How alternative investments have performed since 2000 | Alternative investments

Wine

Fine wine was the best investment of the decade, with the top French vintages earning returns that far oustripped equities, gold and property. The average price of a fine bordeaux red jumped 138% in the noughties, equal to a gain of 11% a year, with the most sought-after labels, such as Lafite Rothschild, up almost 10-fold.

The Liv-ex Fine Wine Investables Index, which tracks the price of notable bordeaux reds from 24 leading chateaux found that between 31 December 1999 and 31 October 2009 there was a 138% return on investments across this range. The best performer was Lafite Rothschild 1982, which cost £2,613 for a case of 12 bottles at the beginning of 2000 and sold at the end of last month for £25,500, a return of 876%.

Behind the price surge is a limited supply and an influx of new-money buyers from China and the rest of Asia. Specialists reckon that, as China continues to industrialise, prices for fine wine will continue to soar.

Liv-ex director James Miles says: “The economic case for investing in wine is compelling: supply is static; quality conscious producers have even cut production in recent years. More-over, fine wine cannot be replenished. Every time a bottle of Lafite Rothschild 1982 is opened, there is one less for the world to enjoy. Add to this rising demand from new markets, such as Asia, and the case for rising prices is a powerful one. Wine has also been a useful tool for portfolio diversification with a history of high returns, low volatility and negligible correlation to mainstream assets.”

But would-be investors should not simply buy the first gluggable case that takes their fancy: not all well-known wines are suitable for investment.

To be regarded as a fine wine, it must have the potential to improve in bottle and appreciate in value, and be actively sought after by merchants. To satisfy this requirement, a wine must have a long track record, often centuries rather than decades, and have received strong critical acclaim. Investors use the Parker score on a fine wine before buying, a classification scale of up to 100 credited to US journalist Robert Parker Jnr, probably the most influential person in the fine wine market.

Miles says: “In practice, this is a narrow group of wines and includes the very top wines of Bordeaux and a smattering of wines from Burgundy, the Rhone, Italy, Champagne and the New World. Most professionally managed investment portfolios have between 80% and 90% by value invested in just eight brands – the five first growths, plus Cheval Blanc, Pétrus and Ausone. These brands have so far accounted for 64% of Liv-ex’s turnover in 2009.”

But beware, this is a market in which naive investors can easily lose out to scam operators. Only buy from an established, reputable merchant. See The Bunch for a list of Britain’s top independent fine wine merchants. Jill Papworth

Which wine will be the best investment for the next 10 years? I strongly believe it will be Asia-focused and entirely red wine. The increased demand we have seen, particularly from Hong Kong, over the past 18 months is likely to spread to China’s major cities, putting enormous supply pressure on certain Bordeaux chateaux. Bordeaux has an almost infinite market for a very small, finite product. To give you a feeling of size, the great Chateau Mouton Rothschild 20 years ago was producing twice as much as it does now as it, and all its peers strive for perfection by making a more concentrated, and therefore smaller, grand vin. In 2008 it made approximately 13,000 cases. Even at £2,760 a case this doesn’t go anywhere – apart from more expensive – in such a potentially enormous market as China. I see the first growths Lafite Rothschild, Mouton Rothschild and Latour leading the pack over the next year or so with Haut Brion and Margaux following close behind.

My tips are: 2008 Ch. Mouton Rothschild at £3,000 per case; 2008 Ch. Lafite Rothschild at £4,960 per case; 2008 Ch. Latour at £3,600 per case; 2006 Ch. Lafite Rothschild at £4,000 per case; 2005 Ch Lafite Rothschild at £8,000 per case. Simon Staples, Berry Bros & Rudd

Classic cars

Classic cars enjoyed a huge boom in prices in the 1980s, followed by a painful crash in the early 1990s. But despite a decade renowned for City bonuses, relatively little of it has poured into classic Ferraris, Mercedes and Aston Martins.

Coys, the UK’s leading auctioneer of classic cars – which also holds sales in Monaco, Italy and Germany, says that while the most sought-after cars have accelerated in price by 200% or more, the majority have stayed in the middle lane, enjoying rises of between 10% and 50% over the past decade.

Although prices have softened over the past year on certain cars – for example, a Ferrari Daytona sold 18 months ago for £190,000 and is now worth £160,000 – classics have generally steadily risen since the 1990s crash, Coys’ negotiator Will Smith says.

He cites examples from a Monaco auction in 2000 – a 1972 Ferrari 246 Dino which sold for £35,000, would now fetch £90,000; a 1957 Mercedes Benz 300SL Gullwing, sold for £100,000, now it is valued at £300,000; and a Porsche Carrera 2.7 RS, which sold for £30,000 in 2000, would now be worth £120,000.

