Most watches start losing value as soon as someone walks out of a posh boutique with them on their wrist: at least 99.99 per cent of them are not good investments. The trick, then, is working out what tends to characterise the ones that don’t.
Superficially, a few things are clear. They tend to be complicated mechanical watches rather than jewellery watches; in the still rather sexist world of watchmaking, this translates into men’s rather than women’s watches. They are often limited editions—a lot of high-end watches are made in very small numbers, sometimes as few as one, and often aren’t even made available to the public. And value can sometimes also come from provenance—in other words, who’s owned them.
Consult the watch message boards, and you’ll find that watches from a tiny number of manufacturers have a chance of increasing in value: some Patek Philippes, especially Calatrava and Nautilus models; some Rolexes, especially stainless steel sports watches like the Daytona and Submariner; some Omegas, particularly Speedmasters; and a sprinkling of watches by the likes of Audemars Piguet and Vacheron Constantin.
Dominic Khoo, founder in 2013 of watch investment vehicle The Watch Fund, believes the real key to profitability lies elsewhere. “There’s no such thing as an investment-grade piece,” he says. “It’s actually not a characteristic of the watch itself; it’s about all the elements surrounding it. You can’t say: ‘I bought a Ferrari and I’m going to make money from it, because one vintage Ferrari gained in value once.’ It’s not about a brand, model or reference.”
Instead, he adds, it’s about having access to particular watches at the right price, and to the right buyers for those watches—because this is an incredibly illiquid market, in items that are often unique. “When we talk about appreciation in value, who says? Even if you find someone of authority to say so, it doesn’t mean anything unless you have someone prepared to buy it at that price. You have to create liquidity.”
In common with most so-called alternative investments, most people with a lot of watches are collectors rather than investors: they collect for love, which presents an opportunity to anyone who collects for money. “You cannot like watches,” says Khoo. “If you think watch investing is going to involve buying what you like, you are sorely mistaken. There are people who love money more than watches, and people who love watches more than money. The two cannot mix. If you love watches, you won’t want to sell.”
You can try trading in watches yourself, provided you have plenty of time on your hands to educate yourself about the market; or you can use an intermediary. The Watch Fund, for example, trades on its watch-industry connections, giving it access to watches and discounts, and its database of 9,000 buyers, working backwards from what those people want and acquiring watches accordingly.
Investors provide the capital to buy the watch and then physically possess it and have beneficial ownership, but the fund has the sole right to sell it. Typically investing in watches with six-figure price tags, it has bought watches worth more than US$100 million, and currently has US$40 million of holdings.
As with all unregulated investments, do extensive due diligence on any intermediary, and read their fee structure very carefully—if they are taking a sizeable percentage, your chances of making a profit are very low.
(Text by: Richard Lord)
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