If low returns on trench positions are making you feel emotional, you should consider investing in emotional assets
There’s nothing new about the search for safe havens. Investors have been irritated for months that cash and short-dated gilts — the traditional trench positions — are promising little more than inflation-adjusted losses of 2 per cent or more.
Happily, the Art Investment Conference presented some appetising alternatives in May. Held in the Great Room of the Royal Society of Arts, the highlight was London Business School professor Elroy Dimson providing evidence that emotional assets are viable vehicles.
The Progress of Human Knowledge, by James Barry, adorns the walls of the RSA’s Great Room
Specifically, he announced that the long-term real returns per annum are 2.5 per cent on art, 2.9 per cent on musical instruments and 2.9 per cent on stamps.
Comparing the rates to more established asset classes, Dimson then presented a graph which illustrated that the trio have outperformed the traditional safe havens of bonds, gold and bills over 100 years.
Before we all rush to Sotheby’s, however, Dimon’s conclusions are not without a caveat.
‘Long-term returns are not as high as some enthusiasts assert. Given waves in market and big transaction costs, a long view is needed. Benefits from diversification and from inflation-hedging are still unclear.’
Perhaps next year’s Art Investment Conference will address the last point — without doubt, it’s the most important point as it will provide a fuller picture of whether emotional assets are plausible safe havens in the long term.