- Last Updated: 5:52 AM, July 29, 2012
- Posted: 10:51 PM, July 28, 2012
Don’t like how stocks and bonds are performing? Here’s an asset you can wrap your arms around — literally.
Rising fears that traditional investing has become a lose-lose proposition have a growing number of wealthy folks seeing dollar signs in niche funds that invest in art, wine, musical instruments and even classic cars.
They’re known as “collectible” funds or “treasure” funds, and while they come with plenty of skeptics and potential pitfalls, they’re also promising returns reminiscent of the days before the Great Recession.
Sergio Esposito, founder of Union Square’s wine shop Italian Wine Merchants, said the wine fund he helped start in 2010, The Bottled Asset Fund, has been doing so well he hopes to launch another next year.
After selling its first batches of wine this year, the $8.2 million fund is now seeing profits upward of 30 percent, he said.
Try getting that out of the S&P 500 or even smart-money hedge funds.
It’s not just wine funds that are promising mouthwatering returns.
Last year, a group that included Pink Floyd’s drummer, Nick Mason, kicked off a fundraising campaign for a vehicle that would invest in classic cars. The goal for the fund, which has yet to launch: annual returns of 15 percent a year, according to Bloomberg.
Meanwhile, a Swiss firm is coming out with a similar fund, which is touting potential profits of 17 percent a year.
The new fund, simply named The Classic Car Fund, is on track to launch next month, a spokeswoman told The Post.
Bruce Wilcox of Xiling Group, a private-equity fund that buys and sells Chinese artwork and porcelain vases, said he is seeing profits of up to 19 percent in the firm’s flagship fund, which launched in 2005.
Indeed, the fund just collected payment on a vase it sold at auction in May for $3.69 million. Xiling bought the emerald beauty for $1.2 million in 2007.
With the financial world still in shambles, few money managers, including hotshot hedge funds, are able to attract new money. But Xiling recently raised $22 million for a third fund after closing its last fund in 2010 with $32 million.
Wilcox, a former hedge-fund manager who is based in Manhattan, chalks it up to currency fears.
“Currencies around the world are in the process of being debased, so tangible assets have an appeal,” he said.
Investors flock to safety assets like gold, art and jewelry when they’re worried about where the economy is headed, experts said. The theory is that even if the US loses its economic edge, fine art, jewelry and other collectibles may still command a premium elsewhere.
Skeptics warn that collectible funds are lined with traps and should be avoided at all costs — even potentially profitable ones.
“I don’t like it,” said Charles Gradante, whose Hennessee Group advises wealthy folks on how to manage their money. Among Gradante’s complaints: such funds — illiquid and opaque — are ripe for funny business.