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An Exclusive Guide to the Passion Investments of High-Net-Worth Individuals

The Wealth Report Series by Knight Frank

Source: knightfrank.com

(KFLII)

Knight Frank Luxury Investment Index

The Knight Frank Luxury Investment Index (KFLII) serves as an extensive resource for evaluating the performance of luxury investments. However, understanding its compilation process and constraints is crucial. The index relies on a weighted assessment of ten asset classes, each representing a different level of “collectability” within the ultra-high-net-worth (UHNW) community.

Art Index

The All Art index, compiled by Art Market Research (AMR), bases its calculations on monthly auction sales data. By determining an average value for artists in the database, known as the Artist Price (AP), AMR computes the Underlying Monetary Value (UMV) for each time point. This allows for a comparison of AP sums relative to a base period, reflecting the evolving value of art over time.

Classic Cars Index

Utilizing data from global and private sales, the HAGI Top Index tracks the value of 50 investment-grade cars from 19 marques. This index, updated monthly, employs a chained-Paasche algorithm method to weigh the market capitalization of each featured model, offering insights into the performance of classic cars as investments.

Colour Diamonds Index

Compiled quarterly by the Fancy Colour Research Foundation, the Colour Diamonds index analyzes purchase price data from 28 global wholesale sources. Focusing on pink, blue, and yellow diamonds, this index monitors size and intensity trends, providing valuable information for investors in these rare gemstones.

The Knight Frank Rare Whisky Index, managed by a foremost leading independent company within the industry, tracks UK auction prices of 100 bottles of exceptional single malt Scotch whisky. Reflecting the craftsmanship of talented distillers and master blenders, this index highlights the value of rare whisky bottles from iconic distilleries.

Watches, Furniture, Handbags Index

AMR’s antiques, luxury, and collectibles indexes offer insights into the market performance of various items. Based on average market values relative to a base period, these indexes track the value evolution of watches, furniture, and handbags, providing valuable data for collectors and investors.

Wine Index

The Knight Frank Fine Wine Icons Index features a curated basket of 200 fine wines, reflecting the preferences of high-net-worth collectors. Re-valued monthly using mid-point, low-market cluster prices, this index offers a comprehensive overview of the fine wine market, aiding investors in decision-making.

The Knight Frank Luxury Investment Index (KFLII) presents a nuanced understanding of luxury investments across diverse asset classes. By examining the methodologies behind each index, investors can gain valuable insights into the performance and trends within the luxury market.

 Source: knightfrank.com

Luxury Investments Defined

Luxury investments, often termed investments of passion, embody a distinct essence. In essence, they mirror conventional investment markets in several facets. Essential components include liquidity, facilitated by a community of like-minded collectors, alongside accessible trading platforms enabling seamless transactions. Furthermore, long-term value appreciation potential is pivotal, differentiating these investments from assets like private jets or super yachts. Preferably, these investments possess measurable data facilitating market performance tracking.

However, the crux lies in the enjoyment derived from collecting the asset class, irrespective of its fluctuating value. Without passion fuelling the collection, without the intrinsic joy of ownership compensating for potential declines in value, it merely becomes another mundane investment.

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