Wealth
Comparing Luxury Investment Around the World
Comparing Luxury Investment Around the World
Do you enjoy the finer things in life? For many of the world’s wealthy individuals, acquiring luxury goods such as art, fine wine, and watches is a passion.
Unlike traditional investments in financial assets, luxury goods can be difficult to value if one does not have an appreciation for their form. A rare painting, for example, does not generate cash flows, meaning its value is truly in the eye of the beholder.
To gain some insight into the market for luxury goods, this infographic takes data from Knight Frank’s 2021 Wealth Report to compare the preferences of nine global regions.
Global Tastes in Luxury Goods
To rank the most popular luxury investments in 2020, Knight Frank surveyed over 600 private bankers, wealth advisors, and family offices. The following table summarizes their findings, as well as each category’s growth according to the Knight Frank Luxury Investment Index.
| Global Average Ranking | Category | 10-year growth in asset values (%) |
|---|---|---|
| 1 | Art | 71% |
| 2 | Classic cars | 193% |
| 3 | Watches | 89% |
| 4 | Wine | 127% |
| 5 | Jewelry | 67% |
| 6 | Rare whiskey | 478% |
| 7 | Furniture | 22% |
| 8 | Colored diamonds | 39% |
| 9 | Coins | 72% |
| 10 | Handbags | 108% |
Art was unmistakably the top category for 2020, ranking first in every geographic region except Africa and Asia, where it placed second instead. The global market for artwork was estimated to be worth $64 billion in 2019, and is often facilitated through auction houses such as Sotheby’s.
In terms of asset appreciation, rare whiskeys have climbed the most in value over the past 10 years. Connoisseurs of this spirit will be familiar with distilleries like The Macallan, whose rare bottles can sell for more than a million dollars.
Comparing Luxury Investment Between North America and Asia
Below, we’ve compared the rankings of Asia and North America to get a better idea of how preferences can vary.
The biggest differences here are watches, which ranked first in Asia but fourth in North America, and classic cars, which ranked second in North America but fifth in Asia. The remaining eight categories took similar spots across the two regions.
| Rank | Asia Popularity | North America Popularity |
|---|---|---|
| 1 | Watches | Art |
| 2 | Art | Classic cars |
| 3 | Jewelry | Wine |
| 4 | Wine | Watches |
| 5 | Classic cars | Jewelry |
| 6 | Rare whiskey | Rare whiskey |
| 7 | Handbags | Furniture |
| 8 | Furniture | Handbags |
| 9 | Colored diamonds | Coins (tied for 8th place) |
| 10 | Coins | Colored diamonds |
Asia’s stronger preference for watches was likely driven by Chinese consumers, who are now the biggest buyers of luxury watches globally. Demand throughout the COVID-19 pandemic proved resilient, with exports of Swiss watches to China increasing by 17.1% between January and November 2020.
Classic cars, on the other hand, may be more popular in North America due to the region’s longer automotive history. Two of America’s most iconic automakers, Ford and General Motors, have both been around for over a century!
The Biggest Sales of 2020
Here were some of the most extravagant and noteworthy luxury sales from 2020.
Art
Francis Bacon’s 1981 Triptych Inspired by the Oresteia of Aeschylus was sold by Sotheby’s for $84.6 million in June 2020. A triptych is an artwork that is divided into three sections but displayed as a single piece.
Other paintings by Francis Bacon have sold for even larger amounts. In 2013, Three Studies of Lucian Freud was sold by Christie’s auction house for $142 million.
Classic Cars
A 1932 Bugatti Type 55 Super Sport Roadster sold for $7.1 million in March 2020, making it one of the biggest classic car sales of the year.
Founded in 1909, Bugatti has produced some of the world’s most sought-after cars. The French brand was acquired by the Volkswagen Group in 1998, and since then, has released numerous special edition cars with price tags reaching well into the millions.
Handbags
An Hermès Himalaya Niloticus Crocodile Retourné Kelly 25 sold for $437,330 in November 2020, becoming the most expensive handbag ever sold at an auction. Founded in 1837, Hermès is commonly regarded as one of the world’s most prestigious makers of handbags.
