At a time when stock markets are particularly volatile and the Euro uncertain, an increasing number of people and businesses are choosing to invest in real assets like gold, wine, art and timber. This isn’t because they have a penchant for shiny things or enjoy a good Châteauneuf-du-Pape but simply because real assets are proving solid investment opportunities.
One of the main attractions of investing in real assets is that they are very much uncorrelated to global equities. Whether global stock indices go up or down, your real asset returns will not automatically follow them. The safest things to invest in are physical; this can be anything from gold to vintage wine to stamps.
The point is that unlike equity they are tangible assets. Share prices can plummet in a matter of minutes but if you invest in timber, for example, it will still be in the plantation in the morning. So while their value may increase or decrease, tangible assets will not disappear or fluctuate in size. This can be hugely reassuring from an investor’s point of view and investors can also visit their real assets, whether this is in a bonded warehouse or a plantation in Brazil.
Another reason why people are investing in real assets is to diversify their investment portfolio away from traditional assets. There are a lot of pension funds that have a requirement for real assets. The more diverse the investments you have the higher the probability of one of your investments increase in value.
In addition, if your assets are too similar and the market drops, then the value of your entire portfolio will be hit. With forestry and wine, in particular, it is possible to diversify your investments within the different types of timber and vintages available. This diversity is a rare opportunity within the investment world.
Interestingly, a survey in the Sunday Times last year asked leading financial advisers, estate agents and fund managers where they would invest a spare £100,000. The answers were revealing – they included shotguns, wine, property, classic cars, agricultural land, timber and gold bullion. If you were to ask me, I would choose vintage watches and Louboutins!