Classic cars may turn out be one of the best alternative investments in terms of returns, with prices of the vehicles almost tripling in the last ten years.
High-end vintage cars saw their value grow by 185% in the last decade, research from Knight Frank’s wealth report found.
Over 12 months the cars grew by 25%, beating all other alternative investments apart from art which shot up 29%.
In 2022, a new record was set when a Mercedes-Benz Uhlenhaut Coupé from 1955 was sold for €135mln to a private collector.
Dietrich Hatlapa. founder of the Historic Automobile Group International. said: “The classic car market has neither a positive nor an inverse correlation with other sectors.
“That’s a feature which many collectors find attractive.”
However, such enticing returns and immunity from wider economic instability come with considerable setbacks.
First, there’s the high cost to buy the vehicle, with the average vintage Ferrari (NYSE:RACE) valued at more than US$500,000.
Even maintaining the car can be costly, a 1966/68 Ferrari (NYSE:RACE) 330 GTC bumper can reach up to £10,000.
Add-on storage, insurance and even authenticating the car and expenditure can start wearing away at the returns.
Some asset managers have been exploring the market attempting to set up classic car portfolios to help bring investors similar returns.
Swiss investment firm Hetica Capital launched a €50mln close-ended fund in 2021 called the Hetica Klassik Fund.
The collection buys and stores classic cars, already having purchased twelve vehicles and setting its sights on another 20 over the next three years.
Investors are required to pay at least €125,000 to join the fund, with a class A share reaching upwards of half a million euros.
After seven years, the fund aims to sell the vehicles and return its investors between a 9% and 15% premium.
However, with the number of costs bringing forth these returns remains a challenge according to experts.
“We've seen more than 100 attempts at setting up funds in the past and nobody managed to build both a diversified investor base and a diversified car portfolio,” added Hatlapa.