Can You Make 15% Per Year Investing In Classic Cars?
IGA Automobile, a new closed-end partnership fund, is planning on investing $150m into “a collection of 20 to 40 trophy marque vehicles with distinguished race or ownership histories” which it claims will appreciate some 15 percent over the next seven years, according to the Detroit News. Though collective buying of super-exotic cars is not new in itself, IGA Automobile fund Director Lancaster claims
This is the first classic-car fund that’s purely for financial returns, rather than passion
The fund, which is advised by Pink Floyd drummer and car nut Nick Mason, has identified several “potential acquisition targets” including the Ferrari 250 GTO, Aston Martin DB4 Zagato, Ford GT40, McLaren F1, Shelby Daytona Coupe and Porsche 917. And, since investors in the fund will be shelling out a minimum of half a million dollars to buy cars that they won’t even be able to keep in their own garage, the investment had better have a chance of making some money. And the fund’s managers think they can make that pitch, as
The Hagerty’s Cars That Matter “Blue Chip” Index, based on the values of the 25 most collectable postwar vehicles, has increased 67 percent from September 2006 to the end of 2010… The Historic Automobile Group International (HAGI) Top 50 index of exceptional classic-car prices was up 6.6 percent in 2010, lower than its average annual growth of more than 12 percent from 2003-08.
That’s better than plenty of investments did over a similar time period… but luxury-goods speculation still has a shaky track record. Besides, doesn’t it seem just a little bit wrong to treat these epic classics like a bond certificate, keeping them stashed away in a vault somewhere? Here’s hoping there’s room in the business plan for some kind of museum.
More by Edward Niedermeyer
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I know somebody who loves cars. Loves to drive them most of all. He's owned several post WW2 classics, from an old MG TD and a Jaguar XK 120, though an R107 Mercedes-Benz. In 2000 he chanced upon a dream car at a good price, a 1957 Mercedes 300sl and bought it. He loved it and drove it often. Last year however he decided he could no longer drive it because it had appreciated in value 450%(!) in nine years. It broke his heart, but he just could not justify the risk of driving a relatively low-tech, drum-braked car on roads surrounded by distracted, innattentive idiots when it was worth so damn much money. That and the fact that all his other investments had lost more than half their value at the same time. So he sold it.
Anyone who ever owned a classic car knows the bottomless pit of finance these cars reside in. Love is what keeps them together. I think I'll keep buying Ford Stock and short GM right now.