Ferrari Fever: Investment Funds Drive Growth of Classic Car Market

Classic cars have long been seen as a status symbol for collectors and enthusiasts, but in recent years they have become a lucrative alternative asset for investors. Vintage cars have risen in value by 185% over the past decade, according to Knight Frank’s 2023 wealth report, outstripping the growth of other luxury goods, including watches, wine, and art. This article explores the growth of the classic car market, including the launch of investment funds by asset managers such as Azimut and Hetica Capital.

A Booming Market

Classic cars have been the preserve of wealthy collectors for decades, but a surge in demand from investors has turned the market on its head. Last year, a 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé became the most expensive car ever sold, fetching $149 million at auction. The potential for high returns and low correlation with other asset classes has led to billions of dollars of investment in classic cars globally.

Asset Managers Enter the Market

Asset managers have been quick to seize on the potential of classic cars as an alternative asset class. Italy’s Azimut has launched an “evergreen” fund that invests only in vintage vehicles worth more than 1 million euros. Meanwhile, Switzerland’s Hetica Capital has launched a 50 million euro “closed-end” fund that aims to achieve returns of 9%-15% after seven years. Despite interest from small investors, the minimum investment in these funds is 125,000 euros.

The Challenges of Investing in Classic Cars

Investing in classic cars is not without its challenges. High running expenses, including capacity and protection charges, can without much of a stretch add up to 5-6% of a portfolio's worth. Additionally, a small scratch or dent can deal a heavy financial blow, with some replacement parts costing upwards of $15,000. Finally, it can be difficult to find mechanics capable of maintaining vintage cars, which can impact their value.

Expanding Market

Despite these challenges, the classic car market continues to expand. The worth of rare vehicles developed by 25% in 2022, the most grounded execution in nine years and second just to workmanship's 29% increment. With the number of wealthy people on the rise, the classic car market is expected to continue its growth trajectory in the coming years.

In conclusion, the classic car market is seeing significant growth as investors seek alternative assets that offer high returns and low correlation with other asset classes. While investing in classic cars comes with its challenges, the potential rewards are significant. As asset managers continue to launch funds focused on this alternative asset class, the classic car market is expected to attract increasing investment in the years ahead.