COVID-19 Dampens Luxury Investment
When compared to 2019, total sales for Sotheby’s declined 16% in 2020, while Christie’s, another leading auction house, reported a 25% decline. Despite these decreases, executives remain optimistic.
“The art and luxury markets have proven to be incredibly resilient, and demand for quality across categories is unabated.”
– Charles Stewart, CEO, Sotheby’s
The industry has been largely successful in transitioning to online operations, with Sotheby’s reporting that 70% of its auctions in 2020 were held online, up from 30% in the previous year.
Education
Ranked: The World’s Top 50 Endowment Funds
Endowment funds represent the investment arms of nonprofits. See the worlds top 50, which collectively have over $1 trillion in assets.
Ranked: The World’s Top 50 Endowment Funds
What do Harvard, the Church Commissioners for England, the NYC Metropolitan Museum of Art, and an entity on behalf of Saudi Arabia’s King Abdullah all have in common? They all have endowment funds.
An endowment fund is the investment arm of nonprofit institutions like universities, charities, and churches. The purpose of the fund is to invest the organization’s assets to fuel future operations and other important projects.
The world’s largest endowment funds have billions in investable assets, making them sizable players in the finance sector. Here, using data from Sovereign Wealth Fund Institute, we take a closer look at the world’s largest endowment funds by total assets.
Types of Endowment Funds
Overall, there are four main types of endowment structures.
- Unrestricted Endowment: A fund structure where assets are used at the full discretion of the institution
- Term Endowment: A fund structure with a fixed term time period before the principal can be spent
- Quasi Endowment: A donation to an endowment with a specific purpose to deploy that capital
- Restricted Endowment: A fund structure where the principal value from donations is held forever and only returns generated on the principal can be used
In addition, each endowment fund has different structures in regards to withdrawals, use of funds, and their general investment philosophy.
The Largest Endowment Funds
The largest endowment funds can be compared on a grand economic scale, in terms of assets.
To put it all into perspective, the largest 50 endowment funds represent over a trillion dollars in assets. Or for a more singular example, look at Harvard’s fund, which has an endowment greater than the entire GDP of countries like Serbia, Bolivia, or Slovenia.
Here’s how the top 50 rank.
| Rank | Endowment Fund | Total Assets | Region |
|---|---|---|---|
| 1 | Ensign Peak Advisors, Inc | $124,000,000,000 | North America |
| 2 | Japan Science and Technology Agency | $80,700,000,000 | Asia |
| 3 | Stanford University | $75,143,751,000 | North America |
| 4 | Harvard Management Company | $72,781,329,000 | North America |
| 5 | Yale University | $56,223,259,000 | North America |
| 6 | Princeton University | $44,460,038,000 | North America |
| 7 | MIT Investment Management Company | $42,526,492,000 | North America |
| 8 | Duke University | $30,385,835,000 | North America |
| 9 | New York University | $27,840,535,000 | North America |
| 10 | Columbia University in the City of New York | $24,698,782,000 | North America |
| 11 | University of Notre Dame | $24,599,541,000 | North America |
| 12 | KAUST Investment Management Company | $23,500,000,000 | Middle East |
| 13 | Emory University | $20,458,905,000 | North America |
| 14 | Johns Hopkins University | $18,037,751,000 | North America |
| 15 | Church Pension Fund | $17,773,649,171 | North America |
| 16 | University of Chicago | $17,276,136,000 | North America |
| 17 | Ohio State University | $16,006,851,000 | North America |
| 18 | Northwestern University | $15,855,683,000 | North America |
| 19 | Washington University in St Louis | $15,103,569,000 | North America |
| 20 | Penn State University, Office of Investment Management | $15,017,272,000 | North America |
| 21 | Notre Dame of Maryland University | $14,938,580,253 | North America |
| 22 | Cornell University | $14,850,618,000 | North America |
| 23 | University of Southern California | $14,495,427,000 | North America |
| 24 | Vanderbilt University | $13,883,495,000 | North America |
| 25 | University of Virginia Investment Management Compnay | $13,811,076,000 | North America |
| 26 | University of Tokyo | $13,285,270,000 | Asia |
| 27 | National University of Singapore | $12,626,100,000 | Asia |
