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Stamps & Coins Alternative Investment Report 2015 • Intelligent Partnership launches the first of their CPD accredited AiR Report series for 2015, revealing that passion assets such as stamps and coins are no longer just for collectors and enthusiasts • A compelling case can be made for including them in an investment portfolio • The Economist Valuables Index has seen growth of over 200% since 2003, outperforming the MSCI World index • The market for collectibles is growing, with one third of the world’s stamp collecting market based in China, underpinning demand
Commenting on the AiR report, Daniel Kiernan of Intelligent Partnership said: “Our award winning research shows that certain, ‘investment grade’ stamps and coins can be very profitable investments that provide diversification, a hedge against inflation and an additional source of returns.”
The first of the 2015 series of the AiR reports compiled by Intelligent Partnership has revealed that investments of passion are no longer purely the domain of avid philatelists and numismatists. Collectible assets represent a compelling investment opportunity as the alternative investment marketplace has grown rapidly over recent years, with the stamp market alone currently bearing a $3 billion global value.
This market may hold stand-out items such as the 1856 British Guiana Magenta, which sold for $9.5 million last year , but it is underpinned by a growing base of investors, particularly in Asia where wealthy individuals hold as much as an average of 18% of their total net worth in treasure assets . Passion assets are no longer held solely as collectibles, but rather as highly profitable investments ideal for those investment professionals interested in tangible assets as a long term store of wealth.
Passion asset indices showing considerable growth
Investments of passion - anything that is tangible and not a financial asset – have performed strongly over the last ten years. An investor that had diversified across the Economist Valuables Index would have achieved 211% nominal growth since 2003, with stamps and coins outperforming every asset class in the index aside from classic cars. The strength of the stamp and coin asset class is reinforced in the Coutts Index: Objects of desire and the Knight Frank Luxury Investment Index, which also show stamps and coins among the strongest passion asset performers. The Stanley Gibbons China 200 Market Study illustrates the changing geography of the global stamp market, finding that the total value of the cross section of 200 rare investment grade Chinese stamps (ranging in value from £1,200 to £325,000) increased by more than £4.1 million over 25 years, representing a CAGR of 10.7%. Similarly the Stanley Gibbons GB250 index, which follows the same metric for the top 250 stamps in the UK, has seen a total return of 195% over the last ten years.
A hedge against inflation
Investing in alternative assets can mitigate the volatility of mainstream markets - passion assets are unique and individual with a limited supply to begin with, and value which increases steadily alongside inflation and often rises with the asset’s age as an already scarce supply is diminished further. As the number of investors in the market increases, rare stamps and coins become harder to source which ultimately results in an inverse supply and demand curve, naturally pushing prices higher. As prices are not connected to the global macro economy or public markets, passion assets provide a good level of portfolio protection in a way that traditional financial assets cannot.
Growing Asian market
The AiR, which is CPD accredited, addresses the common misconceptions that stamp or coin collecting is outdated and that collectors are a dying breed. New sources of demand are cropping up across Asia and within the ever increasing global middle class. There are an estimated 60 million stamp collectors around the world, with over two thirds of these based in Asia and an estimated 20 million collectors in China alone. This growing popularity in the Far East is primarily due to collectors of a younger age demographic wanting to own high status heritage goods, particularly those of a British nature. The Hurun Wealth Report 2012 indicated that 64% of Chinese millionaires invest in luxury goods, with rare stamps among the most popular alternative assets in their portfolios.
The need for expert advice
As the growing Asian middle class emerges and the appetite for passion assets in the region continues to grow, alternative assets are becoming more and more attractive as an investment class. It is a market, however, which often requires expert guidance to navigate. A vast amount of technical knowledge is required to assess the value of a passion asset and identify investable opportunities. Whilst a commemorative stamp from Liberia or Gambia may initially seem like a niche product and a sound investment, it becomes less attractive when you realise the two countries issued over 500 new stamps in one year during the 1970s in order to capitalise on appetite from collectors at the time. Similarly, although rare varieties, mint examples or blocks and strips of the famous Penny Black stamp can sell for thousands of pounds, with over 68 million printed it’s possible to pick up examples for as little as a few pounds. Knowledge of the market is absolutely essential, and investment professionals can mitigate risk by working with trusted independent advisors.
Commenting on the risk involved Keith Heddle, Managing Director of Stanley Gibbons Investments said, “There are so many nuances that determine whether a stamp is suitable for investment that we strongly recommend you consult an expert. It’s also important you buy from a name you can trust, as a guarantee of authenticity is only as good as the organisation using it.”
Commenting on the AiR, Intelligent Partnership’s Head of Research Daniel Kiernan said, “Our award winning research shows that certain, ‘investment grade’ stamps and coins can be very profitable investments that provide diversification, a hedge against inflation and an additional source of returns.”
