Editor’s Note
This article examines the marketing of “real assets” like fine wines and collectibles as safe investments, cautioning readers to scrutinize claims of scarcity and guaranteed returns often promoted by sellers.
Fine wines, precious stones, forests, or collectible watches… While there is nothing illegal about marketing such goods, presenting them as promising investments is another matter. Scarcity, safety, guaranteed returns: according to some of their promoters, these exotic products combine all the advantages. Arguments that, through constant repetition, eventually hit home.
laments Jean-Pierre Rondeau, president of the Compagnie des CGPI, an association of financial advisors.
By straying too far from the beaten path, these investors expose themselves to severe disappointments, as the harsh reality almost never matches the polished sales pitch. The first argument put forward: “Demand is stronger than supply, it can only go up”!
one can read, for example, on Diamants-invest.com, a website selling this precious stone online. The same ingrained optimism is found among wine sellers, provided they are renowned châteaux (Latour, Pétrus, or Romanée-Conti), prized by Chinese consumers.
promises the Patriwine website, which allows, for a €10,000 investment, to build a “turnkey” cellar. It must be said that these prestigious vintages, which some enthusiasts still dare to drink, can only become rarer… But here’s the thing.
reminds Jean-Pierre Rondeau. Diamond, which had already experienced a crash in 1985, saw its price drop by 10% in 2008, at the height of the financial crisis. As for wines, after years of a crazy surge, their prices have more than stabilized, including for the great appellations.
testifies a Patriwine customer. As for her case of Lafite Rothschild 2008, bought for €14,835, it is now worth only €10,043, a decrease of 32.30%. Not to mention yellow metal (gold), which saw its value plummet by 29% in 2013. We’ve seen better crisis investments!
And that’s if the announced prices were truly transparent. But that’s the other problem with these “real assets”: unlike stock markets, their prices are not monitored by any independent authority and are, to say the least, opaque. In wine, for example, valuations are sometimes based on the Liv-ex, a UK index dedicated to Bordeaux, and sometimes on a rating established by the French broker iDealwine. When not based on the hard-to-verify results of auction sales, as in the case of the Luxembourg fund Nobles Crus, suspected of overvaluing its vintages to show positive performance. The same debate exists with diamonds, for which intermediaries rely either on the Rapaport or the Idex Polished Diamond, both equally private indices. On the Investdiamond.com website, which offers the purchase of diamond shares, it is the sellers who set their prices.
promises its founder, Jean-François Faure. In the end, the result is the same.
summarizes Natalie Lemaire, in charge of investor relations at the AMF (French Financial Markets Authority).
But the worst is when the speculative bubble that had until then allowed these investments to be sold finally bursts. Unlike stocks, which can be sold quickly and in large volumes, most of them are indeed… illiquid.
Result: you see their price collapse without being able to get rid of them. The savings invested by Nobles Crus investors have been blocked since mid-2013, by decision of the Luxembourg stock market regulator. Time for the manager to liquidate, if possible while limiting the damage, its stocks. As for recovering the goods directly, rather than their cash equivalent, it’s better not to count on it too much.
warns Jean-François Faure of Investdiamond. And even then, these small problems are nothing compared to those promised by the latest fashionable investment: forests, preferably tropical ones. Artal Forest thus sells plots of teak forests in Costa Rica, supposed to yield at least 8% per year, while Forest Finance promotes acacia (5-6% yield) or cocoa trees (5-7%). A great deal, when you know that the first harvests (and therefore hypothetical income) do not occur before three to twenty years…