The importance of the Advisor in the Luxury-Watches investment

The vintage watch market is in strong development and represents, if appropriately approached, an important possibility of financial diversification in the management of an investment portfolio.

The difficulty in finding and appropriately selecting potentially performing models are just some of the reasons why it becomes essential to rely, in the management of the purchasing process, to a competent and certified advisor.


THE VINTAGE WATCH AS AN INVESTMENT ASSET

Now more than ever, the vintage and collectible watch has become a priority asset within the world's investment portfolios. It is considered a safe haven asset, as are vintage cars, wines and art, but with an undoubtedly wider lifespan due to the relative "youth" of the reference market.

Although the watches that are considered can touch even the hundred years, the vintage collectible watch market was born only at the end of the 90s and developing a lot in the last decade.
The entry of important players and foreign capital, especially Asian ones, has meant that in the watch collecting market an important speculative lever has increasingly taken hold, that has shaped the behavior of old collectors over time and created new ones.

While the "old" collector once approached the market with the mantra "buy what you like", taking little interest in the speculative aspect, today the interest of the new pool of enthusiasts is undoubtedly more market-driven.


WHY THE WATCH?

The strength of the watch as an asset focuses on totally different key concepts than those that characterize traditional investment instruments. Assets that are usually considered are contracts of which you know the content and shape, but they are not tangible.

Watches, on the other hand, being physical and collectible goods, play in a market that is guided by the passion for the object and the need to enjoy the good: the concept of mere speculation as the sole purpose of acquiring the asset is therefore lacking.

One of the concepts that make the market alive is undoubtedly that of belonging to a community.

Although collectible watches have become assets with characteristics that can be sometimes comparable to traditional investment instruments, the major players are not primarily pure speculators, but great scholars and enthusiasts of the subject.

This also leads those who first approach this industry to feel immediately part of something, of a larger group, which becomes a global community of enthusiasts, before than investors.

Vintage watches often have a unique history, recognizable design and a number of details that make you excited. Their attractiveness and natural scarcity, given by a finished and non-replicable production, makes them beautiful and pleasant objects to wear.

As a result, there are more and more potential buyers interested in entering this market, but at the same time opportunities to acquire remarkable models are increasingly scarce.

The reason is both psychological and technical.
Those who own these new assets are usually reluctant to sell, making supply much lower than demand.

In addition, the increase in the collectible level of watches, and consequently in the economic value, has led to an increasingly detailed search for the overall quality of storage, details and coevity, cutting off from the market a considerable number of models that did not respect these characteristics.


THE FEATURES OF AN INVESTMENT WATCH

The fact that the vintage watch has now become an asset is undoubtedly linked to various factors, such as therefore mentioned scarcity and finished production that makes them rare and non-replicable objects.

However, it should not be mistakenly believed that all vintage watches can perform in the same way.
The market, which has now become global, is increasingly looking for three fundamental characteristics: quality, details and origin.

These are basically the factors that determine the important assessments to which we are now accustomed.

Even the most important and well-known references, comparable to blue chips, perform in a certain way only if the provenance is traceable and the conservative quality is high.

In fact, we can spot various watches with important references that, at auction, have had disappointing performances due to poor information on provenance or important qualitative defects such as, but not limited to, polishing, reprinted dials, non-coeval ring inserts.

For a practical and easy example, we can examine the well-known reference 6263 by Rolex.

This fascinating model has a wide range of characteristics relevant from a collector's point of view. Considering specimens with similar traits and analyzing auction results of recent years, it can be easily seen that prices have always had a distinctly positive trend.

Despite the positive generic trend, there are non-bullish results within this time range that could suggest minimal volatility in prices.

This, on the other hand, is due to the different quality of the watches that appeared in the auction: some specimens were not characterised by high conservative quality or coevity of the elements and the results were affected.

