Investment in real assets such as gold, wine or private equity is gaining in popularity. A natural trend, given the changing expectations of investors.
In an increasingly digitised and volatile world, many investors are looking for ways to protect their wealth while making long-term gains. “Investors also want to give more meaning to their investments, particularly by investing close to home,” explains Frédéric Pouchain, CEO of Whitestone Group. This is why real assets have gained in popularity, offering investors unique advantages and greater stability than purely financial investments.
To better understand this appeal, we need to distinguish between the price and value of assets. As Warren Buffet said: “Price is what you pay. Value is what you get”.
The value of an asset can be much higher than its purchase price. It obviously depends on individual tastes, but also on the tangibility of the assets. “And this applies perfectly to real assets: a wine can be drunk, gold can be touched and sold and a company has brands, products, factories or even a distribution network,” stresses the expert.” This is not the case with crypto-currencies or currencies, which are based on intangibles and are therefore riskier”.
But we still need to determine which real assets will deliver the best returns. Frédéric Pouchain advises always referring to the 3 vital concepts underlying any return: volatility (a measure of the fluctuations in the price of an asset over a given period), risk (the probability that the value of an asset will fall or that the investment will not produce the expected returns) and liquidity (the ease with which an asset can be bought or sold on the market). “While commodities such as gas, oil, zinc or copper can make a lot of money, they are unfortunately highly volatile and difficult for individual investors to buy and store,” continues the expert. “This is not the case with wine, gold or private equity. He points out that real estate is also a real asset, but that it is a completely different process that pursues different objectives.
In addition to these fundamental principles governing investment, diversification is also important. The weighting between the different assets in a portfolio is very personal and requires the investor to know himself well.
For example, he needs to know whether he could withstand a 20% fall in the price of an asset at any given time. Another point to consider is market timing. Market timing is not an exact science and often leads to frustration on the part of investors, who often feel that they are buying too late and selling too early. One way of mitigating this is to keep a pocket of cash to strengthen a position in the event of a fall in the price of an asset in the portfolio, provided that its fundamentals are solid, and to keep a small position in the event of a sale.
Private equity offers access to real cash flows and growth opportunities, but generally involves a degree of illiquidity. Investors can invest in private equity funds, but access may be limited to a minimum amount (often €250,000) and investments are often locked in for a period of time investments are often locked in for a period of 8 to 12 years. Listed holding companies offer an alternative by allowing investors to invest in private equity while benefiting from liquidity through the trading of their shares on the stock market. We are fortunate to have a number of well-managed holding companies in Belgium.
Gold, for its part, is regarded as a precious real asset that continues to shine through generations and centuries. It is sought after as a safe haven in times of economic uncertainty, as was recently the case at the start of the covid crisis or the war in Ukraine. Despite its undeniable appeal, the existence of companies specialising in gold investment is little known in Belgium. Which is a pity. Because by facilitating the process of buying and selling gold through digitalization, as well as taking care of storing the gold for customers, it is easy to put gold in the form of coins or ingots in the portfolios of investors wishing to diversify their assets.
Finally, investing in wine is done for certain categories of ultra-premium and premium wines. If the value of these wines rises, investors can sell them, but if it does not, they still have the option of consuming them. This allows investors to enjoy both the wine-tasting experience and the opportunity to make a financial profit.
In conclusion, this type of asset will allow you to rediscover the taste for investing in things that are worthwhile.
About.
Founded in 2012, the group began its activities in listed asset management. It has extended its activities to private equity, taking stakes in unlisted SMEs in Belgium and the Grand Duchy of Luxembourg. This holding company, listed on Euronext Brussels (ticker ROCK), is active in four sectors: financial services (listed asset management and gold trading with Gold & Forex International), industry, technology and the environment. Its aim is to create value over the long term by acting as a professional shareholder with an involvement in governance, strategy and financing.
published in Fokus Finance, 08 June 2023
FRÉDÉRIC POUCHAIN CEO
