That fancy handbag on your arm may be worth 10,000 dollars today – but its value could double or even triple in the not-so-distant future. Welcome to the world of passion investment, where savvy consumers invest in luxury goods they love.
A former senior private banker, Rozita Ramelan realised her ultra-high net worth clients had the interest but lacked the time to invest in such alternative assets. She soon became their trusted advisor and buyer before formally founding luxury concierge and retailer Kabinet Privé in 2013.
What is the difference between luxury portfolio investing and passion investments?
Both are forms of alternative non-traditional assets that have high perceived value: vintage cars, artwork, wines, to atelier-produced watches, high jewellery, handbags. Passion investing refers to a special class of investors: someone who is a connoisseur first, a collector second. The term ‘connoisseur’ has roots in early 18th century Old French: from the word conoistre or ‘know’. Kabinet Prive serves clients with a deep abiding respect for their portfolio because they take the time to appreciate its true value.
Why is it worth investing in luxury goods and what kind of ROI can we expect?
Firstly, not all luxury goods are investments; in fact, most are simply used for enjoyment. However, a very small subset of these items, hold their value and appreciate over time. By how much? Well, it really depends on three broad factors: scarcity, demand, and pricing trends. As an example, a normal leather Birkin cost $2,000 from a boutique in 1980 and prices increased to $4,000 in 2000. A new Birkin today is around $11,000, that?s a consistent 6% increase a year for the last 20 years!
How can we tell which pieces are actually worth investing in?
When in doubt, remember the adage ‘old is gold’. The longer a luxury maison has been around, the stronger its brand value, the more skilled its artisans and the more loyal its clients. Choose a piece that is rare either because it’s more difficult to make, or its raw materials are harder to come by. Classics are always in demand. And perhaps most importantly, seek professional advice, as you would in making any major investment decision.
How do we sell our pieces to get returns on our investment?
Within a portfolio, the holding period for each investment differs. Some pieces are ‘for keeps’ to pass on to your heirs. Others are held to achieve a target return and are liquidated to resellers, other investors or auction houses. The important thing about passion investing is that the market is actually very liquid, contrary perhaps to popular misconception. On balance, there are always more buyers than sellers at any given time. Hermes ateliers make around 3,000 coveted bags a year; there are 46.8 million millionaires globally as of 2019. The math is irrefutable.
Are there specific resellers, auction houses or a specific market to rely upon? Why should Kabinet Prive be our go-to platform for this?
Because we are curators and actively manage our client portfolios, Kabinet Prive is uniquely positioned within the global network of commercial resellers as well as individual owners – both buyers and sellers. We work with the major auction houses that have specialist departments in luxury goods. We also actively track the pricing trends of each sub-category of a portfolio and use algorithms to project and predict future values. As an example, we understand the historical trends of a 10 carat Type IIa diamond versus an 8-carat Mogok ruby, and we can take an informed view of future values. Given our experience, we know how to build robustness and value in a passion investment portfolio.
A version of this article was published in the December 2019 issue of SilverKris by Singapore Airlines