in the Middle East, India, and China.

They’ll be cult objects

According to some market participants, the global race to abandon combustion engine cars will only increase interest in these relics of a bygone era.

“Electrification will favour classic cars”

said Cristiano Bolzoni, head of Maserati Classiche, the company’s vintage car division. “They will become cult objects over time.” According to Adolfo Orsi, founder of the Classic Car Auction Yearbook. Which has been tracking auction sales data since 1990. Ferraris are the most valuable vintage automobiles, describing them as “absolutely the blue-chips of this sector.”In 2021-22, Ferraris commanded an average auction price of $589,000, followed by Mercedes-Benz vehicles at $378,000 and Porsches at $348,000. “Over the last five to ten years, the classic car community has changed tremendously,” Zimmermann said. “Previously, only people knew the cars inside and out. Others, on the other hand, simply thought:

“I like these cars, I can afford one, and I won’t lose money by purchasing one.”

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Tags : Classic cars, Classic cars investment, Vintage cars.
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