Passion Investments: An Asset Class that won’t put you to sleep.

By Leon Liao

What is an Investment?• ɪnˈvɛs(t)m(ə)nt/

o Noun

o the action or process of investing money for profit.

o "a debate over private investment in road-building“

o synonyms: investing, speculation; More

What is a Passion?• ˈpaʃ(ə)n/

• Noun

• A strong and barely controllable emotion

What is a Passion Investment?• A collectible item from a hobby that increases in value due to

rarity and popularity.

• Originates when a person wants to unite a hobby with speculation.

• E.g. Alfredo Paramico former head of Global Markets at Banco Bilbao Vizcaya Argentaria SA now runs “Precious Time” ($35mm AUD) a fund that invests in vintage watches

Why do Passion Investments increase in value?• People love stories. Passion investments tell stories that

cannot be replicated by modern luxury. It is an emotional purchase – similar to why people will pay $15k-100k for a Birkin.

• Rarity. Normally, when a new product is released, there will be imitators. Vintage items cannot be replicated because their value comes from the time period from when they were released.

• Fad. Contrarians believe that there is a bubble. (good luck shorting vintage watches)

Ben Clymer from Hodinkee

Rarity• “…there is nothing that is so lasting. These are all so

multigenerational….I think this can connect one generation to another generation even though they never overlapped”

Emotional Value• “These things can be real talismans to a previous life, a

previous generation…. This is one of the few things that belonged to him and one of the things that I can take with me everyday”

Advantages of Passion Investment• It’s your hobby! So it’s fun!

• Inflation hedged – the vintage items run in line with inflation.

• Diversifies a portfolio. Passion investments are equity/debt market uncorrelated.

• Incredible returns if you pick a winner

Disadvantages of Passion Investments• What if it is a fad?

• No way to hedge exposure with derivatives.

• Opaque and asymmetric market.

• No central marketplace.

• Fakes?

Price Evolutution

Paul Newman Daytona

Sold for $1,089,186 on November 10, 2013 (Christies)

Manufactured in 1969 with original Rolex guarantee dated 1978 and Rolex box

Things to Look out For• 1. Case Material (Steel is Best!)

2. Historical ProvenanceDuke Ellington is an American jazz legend.

3. Brand• Mainstream brands, Rolex, Patek, AP, Vacheron Constantin,

Tudor are easy to sell

• You could take a long position in a brand that is about to be resurrected.

• E.g. Vintage Panerai before being resurrected by Richemont

• Blancpain before being resurrected by by Jean Claude Biver and being sold to Swatch