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The Lap of Luxury Investing

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It seems the world’s 9.5 million high-net-worth individuals (HNWI) are quite fond of “investments of passion.” Luxury collectibles (automobiles, boats, aircraft), jewelry, art, sports–related investments (professional teams, racehorses), and other collectibles categories (wines, antiques, coins) have become an important portfolio allocation, according to the 2007 World Wealth Report, released in June by Merrill Lynch and Capgemini. The report revealed that luxury collectibles ranked first, accounting for more than 26% of all HNWI’s investments of passion in 2006. The art market was rated second, with 20% of all HNWI’s allocations, and according to Capgemini, has drawn such wide interest that many wealthy investors, even those without a particular passion for collecting, now see paintings, drawings, and sculptures as “viable vehicles for diversifying their portfolios given the low correlation between art prices and the market cyclicality of stocks, bonds, and real estate.”