Daily Management Review

Ferrari Mania Causes Vintage Automobiles To Rush Into Investment Funds


Ferrari Mania Causes Vintage Automobiles To Rush Into Investment Funds
According to Andrea Modena, head of Ferrari's historic car business, a Ferrari owner sold his 1962 250 GTO in 1977 when his wife complained that it was too noisy. She or the car had to go.
"Nowadays, I'm not sure the wife would have won out."
Indeed, times have changed. When the same Ferrari model sold for $48 million at auction in 2018, it broke the record for the highest money ever spent on a vehicle. A 1955 Mercedes-Benz 300 SLR Uhlenhaut Coupé broke the previous record by racing to 135 million euros ($149 million) last year.
These kinds of megadeals are at the forefront of a global trend of interest in historic automobiles that sees billions of dollars spent each year.
According to Knight Frank's 2023 wealth report, the value of vintage automobiles has increased by 185% over the past ten years, outpacing the growth of luxury rivals such as wine, watches, and art and coming in second only to rare whiskies.
Investors intrigued by the potential of large profits and a lack of correlation with traditional portfolio assets like equities and bonds have entered the market, which previously only attracted a relatively limited group of collectors.
"We've been monitoring the market for a long time," said Giorgio Medda, CEO and global head of asset management at Italy's Azimut. "The track record of the past 30 years tells us classic cars have become a financial asset class we want our clients to have in their portfolios."
The asset manager is launching what it calls the first "evergreen" fund in the world this year to invest in classic cars, and it says it will only wager on vehicles costing more than 1 million euros each.
Alberto Schon, the owner of Ferrari and Maserati dealer Rossocorsa, is the fund's advisor. The fund says it will choose cars with interesting histories.
The small Swiss asset manager Hetica Capital launched a 50 million euro "closed-end" fund in 2021, which it also claimed was the first of its kind, although Azimut's fund will have no expiration date and can accept new money eternally.
The Hetica fund, which wants to achieve returns of 9%-15% after seven years, has so far purchased 12 automobiles. By the sixth year, it hopes to have 30-35 cars, leaving the final two years for selling the cars and paying investors.
Plans are ambitious.
"We've seen more than 100 attempts at setting up funds in the past. Nobody managed to build both a diversified investor base and a diversified car portfolio," said Dietrich Hatlapa, founder of classic car research house HAGI, which supplies the sector data used by Knight Frank.
Additionally, it's not a field for those with weak financial resolve.
The minimum investment threshold for the Azimut and Hetica funds, both of which are registered in Luxembourg, is 125,000 euros.
"We get loads of calls from people who're looking to invest 1,000-2,000 euros and we have to turn them down," said Walter Panzeri who runs Hetica's Klassik Fund.
In addition, a minor dent or scratch or the need for a replacement item might be very expensive. A unique antique car's bumper alone, for instance, can cost $15,000 to replace, according to Modena.
According to Florian Zimmermann, who began collecting vintage cars while working at Mercedes-Benz and has since amassed a collection of 300 vehicles with a partner, running costs for car collections, including hefty storage and insurance fees, could easily amount to yearly sums of 5-6% of the portfolio's value.
"It's getting harder and harder to find the proper mechanics to keep these cars alive. And you have to spend quite an amount of money to keep all these cars in running condition," he said.
The vintage car divisions of automakers, which not only offer repairs and parts but also certify the authenticity of vehicles to take part in exhibits and contests, can make money by investing in funds that manage automobile portfolios.
According to Peter Becker of Mercedes-Benz Classic, who claimed that only the carmaker's experts with access to its archives could authenticate the originality of a classic model, the certification process alone can run up to 20,000 euros.
Despite this, the market for classic automobiles is growing as the number of wealthy people also increases; according to Knight Frank, the value of historic cars increased by 25% in 2022, which was their best performance in nine years and was second only to the 29% increase in art.
Hagerty, a company that insures vintage cars, calculates that worldwide collector vehicle sales, including both public and private sales, total around $80 billion annually.
Although Hagerty reported $3.4 billion in auction sales in 2022 compared to $774 million in 2007, Zimmermann said a growing number of purchasers have developed in the Middle East, India, and China in recent years. North America still represents the largest market for auctions.
According to some market participants, the rush to replace combustion engine cars would only increase interest in these artifacts from a bygone period.
"Electrification will favour classic cars," said Cristiano Bolzoni, head of Maserati's vintage car unit Maserati Classiche. "Over time they will become cult objects."
According to Adolfo Orsi, the publisher of the Classic Car Auction Yearbook, which has been compiling statistics on auction sales since 1990, Ferraris are the most valuable antique vehicles. He called them "absolutely the blue-chips of this sector."
In 2021–2022, Ferraris brought in an average of $589,000 at auction, followed by Mercedes-Benz vehicles on $378,000 and Porsche vehicles on $348,000.
"The classic car community has changed tremendously over the past five to 10 years," Zimmermann said. "Once it was only people who knew the cars inside out. But over time others simply thought: I like these cars, I can afford one and I don't lose money by buying it."