Hermes handbags an emerging asset class for UHNWs

There's now an index that tracks the value of collectable Hermes bags and they returned 13% in 2019, beating annual returns of other collectables like cars, jewellery, art and rare whisky.

Knight Frank Luxury Investment Index, for the first time, added collectable handbags to its list of asset classes.

And Hermes came out on top with 13% returns for 2019, ahead of stamps (6% growth in value), rare whisky (5%), art (5%), watches (2%), wine (1%), furniture (0%), coloured diamonds (-1%), cars (-7%), jewellery (-7%).

"It's only been possible to create an index on handbags now because of the frequency with which many iconic pieces are coming to auction today," said Sebastian Duthy, a director at Art Market Research, which supplies most of the data in the Knight Frank Luxury Investment Index.

"Although bags made by other luxury brands like Chanel and Louis Vuitton are also highly collectable, it is those made by Hermes that attract the highest prices and are considered the most desirable."

In Australia, a 30-inch Hermes Birkin starts at $16,285 and goes up to undisclosed prices.

However, widening the lens to 10-year period, handbags slip down the ranks and rare whisky emerges as the best investment.

Whisky grew by 564% over 10 years, followed by cars (194% growth in value), art (141%), wine (120%), handbags (108%), jewellery (90%), coloured diamonds (86%), stamps (64%) and watches (60%).

"As with other investments of passion like rare whisky, whose value has risen sharply in recent years, handbags are increasingly being seen as an investment class in their own right, as well as highly desirable fashion accessories. Collectors are prepared to spend hundreds of thousands of dollars on the rarest or most desirable bags," KFLII editor Andrew Shirley said.

Ultra-high-net-worth investors allocate about 5% of their investment portfolios to collectables, higher than their allocations to gold or precious metals at 3%, according to the Wealth Report Attitudes Survey 2020. The leading asset classes for the rich are still property (27% allocation), equities (23%), fixed income (17%), private equity (11%) and surprisingly, cryptocurrencies at 1% -- meaning that collectables are a fringe asset class for the rich.

"The results of the survey reveal that most UHNWIs are planning to retain or increase their allocations to luxury collectibles, which is no surprise with impressive returns on offer," Knight Frank joint national head of private office Sarah Harding said.

"Ultra-wealthy investors from the Middle East and Europe are leading the charge in growing demand for collectables, while nearly all of the Australasian investors are expected to maintain the same exposure to this asset class.

"As luxury collectables continue their rise up the investment agenda, a growing number of fledgling UHNWI collectors are making their first forays into the world of auction sales, which can be an art in itself."

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