Only 19% of treasure assets owned by wealthy individuals globally are held for financial motivations according to new Barclays report
– Globally, high net worth individuals hold on average 10% of their total net worth in treasure assets –
– Over half of wealthy respondents consider at least one of their treasure assets to be priceless. For those who would be willing to part with them, they require on average a 60% price increase in the year after purchase to entice them to sell –
– 41% feel that there is a duty to share their treasure assets for the good of society –
– One third of global respondents report having increased the number of treasure types they hold compared to five years ago –
Johannesburg, 11th June 2012: Only 19% of treasure assets – which includes items such as precious jewellery, fine art, wine, antique furniture, classic automobiles and precious metals – owned by wealthy individuals globally are held for financial motivations, according to the latest report in the Wealth Insights series from Barclays.
Despite the increased public interest in collectibles and record prices being set at auction, the report found that investors are far more likely to buy treasure assets for emotional, rather than financial reasons. A third of the 2,000 wealthy respondents surveyed globally confirmed that they were holding more treasure types today than five years ago.
Launched today (11 June 2012), the report, Profit or Pleasure? Exploring the Motivations Behind Treasure Trends, provides an in-depth study of investment trends across the world in these ‘treasure assets’ as well as offering insight into the financial and emotional motivations for wealthy individuals holding these particular assets. The report looks at the value these high net worth collectors place on their possessions, as well as considering questions of social utility around accumulating treasure.
Globally, high net worth individuals hold on average around 10% of their total net worth in treasure assets, however, this rises to nearly a fifth in the UAE, who have on average 18% of their net worth tied up in treasure assets. For individuals in Brazil, China and Singapore treasure assets make up, on average, a sixth of their total wealth, whilst those in the UK (7%), India (3%) and Qatar (2%) hold more conservative levels.
South Africa is very much on a par with the rest of the world, with wealthy individuals holding approximately 11% of their total net worth in treasure assets Meanwhile, 38% of South African respondents hold precious metals – an asset traditionally thought to hold its value when financial markets are turbulent and the majority (92%) agree that diversification is valuable.
Nomkhita Nqweni, Chief Executive of Absa Wealth and Wealth and Investment Management, Barclays, Africa comments: “This report delves into the attitudes of those investing in alternative ‘treasure assets’ such as precious metals, jewellery, wine and coin collections. There will always be both an emotional and a financial component to the decision making process, but, given some of the difficulties associated with maintaining, securing and liquidating treasure assets, our study suggests that it is the former that will always pay the greater return. Treasure may, if you’re lucky or very knowledgeable, give you a financial return, but buy something you enjoy and it will always give you an emotional return.”
Globally, a number of different factors appear to affect the popularity of treasure asset types, from the age of the investor to the wider economic stability of their region. Precious jewellery is by far the most popular treasure asset type for wealthy individuals across all countries, with 70% of respondents investing in this asset, followed by fine art (49%) and antiques (37%).
Fine art pictures and paintings is the most popular asset type for wealthy South Africans, with 74% of respondents holding this treasure. Approximately 58% hold antique furniture and 52% own coin collections. South Africans top the global list (with 46%) of individuals planning to hold coin collections in the next five years.
Amongst global respondents, age is an important differentiator. Fine art and antiques tend to be more popular among older individuals, while the younger generation prefers cars, wine, precious metals and jewellery. In general, younger individuals also tend to hold a higher proportion of their total wealth in treasure assets, which experts have attributed in part to young people’s willingness to adopt higher-risk investment strategies.
Dr Greg B Davies, Head of Behavioural Finance at Barclays adds: “Whilst the type of treasure assets people choose to invest in varies slightly from country to country, the growth in the popularity of treasure is consistent with a general move towards simplicity, familiarity and tangibility in investing. Investing in assets as a like-for-like alternative to traditional asset classes should, however, be done with extreme caution as there are many attendant risks which range from the costs of insurance and upkeep of treasure to the subjective nature of these markets.”
Interestingly, the report found that the most significant motivation for holding treasure assets was enjoyment, with nearly two thirds (62%) of treasure assets held for this reason. In contrast, just 18% of treasure assets were held purely as an investment.
Social and heritage reasons were also important for choosing to own treasure assets, with the global wealthy reporting wanting to protect over one third (37%) of their treasure assets for future generations to enjoy, and holding more than a quarter (26%) because they enjoy sharing these treasure assets with friends.
Largely in line with the global trend, the top motivations for holding treasure in South Africa were enjoyment, to keep assets as heirlooms and to show the treasure off. Only 16% of treasure owned by South African respondents is held – in part – for financial reasons.
“The report uncovered that investing in treasure in most parts of the world is more about enjoyment than financial returns” Dr Greg B Davies continues. “What’s interesting is that financial and emotional motivations seem to work independently of each other. It was found that the more that collectors say they acquire treasure for financial reasons, the less enjoyment they tend to derive from it.”
The Endowment Effect
The report also revealed that wealthy collectors often require a very high price increase before they consider selling on their treasure. Owners of fine art, for example, reported a need for on average a 62% price increase in the year after purchase before they are willing to consider a sale.
The endowment effect, whereby people expect a higher price for an item when selling it than they would be willing to pay for it, is prevalent amongst wealthy collectors. As Dr Greg B Davies explains: “Once people own something, they start to ascribe value to that object, simply through having owned it. This means that they are not willing to sell it at the same price for which they would buy it.”
Additionally, some types of treasure asset are more likely to be considered priceless than others – that is, they would not part with it at any price. Just under half of respondents (44%) who own precious jewellery, fine art sculptures and antique furniture consider their treasure to be priceless, the report found.
The Social Utility Debate
Significantly, the report reveals that one in ten treasure assets are held so that no one else can have them. This highlights complex questions about the social utility of holding precious items, which may be of cultural value, or important to society.
Although 61% of respondents say they would be prepared to loan some of their possessions to a museum or exhibition if asked, fewer (41%) feel that there is a duty to share valuable possessions for the good of society.
Dr Greg B Davies concludes: “Investing in art can be highly positive on a broader social level if the collector is willing to act as a custodian to the item and share it as a cultural treasure with a much wider audience. There is a school of thought however, that argues that investors can create greater social benefits if they invest directly in productive businesses or new ventures. Many will feel that this rings true in the current environment, prompting both a relevant and emotive debate.”
Barclays moves, lends, invests and protects money for customers and clients worldwide. With over 300 years of history and expertise in banking, we operate in over 50 countries and employ over 140,000 people.
We provide large corporate, government and institutional clients with a full spectrum of solutions to their strategic advisory, financing and risk management needs. Our clients also benefit from access to the breadth of expertise across Barclays. We’re one of the largest financial services providers in the world, and are also engaged in retail banking, credit cards, corporate banking, and wealth and investment management.
Barclays offers premier investment banking products and services to its clients through Barclays Bank PLC.