'Investments of passion'

According to the recently released 2007 World Wealth Report by Merrill Lynch and Capgemini, 'investments of passion' (read: luxury collectibles like automobiles, aircrafts, race horses, jewellery, wines, antiques, etc) have become an important portfolio allocation for the world's 9.5 million High Net Worth Individuals (HNWIs).

The report reveals that luxury collectibles ranked first, accounting for over 26 per cent of all HNWIs investments of passion in 2006, thereby making them top sellers over the last one year.

Art investments ranked second, and have become a popular commodity for wealthy investors looking to diversify their portfolios. Jewellery followed with 16 per cent allocated to this luxury market. This category was most popular with Middle Esaterners, who directed 32 per cent of their investments of passion in jewellery. In contrast, North Americans and Europeans allocated less than 20 per cent.

As investments of passion continue to be of great interest to HNWIs, the cost of luxury goods and services rose nearly twice as fast as the cost of everyday consumer products in 2006. The cost of the luxury items tracked by the Forbes' Cost of Living Extremely Well Index (CLEWI) rose 7 per cent while the cost of consumer goods and services rose 4 per cent, representing a significant increase in relative inflation of luxury goods over 2005, when the CLEWI rose 4 per cent.

The Report concludes that the growing buying power of emerging market HNWIs will continue to drive demand for lifestyle and luxury brands. However, this upturn carries with it the risk that as the number of HNWIs interested in investments of passion primarily for purposes of financial gain increases, so does the possibility that these items will become overvalued.

A copy of the 2007 World Wealth Report is available here.

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