In the twelve months to 1st July 2014, private investors in short-term secured loans have seen a total annual return of 10.5%. This is almost twice the 5.3% return from collectable art, and compares with negative returns for gold and wine investments.
Physical gold investments are worth 1.6% less than a year ago, while investors in fine wine have suffered an even greater loss of 16.5% over the year to 1st July.
Those who invested £500,000 in bridging loans on 1st July 2013 would now see their investment worth £552,000, while the same investment in fine art would have gained approximately half as much value, to reach £526,500 by 1st July 2014.
If invested in gold, the same £500,000 would be worth just £492,000 on 1st July this year. However this drop represents only a fraction of the losses seen for fine wine. A £500,000 investment in fine wine would have lost more than £80,000 in the course of the last year, to be worth £417,500 as of July.
Duncan Kreeger, director at West One Loans, comments:
“Economic recovery is strengthening across the developed world, led by the UK. So alternative investments are no longer a question of finding havens. Growth is on the agenda – and investors are on the hunt for ways to get involved.
“Property now has an enormous capacity for growth, to overcome a particularly sharp downturn and make up for the ground lost over the last five years. But while developers are in no way short of projects, finance is the tightening bottleneck to further progress. For those private investors who can offer assistance, this is presenting enormous opportunities. Bridging loans can give individuals and smaller institutions access to the property lending market – previously dominated by increasingly cautious large banks.”
When compared by volatility, the same major asset classes also favour bridging for stability of returns, with a three month standard deviation of 0.03% for property bridging loans.
Second lowest for volatility, though reflecting consistently low returns, is fine wine, with a volatility of 1.6% over the last three months. Meanwhile, fine art has seen a three month volatility of 1.7%, a considerable improvement since art investments saw a peak in volatility earlier in 2014.
However, these assets all compare favourably with gold, which saw volatility spike over 10% in the three months to July.
Duncan Kreeger concludes: “Sophisticated investors are looking to alternative assets as a new way to navigate risk and return, spreading their capital between a greater variety of asset classes.
“But alternatives are also about new ways of linking the investor to the asset. For example, physical gold or art works are an excellent way to hedge against more mainstream markets – but the ownership and investment structures are not particularly revolutionary.
“By contrast, short-term property loans from individuals to developers have a similar level of liquidity as many physical assets, but allow more imaginative links with profitable projects.”