If, on the other hand, we isolate specimens with equally important market-appreciated characteristics, we will immediately notice how the overall quality of the object is always paid for. It is important to understand how the most important performances are certainly supported by the aforementioned characteristics, but amplified by the details.

The quotation of a watch in excellent condition, with a noticeable and well-known provenance, can drastically change even based on graphic or historical details.

An example is the dial fonts, used for longer or shorter periods of time, or intended for watches that were originally directed to different markets or which, again, identify more or less rare series based on errors in the use of finishing paints, in the application of light material, etc.

Speaking of historical importance, we cannot but mention assigned watches, supplied to military corps, or those with a dial depicting the royal coat of arms of a nation or kingdom.

Despite the few points we just covered, it is easy to understand how the subject of study and research in terms of collecting expands exponentially as you go down specifically.


COVID 19 AND MARKET PERFORMANCES

The growing global interest, over the last decade, has led the performance of the watch market to drive itself in constant and stable price increases.

It was perhaps the year 2020, however, that consecrated the watch as an actual object of investment (and worship).

The deep economic crisis generated by Covid19, which began at the end of 2019 and unfortunately is still ongoing, has seen an increasing investors interest in stable and safe assets, other than traditional ones, since they are still too linked to the extremely volatile trend of financial markets.

If we look at the price of gold (Eur/gr) in the last year the absolute performance has been +9.4%, but with very high relative volatility.

Considering, for example, the Period of March 2020 in which Europe entered lockdown, the gold price was dragged down by the sharp depreciation of the world price lists, reaching a loss of 5.8%.

In August it reached its peak of the year, with a subsequent loss over 5 days of 8.7 points, currently settling at -12.6% compared to the peak of August 7th.

Another interesting index to evaluate is the FTSE Italia Beni Immobili, commonly known as the index that reports and summarises the trend of the Italian real estate market.

It is well known that real estate has been one of the main pools for all types of investors, from the small saver to the investment fund, considered safe and with certain returns until a few years ago.

Taking as references the same periods analysed for the gold trend we see how, in a year (01/20-01/21), the index had a decrease of 31.3%, while in the short term between 18/02 and 19/03 2020 left 41.9 percentage points on the ground.

Comparing these data with the pre and post Covid19 performance of the watch market, things are drastically different.

The first auction held in Geneva in 2020, namely Phillips "Geneva Watch Auction XI", had a mind-blowing outcome, with all the lots sold and economic results well above expectations.

The reason lies in the historical and qualitative importance of the proposed pieces and how, once again, their economic value is also recognised within investment portfolios and prestigious collections.

Moreover, since they are not assets linked to traditional investment instruments, they are not affected by the performance of global markets and volatility is controllable by choosing quality specimens that, given the inherent scarcity of this type of objects, will enjoy price evolution often predictable by competent advisors.

The chart above represents the price evolution of some comparable examples of Patek Philippe ref.3700/1 with the latest result at the July auction in Geneva.

The graph below, on the other hand, shows the evolution of the quotations of the same Patek Philippe ref.2499/100 specimen that has appeared three times at auction in the last 23 years.

Sold in July 2020 during Phillips' auction in Hong Kong, it demonstrates global interest in this type of asset and confirmation of the constant growth in prices for qualitatively excellent specimens.


THE IMPORTANCE OF THE ADVISOR IN THE PROPER-WATCH SELECTION PROCESS

It is therefore essential to choose the right advisor, who can support both the new and the most experienced collector through this wide panorama of investment opportunities.

The task of the advisor is primarily to advise in the purchasing phase, knowing specifically the subject matter and the reasons that lead some references to perform better than others and therefore being able to carry out a correct asset management and in line with the return results expected by the client.

It is also of fundamental importance in the management of asset acquisition and liquidation procedures, working in a market not regulated by normal financial procedures and thus of possible difficult management by the private investor or collector.

Being able to have a competent, certified and regulated reference point is mandatory in order to guarantee transparency and expertise to the end customer during all phases of the relationship.