Investing in cars: a case of portfolio diversification

What is worth for an investor? Buying shares of Ferrari, purchasing a Ferrari for the pleasure of driving it or investing in a portfolio of Ferraris and other cars ? The portfolio managers of car investment funds would plaid for the second option, being car enthusiasts, but would obviously opt for the third one.

Geneva-based Hugo Reyneri is a portfolio manager and the co-founder of car investment firm Honoris Cars launched last year. “An old dream” he concreted as he has been involved in the automotive sector since young, having spent years on race tracks, participating to historic rallies.

“Also I have bought and sold a number of cars while being a portfolio manager in Lombard Odier and then in HSBC Private Bank. I was already advising some tips to private clients for car acquisitions and sales,” Reyneri says to InvestmentEurope.

According to him, the automotive sector will split in two categories : “on the one hand, there will be cars for daily use such as electric cars or Google cars, and on the other hand, there will be classic cars bought by passionate individuals.

“The less people will drive because of the robotisation of cars, the more classic cars will be seen as art pieces. It is a way to diversify portfolios. It needs a reel selection among cars. I am convinced that over the 15 to 20 coming years, cars will be part of a classic asset allocation as it may provide investors with returns that are decorrelated from traditional investments.”

It is also in Switzerland but in the German-speaking region of the country that the Classic Car Fund, a car hedge fund, was launched in 2012 by Filippo Pignatti Morano (pictured) who worked 20 years in private banking before deciding to mix his passion for classics with finance.

“The classic cars have been the most profitable asset in the last 10 years and this will be the case in the next 10 years, with a lower volatility than the FTSE,” foresees Pignatti Morano, speaking to InvestmentEurope.

“Just think about the BRIC nations, the baby boomers, every year there are more and more billionaires and China will soon open its doors to the import of classic cars – don’t forget that classic cars are limited,” he adds.

About electric cars, he raises the question of whether they will be considered as classic cars in 30 years from now or not.

Who are the car funds’ investors?
For Honoris Cars’ co-founder Reyneri, cars remain an illiquid asset class that suits more high net worth individuals than institutional clients. But you can achieve big gains.

Though he underlines a few individuals have bought cars at CHF30,000 to resell them CHF150,000 only few years after purchase.

“Some individuals aged 35 to 40 years old have started to form car collections with cars of the 90s/2000s with an initial budget of CHF30,000. There is a dichotomy between vehicles. Ferraris have seen a 500% rise in value between January 2007 and May 2017 (Hagerty data) while Chevrolet models have seen their value up 20% on the same period,” Reyneri develops.

Pignatti Morano says investors in the Classic Car Fund are family office, banks, asset managers and individuals.

“The biggest investor at the moment is an asset manager, followed by a bank. Investors look at The Classic Car Fund as a diversification not correlated to the finance market for their portfolio. The fund has also big classic car collectors that subscribe the fund with some of their cars with the aim of asset protection. The fund gives this collectors the possibility to continue driving and storing this cars in their garage if they wish so,” he points out.

Pignatti Morano’s garage currently tallies 12 classic cars, including a Lamborghini Espada, a Ferrari Daytona, a Ferrari 308 GTB fiberglass (only 712 vehicles produced), a Ferrari Testarossa (bought for CHF80,000 and now traded for more than CHF120,000). All cars have been purchased with a team of consultants.

ABOUT THE AUTHOR
Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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