Collectibles recorded a strong performance in 2021 from both a sales and returns perspective after a disrupted 2020, reflecting the reopening of economies and pent-up demand, but with large differences across and within collectibles categories, according to Credit Suisse Research Institute.
The 2022 Collectibles Report, produced in collaboration with Deloitte, focuses on key trends in the biggest collectibles categories including the rapid developments in non-fungible tokens (NFTs), the new digital collectibles.
The report also looks at the performance trends of collectibles and analyses their sensitivity to inflation, interest-rate increases and growth strength in the current post-Covid environment.
Collectibles have low correlations to traditional financial assets like equities and bonds, the report has found. In times of elevated uncertainty, whether due to war or to resurgent inflation, they can even provide investors with precious stores of value, building on their real asset properties with prices based on scarcity and societal value.
RISK-RETURN PROFILES
Each collectibles category has a different risk-return profile that will allow it to perform under different scenarios. For example, Chanel handbags, traditional Chinese artworks and wristwatches are found to offer the best inflation protection, while fine wines, modern and contemporary art, and American and Latin American art tend to suffer in high-inflation regimes.
Rising interest rates are not so much of a headwind for collectibles, with a number of fine art categories performing better in high-rate regimes than in low-rate regimes.
Credit Suisse currently estimates global inflation at 6.5% for 2022, and expects global and US inflation will average around 3.8% in 2023, assuming that central banks are successful in bringing inflation back to lower levels with expected monetary tightening.
Some collectibles, such as Chanel handbags, are expected to outperform gold, a common inflation-hedged instrument.
"Despite all its uncertainties, macroeconomic and geopolitical shifts, 2022 started on a strong footing for collectibles, with several record-breaking sales in fine art as well as classic cars," said Nannette Hechler-Fayd'herbe, head of global economics and research at Credit Suisse.
"With inflation likely to stay elevated and interest rates set to rise, we do not expect similar positive wealth effects on collectibles as in 2021 and would anticipate slower returns in 2022 than in the previous year overall."
However, collectibles also act as good stores of value. Watches, jewellery and handbags (especially Chanel handbags) stand out with their low volatility (between 2.5% and 5% annually) and low drawdowns. With the exception of pocket watches, their annual returns are between 4.5% and 6.5%. Their information ratio (which puts returns in relation to volatility and reflects the risk-reward) is impressive, with values exceeding 100%, meaning average returns systematically outpace fluctuation ranges.
Particularly noteworthy are Rolex watches and Chanel handbags, with very strong information ratios of 200% or higher. This means that the average annual return of 10% for Rolex watches, for example, is double the usual fluctuation range of 5%.
Throughout the pandemic, the collectibles markets have seen a major shift. In-person auctions were cancelled in 2020, which opened the way for a vibrant digital marketplace. Online buying and sales at auction houses grew more than 700% from US$168.2 million in 2019 to $1.35 billion in 2021.
This in turn added new digitally savvy collectors, gave Asian collectors even more access and clout than before, and changed other market structures -- such as the price range of goods sold. According to Sotheby's, bidding from Asia grew by 60% since 2019. There is also a continued shift to the East with new art market hubs emerging in Asia such as Seoul and Japan.
SUSTAINABILITY FOCUS
"We have also seen a greater focus on sustainability in the various collectibles categories from art, fine wines to jewellery," said Ms Hechler-Fayd'herbe. "More and more artists are drawing people's attention to environmental issues. Not only do painters use sustainable art supplies, they are also willing to foster a healthy attitude towards the environment.
"In the jewellery category, consumers are asking for increased transparency, traceability and responsibility toward both environmental and social issues, with the focus on social impact, environmental preservation, carbon footprints and conflict-free supply chains."
Other key trends to follow in 2022 include the further rise of young contemporary artists and African artists, the expanding influence of Asian collectors as well as the new generation and the broadening of digitisation, with NFTs finding applications in all collectible categories, the metaverse and online buying.
Digitisation has also finally conquered the classic car market with the rise of Bring a Trailer to become the number one auction house in the United States -- the world's biggest market for cars -- in 2021.
With the development of digital transaction platforms, "instant classics" (nearly new cars with collector value due to a limited series) have established themselves as a new trend among collectors.
To download the 2022 Collectibles report, scan the QR code