| 28 | UNC Management Company | $11,986,857,000 | North America |
| 29 | University of Michigan Office of Investments | $11,900,000,000 | North America |
| 30 | General Authority of Awqaf | $11,238,371,192 | Middle East |
| 31 | Church Commissioners for England | $11,197,700,000 | Europe |
| 32 | J.Paul Getty Trust | $10,778,927,000 | North America |
| 33 | Trinity Wall Street Episcopal Church | $9,932,419,000 | North America |
| 34 | Unitersity of Utah | $9,827,602,000 | North America |
| 35 | Brown University | $9,793,108,000 | North America |
| 36 | Kamehameha Schools | $9,326,013,000 | North America |
| 37 | Dartmouth College | $9,078,340,000 | North America |
| 38 | Hong Kong Jockey Club | $8,603,580,000 | Asia |
| 39 | Rice University | $8,424,555,000 | North America |
| 40 | The Leona M. and Harry B. Helmsley Charitable Trust | $8,313,588,000 | North America |
| 41 | University of Pittsburgh | $8,011,856,000 | North America |
| 42 | Nature Conservancy | $7,870,380,000 | North America |
| 43 | University of Toronto Asset Management Corporation | $7,329,730,000 | North America |
| 44 | University of Rochester | $7,149,025,000 | North America |
| 45 | Virginia Commonwealth University | $6,985,495,306 | North America |
| 46 | Purdue University | $6,755,500,000 | North America |
| 47 | University of Miami | $6,582,600,000 | North America |
| 48 | University of Minnesota | $6,304,508,000 | North America |
| 49 | Caltech Investment Office | $6,252,584,000 | North America |
| 50 | Metropolitan Museum of Art of New York City | $5,588,554,000 | North America |
The largest endowment fund, Ensign Peak Advisors, is based in Salt Lake City, Utah, and manages the assets for the Mormon Church (officially known as the Church of Jesus Christ of Latter-day Saints). The church itself has over 16 million members worldwide and is the fourth largest church in America.
The Japan Science and Technology Agency (JST) is a national research and development agency that plays a core role in promoting technology, innovation, and science within society. In 1995, Japan’s government passed the Science and Technology Basic Plan and the JST came to life and now has over $80 billion in assets as well as offices in Paris, Washington, Singapore, and Beijing.
Just two funds come from the Middle East. The King Abdullah University of Science and Technology (KAUST) with $23.5 billion and the General Authority of Awqaf. KAUST is ranked 95th amongst universities in the world and made history in the country by being Saudi Arabia’s first mixed-gender university.
The General Authority of Awqaf has $11 billion in assets and was established as a public authority to manage endowments and enhance Saudi Arabia’s various goals for societal development. “Awqaf” in Arabic loosely translates to assets that are donated or purchased for general or specific charitable causes that are socially beneficial.
On the environmental side is the Nature Conservancy, which has $7.8 billion in assets. The charity is estimated to have protected more than 100 million acres of land.
American Universities Dominate
Universities are one leading category from the world of endowment funds, particularly those from the United States. In fact, universities make up 39 of the top 50 endowment funds, with 35 of them based in America.
Historically, Harvard has been the largest, but Stanford has edged ahead in recent years. Stanford has $75 billion in assets compared to Harvard’s $73 billion. These vast amounts of money have not gone unnoticed, and elite universities are facing mounting criticism in some circles.
“When Harvard’s total admitted freshman class is 1,400 people—and they have an endowment that is the GDP of El Salvador—they’re not a nonprofit, they’re a hedge fund educating the children of their investors.” – Professor Scott Galloway
With student debt rising to $1.6 trillion, it’s likely these universities may face greater criticism around how they use the wealth available to them in endowment funds.
Sizable Influence
The top endowment funds carry considerable influence within the world of finance. While they all have billions to invest, each has very different objectives and intentions on how to deploy their capital.
And despite being non-profit organizations, endowment funds are seeing their overall assets exceed those held by many other investment funds, such as sovereign wealth funds, hedge funds, and private equity firms.
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