But while 90% of the cars in the Coys 2000 catalogue have gone up, some have not. A Jaguar XJ220, technically a classic because of its extreme rarity and desirability, sold in 2000 for £120,000 but is worth no more today.

Mr Smith says values depend “primarily on popularity and rarity with, arguably, open-top sports cars currently the most desirable”. Jill Papworth

What will be the best-buy classic car for the next decade? The existing popular classics are relatively undervalued. They are not going to treble in value in the next five years, but they represent sound investment potential, as their prices have been steadily creeping up and we see no reason why they will not continue to do so.

A perfect example is the Jaguar XK120 Roadster, a simply stunning British sports car that nostalgically hints at the world-beating lines British car designers were producing in the 1950s. Prices currently start at £35,000, and go all the way up to £100,000-plus, but we see them steadily increasing due to their already established cult status.

My other recommendation is 1970s and 1980s supercars, such as the Lamborghini Countach and Maserati Bora. They were on every schoolboy’s bedroom wall when they were first released in the 1970s. The very same schoolboys that are now in a position in which to fulfil their dream car ambitions and, as such, values in such 1970s Italian exotica have started to increase rapidly. For example, five years ago a nice Lamborghini Countach QV500 could be yours for £40,000. Today, the same car would cost at least £60,000. Will Smith, Coys classic car auctions

Art

It is almost impossible to accurately measure the return on art over the past decade. Auction prices are only of limited help as they don’t take account of the large amount of art sold privately for undisclosed prices. It’s also hard to measure the decade’s increase in value unless the same works of art came up for sale both in 2000 and 2009 – and not many have.

A few facts, however, may shed light on the decade’s price trends, at the top end of the market at least. First, total sales of all art worldwide at Christie’s auctions came to £1.5bn in 2000, compared with £2.8bn in 2008. That’s an increase of 87%.

Second, this year saw the sale of Claude Monet’s Au Parc Monceau at Christie’s Impressionist and Modern auction. Back in June 2001 it went to auction, and fetched £3.7m. This year the same painting sold for £6.3m, a rise of 71% over (almost) a decade. It suggests that while great art has not kept pace with fine wine or gold, it has been a safer place to invest than shares.

More and more private client advisers regard art as a serious investment. Iain Tait of London & Capital, which manages £2bn, says: “There is a willingness to look at alternatives. There is a lot of cash on the sidelines waiting to be employed. Art offers a relatively attractive return with low volatility.”

Last week saw the launch of the “Emotional Assets” fund, which invests in collectables such as art, photography, vintage watches, rare manuscripts and ceramics. Its manager, Bernard Duffy, reckons he can make 15% a year for investors. But the minimum investment is high at £100,000.

Railpen, the old British Rail pension fund, invested in paintings in the 1970s, and earned around 10% annualised returns on its portfolio. But the fact it eventually chose to sell up and invest in other assets says something about art as a long-term investment.

Art is not like an investment trust or unit trust; there are no regulators to safeguard investors’ interests. It is always difficult to value – and may be impossible to sell in a hurry.

Earlier this year it also looked as if the art market was taking a pounding from the credit crunch. In New York, the world’s biggest art market, more than 60 galleries have shut, although the downturn has been much less severe in London.

But the auction houses are confident that emerging markets will keep the market buoyant. Harvey Cammell of Bonhams says: “One of the strongest markets during the recession has been Chinese art. We have just had one of our strongest Chinese sales with items of jade and imperial works of art selling far, far in excess of expectations.” Patrick Collinson and Jill Papworth

What will be hot in the next decade? Everyone’s looking for trends, and there are some. Whereas the last decade was about territories – China, India, Asia, Iraq, Iran – the next will be about formats and mediums (new and old); not so much painting, photography and sculpture but more textiles and tapestries, digital art, gardening art, eco art, all things cosmic, woodcuts and even wax. But where should you look to speculate, appreciate, and accumulate?

Tapestries and textiles are not quite in contemporary galleries yet, but they will be, courtesy of practitioners such as Kara Walker and Grayson Perry (ceramic pictured above right), and Selwyn Image and enthusiasts like Alistair McAlpine.

“Outsider” art – which is easy to find, cheap to buy and fun to own – can only go up, so get some now, along with your salvage, stained glass, vintage bricks and mirrors.

But what of the newer than new? There will always be painters like Ansel Krut, who is as good if not better than Peter Doig and still more or less undiscovered, and text-based colourist and Saatchi favourite Peter Davies. Londoner Francesca Lowe makes philosophical sci-fi fantasias, while digital guru John Maeda turns nature’s ponds and oceans into beautiful kaleidoscopic tundra. All of these artists’ prices have doubled or tripled in the past five years. Tot Taylor, director of Riflemaker Gallery