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Rev up your portfolio with a Ferrari

Contributed by Jonny Fry on The Capital

study, with data from 29,002 global auction rooms from 1998 to 2017, was used to ascertain the classic car Sharpe ratio (a measurement that takes into account the volatility of returns i.e. how much the price rises and falls, as well as growth of an asset). Regarding the gross annual Sharpe ratio of classic cars versus those of other asset classes over the sample period it was found that:

· classic cars, overall, have a higher Sharpe ratio (0.35) than the S&P 500 Index (0.21), the MSCI World Index (0.16), and art (0.07). However, adding dividends would boost Sharpe ratios for the equity indexes to round about 0.30;

· classic cars have a lower Sharpe ratio than global government bonds (0.40) and gold (0.40);

· correlations between classic car returns and those of other asset classes are generally low, indicating the diversification benefits within a portfolio of other classes.

source: Knight Frank report

Jonny said, in a survey carried out in the USA by Bank of America it was found that, among its High Net Worth (HNW) clients, there was an average asset allocation to assets of 55% stocks, 21% bonds, 15% cash, 6% alternatives and 4% other. These conclusions imply that the potential demand for alternative and other types of investments, such as digitised exposure to ‘non-traditional’ assets, is very real. 

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