Investors’ flight to safety and regulation creates tailwinds for passion assets

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“Passion investments” can sound like an oxymoron: What do feelings have to do with optimal returns? Yet, from art and cars to StockX, collectibles are a fixture in rich people’s portfolios.

Not wanting to put all eggs in one basket is not a new impulse. But while it is easily forgotten in good times, a recession is a great recipe to put diversification back on the agenda. In recent months, this has created tailwinds for alternative investments, also known as “alts.”

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Not all alts can be described as passion investments; I doubt anyone feels very passionate about private equity funds or debt, for instance. But the category also includes assets that overlap with hobbies and collectibles, such as wines, spirits, handbags and watches.

In sharp contrast with retail investors overall, those who invested in these categories were in for strong returns last year: “Watches and wine led the Knight Frank Luxury Investment Index results Q4 2021 to its strongest annual performance since 2018,” the property consultancy firm reported.

Concomitantly, the number of investors dabbling in these categories is also growing.

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