At some point, the super rich reach a level of wealth where "traditional" boring investments like real estate, precious metals, equities and bonds all become a little too mundane. That’s generally when they find time for investing in things like art, collectible cars, fancy batteries and even psychedelic drugs. In fact, we recently wrote about the boom in insurance for items like whiskeys, which are also becoming popular collectible items, having recently priced at more than $1 million per bottle in auction.
But art has always been at the top of the list for those who simply have more wealth than they know what to do with. With the art market hot by virtue of the last decade of "prosperity", those selling high-priced pieces have enjoyed the benefits of a minimum price guarantee at many auctions, as there remains significant demand for these "alternative investments".
To keep business consistent, auction houses have negotiated with third parties to help guarantee bids for art that is put up for sale. And it’s great money, too: the guarantor on the sale of Leonardo da Vinci’s “Salvator Mundi” was said to make as much as $150 million, according to Bloomberg.
Not surprisingly, the super rich are also collecting rare exotic vehicles, like Ferraris. The recent sale of a 1962 250 GTO went for a whopping $48.4 million. Only 36 of that particular model were made and the vehicle was also guaranteed by an auction house. Vintage automobiles reportedly returned 280% over the past 10 years according to the Knight Frank Luxury Investment Index. That's twice what the S&P returned in the same amount of time.
And with the marijuana game officially going mainstream, investors are now also looking toward the next "big thing": psychedelic drugs, including synthetic psilocybin (the active ingredient in magic mushrooms), which has been known to help alleviate depression and disorders like PTSD. With psilocybin finally being embraced in some large scale clinical trials, including one that recently launched in Europe and North America by Compass Pathways, large financial backers are starting to step up to the plate.
Mike Novogratz, an investor in Compass Pathways and famous bitcoin investor, told Bloomberg: “It just feels like a cultural shift going on. It’s been around for thousands of years; people kind of know its side effects.”
And if that wasn’t far enough off the mainstream, the wealthy are also investing in, well... batteries. Even though right now the lithium ion battery industry has very low margins, Citigroup estimates that “very efficient manufacturers will generate higher profit margins over time”. This has drawn in the attention of investors who hope to see the $22 billion industry swell to over $100 billion within the next six or seven years.
Citigroup is planning on offering a product that tracks the performance of seven stocks exposed to battery manufacturers and the mining of raw material that is used in the production of batteries. Citi's projections estimate that the portfolio could have a 36% average return over its first year. Buyers of the product would get their initial investment back at maturity while also collecting 70% of any performance gains. David Bailin, the unit’s chief investment officer told Bloomberg: "Clients can choose when to get in but won’t be taking a significant capital risk if the note-writer pays it off at maturity"....MORE