Posted on in Editorial by Josh



Exotic asset funds are quickly taking center stage. Many are extremely lucrative, such as the £10 million London based Wine Investment Fund that can double investments in a five year period, but some analysts contend that the illiquid nature of the market makes realizing returns difficult. In the past, individual investors overlooked this shortfall in exchange for the non-monetary benefits that exotics can offer.

Fine art, luxury good, antique car, jewlery and wine funds allow investors to participate in global conversations surrounding the exotic assets that occur during specialized events like car shows, wine tastings and art fairs. Director of the Wine Investment Fund, Peter Lunzer, explains that in “Asia, specifically Korea, China and Japan, wine is perceived as a status symbol, just like a Rolls-Royce or a Louis Vuitton bag, so demand increases dramatically.” As indexes for these markets grow in number, investors no longer have to trade profit for participation, and can count on gaining both. The issue of illiquidity has dissolved with the help of new analytic technology that allows expert fund managers to maneuver distinct exotic markets and avoid the shortfalls of illiquidity. 

The "Pink Star" Diamond that Sotheby's sold for $83 million. A small fraction of the $36 billion turnover in the luxury and car sector reported by Deloitte last year. 

Appraising unconventional assets has never been easier for retail investors thanks to tools that transform big data into predictive analytics. Fund managers use these tools to aggressively target exotic assets now more than ever, and for good reason. Managers are capitalizing on the growing demand for higher return investments during this period of low-yields. For the individual investor, access to these assets has been democratized by a wave of virtual investing tools, like Arthena, that offer affordable entry to online members. Portfolio managers are also seeking out unique asset classes to diversify their holdings with precision, gaining exposure to the specific benefits of rare market. In The New DiversificationDr. Christopher Geczy, a Finance Professor at Wharton, explains that investors must diversify for the extreme, using exotic alternative. 

Even risk-averse institutional investors are following suit as they search for exposure to assets with high growth potential during times of moderate growth in conventional markets. Historically, intuitional investors favor private-equity as a go-to exotic alternative. In 2013 intuitions set a record for pouring nearly half a trillion dollars into private equity funds. Public pension funds’ average target allocation to exotic assets has increased, forcing the industry to invest vigorously in a range of financial products that expose unique assets.  

This is because exotics act dually as a safe haven and growth opportunity for investors. Global political uncertainty has forced cash out of the bond market, and many investors are using exotic assets to safely stash their cash. While government debt may lose value, a rare blue-chip artwork or antique car should only grow in value over time. 

The Telegraph published an article explaining how benefits of exotics assets cater to the coming power of high-net-worth individuals from BRIC nations, whose massive investments into market propelled the global focus on exotics. These nations are cultivating a generation of educated and entrepreneurial investors with new money and easy access to exotic assets, such as fine art and luxury goods. Stephen Decani, CEO of Newscape Captial Group, explains that “there is a new wealth that will not go away and that means for luxury cars, watches and wine, there will always be demand and investing in these exotics is as much a lifestyle thing as an investment.”

Along with high returns, investors in Arthena’s art funds gain access to exclusive art world events and receive VIP invitations to art fairs all over the world. Email concierge@arthena.com for more information.