Many conventional investments nowadays offer poor financial returns and zero excitement. So it’s no surprise that many of us dream of putting cash into something that sets the pulse racing – diamonds, a classic car, fine wines or contemporary art, perhaps. But what if what you desire is simply too rare, too precious, unless you have unfathomably deep pockets?
One answer is to share ownership with other investors. This spreads the risk and puts possessing a slice of a coveted trophy asset like a winning racehorse, top winery or prestigious property tantalizingly within a broader reach – not just the preserve of billionaires. Shared ownership is especially common in the world of executive jets, horse racing and property. Indeed NetJets, owned by Warren Buffett’s Berkshire Hathaway since 1998, built its business on offering quarter shares of aircraft – hence QS is emblazoned on the tails of the US-registered fleet.
In the case of a jet, part ownership may confer some bragging rights but there is little sense of fun; co-owning a costly asset otherwise likely to be idle simply makes practical sense. Many private investors are looking for something different, something that combines investment with their personal passions and lifestyle choices. Own a part-share in a vineyard, for example, and you may perhaps be invited to relaxed private tastings or even to make suggestions about the style of wines and – come harvest time – you can always make yourself handy with a pair of secateurs amid the vines.
The good news is that there are myriad investments out there, with new opportunities presenting themselves all the time. But squaring the circle is not easy: the unsentimental approach of the hard-nosed professional investor is far removed from the hobbyist’s enthusiasm. So a good starting point for anyone interested in dipping their toe into a shared investment is to be clear from the start what your goals are. What financial returns do you expect? Do you want to contribute more broadly to the venture and maybe see your advice or expertise heeded? Above all, do you expect to have occasional access to the asset or draw some valuable perks?
Shared ownership of course involves building relationships – and that’s complicated. One salutary tale comes from a lawyer, now retired, who agreed back in the Eighties to buy a quarter share of a horse from a close friend; the friend’s three family members held the remaining share. The horse was a winner and ultimately became a household name in fence-jumping races; there were joyous moments as the four owners gathered around the victorious horse after races – and innumerable trips to the winners’ enclosure. The glorious winnings became almost secondary.
He then joined a formal syndicate where 40 people took stakes in a new mount. This horse was also a success on the racetrack, yet disenchantment set in swiftly. “It was a dismal experience,” he admits. “There was no emotional bond at all with the animal, which is what I realized I had come to value. You had to book paddock visits in advance and the crush after races was awful. To try to get access to the winners’ enclosure you had to draw lots with the other stakeholders.”
One would imagine that sharing is less of a problem in the wine world. Although older vintages can command stratospheric prices, a single bottle of most current vintages should be affordable to a connoisseur at least on an occasional basis. But what if an enthusiast sets his or her sights not on a lone bottle but on ownership of the winery itself? France’s most esteemed vineyards may be beyond reach. But in many parts of the world, shared ownership of wineries is pretty common – and to some investors, the idea of a wine label of one’s own is irresistible. In the new wine-making region of Ningxia in the north east of China, up-and-coming winemakers have set about meeting this need. Twenty years ago, there was scarcely a vine under cultivation here. But a tourist wine route to rival Burgundy’s is being developed while one of the grandest plans is at the spectacular Ho-Lan Soul winery. Here there is to be one central château surrounded by 200 smaller private châteaux. Buyers will be able to acquire a plot, bottle their own wine and place their name (or whatever they choose) on the label.
Another approach to “democratizing the exclusive” is currently underway at the St. Regis Hotel in Aspen. The owners, Elevated Returns LLP, are planning to sell a 20 per cent stake in the Colorado property they acquired eight years ago. The first round of the offering is going to investors deemed by the Securities and Exchange Commission to be well-informed “accredited” investors.
A new departure is that it will use the blockchain technology often employed in cryptocurrencies to “tokenize” the assets. This would in effect transform the tranche that has been sold off into coin-like units that could be split into ever smaller parts. The company ultimately hopes that in the near future the SEC will then give the go-ahead for allowing non-accredited investors to buy the tokens. Once that happens, the company would either embark on a second round or simply enable the tokens to be purchased and sold without restriction.
Stephane De Baets, president of Elevated Returns, comments, “The St. Regis Aspen is a remarkable hotel – even if you haven’t stayed there, you will have heard about it. The opportunity to own a part of it appeals to everyone from our most regular guests to moms and pops. We are democratizing real estate investment by making it possible to trade in much smaller amounts in our hotel.”
According to the owners, the St. Regis Aspen investment will display many of the advantages we associate with cryptocurrencies, but unlike them, it will be backed by a tangible asset: the hotel. And it’s hoped the tokenization will increase the ease of buying and selling, thereby pushing up values. However, there will be no perks: the owners have ruled out room discounts or other incentives, in part because of the complications this would introduce to smaller trades in the tokens.
A final option for investors trying to align their hearts and their heads could be diamonds – more particularly, fancy colored diamonds. Diamonds are precious, but colored diamonds are rarer and can be still more precious. Naturally tinted from the presence of elements such as nitrogen and boron deep in the earth when the diamonds were first formed, fancy diamonds come in a range of hues. Among the most highly prized are certain “intense” and “vivid” reds which can sell for more than a staggering $3 million a carat.
Normally, such exotic stones would be the preserve of ultra-high-net-worth individuals. But funds now allow others to buy into the market. Philip Baldwin, managing director of Sciens Coloured Diamond Fund, comments, ”These stones are extremely rare and hard to find. Few people will have the expertise to buy or sell them. We do that, plus take on all the other responsibilities such as insurance and ensuring individual members of the fund are treated equitably. And we have created a liquid market.” Those sharing in the ownership can legitimately claim to own what, by mass, is just about the most expensive natural thing on earth. Alas, shared ownership does not extend to invitations to wear the diamonds personally – even for an evening.
Needless to say, it’s worth ensuring that the satisfaction in prospect with any of these is enough to offset matters if the financial returns disappoint – since the value of any investment, shared or otherwise, can of course go down as well as up.
Your address: The St. Regis Aspen Resort
Images: Alamy; Getty Images; John Bishop for St. Regis
