The luxury asset space gains momentum amidst market volatility owing to economic worries and rising inflation. Here are the top luxury asset investing trends by Konvi, Europe’s leading luxury asset investing platform.
Investment In Luxury Assets Gains Momentum
Per the International Market Analysis Research and Consulting Group, the global luxury fashion market size is projected to soar to US$ 327.1 billion by 2032, demonstrating a CAGR of 3.14 percent during 2024-2032. Luxury assets—spanning fine wines, rare watches, and tokenised collectibles—have become an attractive option, due to their ability to hold steady value in uncertain times.
Konvi, at the forefront of this shift, has witnessed a surge in interest from investors seeking security and long-term growth. From the integration of blockchain to enhance transparency and liquidity to the rise of fractional investing that democratises access, 2024 has set the stage for a transformative journey in luxury asset investment. This article explores how these developments are reshaping the landscape and why younger generations are leading the charge into this evolving market.
Market volatility and diversification
“Volatility returned with a bang to financial markets in 2024, largely driven by geopolitics. With conflicts increasing worldwide, the growing potential of global trade wars and a record year for elections being set, geopolitical tension has inevitably affected investment markets, causing volatility across a variety of regions,” explains Eran Peer, co-founder and CEO of Konvi. “This volatility has created a particularly treacherous environment for retail investors due to uncertainty. As a result, we’ve seen an influx of new investors into alternative assets seeking more secure, solid and longer-term returns on their investments.”
“Luxury assets provide a strong alternative to traditional investing routes, particularly in times of high volatility. Unlike more popular assets, such as stocks or bonds, luxury and alternative assets, like fine wines, whiskies, watches and even fossils, are more detached from the global financial markets. This means they’re generally affected by the swings and dips of a volatile stock market, often seeing more steady growth. With geopolitical tension showing no signs of easing, we expect market volatility to continue into 2025. As a result, we expect to see continued growth in the interest in luxury asset investing we’ve witnessed this year, as investors diversify their portfolios away from traditional investing routes.”
Blockchain
Blockchain technology offers huge potential
After moving past the peak of its initial hype, blockchain is re-emerging as a transformative technology with practical applications across industries. A Gartner forecast says “the business value-add of blockchain will grow to slightly more than $176 billion by 2025, and then it will exceed $3.1 trillion by 2030.” Blockchain technology offers huge potential for e-commerce. And, payments, supply chain and decentralized marketplaces is what immediately comes to mind. Per Forbes, “The main advantage of a decentralized platform is that there is no single point of entry where malicious code can be executed… The strength of a blockchain platform is that an e-commerce company can set the rules for their cybersecurity and make sure critical data stays safe.”
“Having passed the peak of its hype over the past few years, blockchain is re-emerging as a key technology,” explains Eran Peer, co-founder and CEO of Konvi. “In the luxury assets space, we have seen it become an important means for boosting liquidity, security and transparency – key issues within the space. Decentralised ledger systems are becoming increasingly recognised as a way to provide investors with verifiable ownership records for high-value assets and enable instant transfer of ownership. Tokenising assets tackles the age-old issue of transferring ownership of assets that are often fragile, precious or difficult to relocate physically, bolstering liquidity in luxury markets. Tokenising illiquid assets could create a global market worth up to $16 trillion by 2030 and is already being explored in areas such as real estate.”
“DLT also offers high levels of security, mitigating the risk of fraud, and will also ease the implementation of fractional ownership models, helping to democratise the asset class. Looking ahead to 2025, we expect to see an expansion of blockchain’s role within the luxury assets investing space. The adoption of tokenisation and smart contracts could significantly streamline the trading process for luxury assets, in addition to reducing transfer costs and eliminating inefficient market intermediaries.”
Gen Z and Millennial investors
There’s an uptick in millennials’ engagement in the luxury asset investing space.
One of the key trends in 2024 has been the uptick in Gen Z and Millennials’ engagement in the luxury asset investing space. With luxury asset investing on an upward growth trajectory, consolidation of luxury fractional investing platforms is underway and will ensure that luxury asset investors can buy and sell fractions of assets on secure platforms and gain more accessibility to returns from this fast-growing market.
“One of the key trends we’ve noticed in 2024 has been the uptick in Gen Z and Millennials’ engagement in the luxury asset investing space. Gen Z and millennials are living under a unique financial environment that is much harsher than previous generations. If you started investing in the last five years, your investments will have had to weather the pandemic, inflation, geopolitical tension and market various crashes all in a very short time span,” says Eran Peer, co-founder and CEO of Konvi.
“Naturally, this causes young people to lose faith in the more traditional investment routes, such as stocks and bonds, encouraging them to diversify outside of these areas and move towards asset classes that are less directly influenced by market and policy shifts. Luxury collectable assets offer young people an alternative diversification method and are proving extremely popular, with 94 percent of wealthy Gen Z individuals interested in luxury collectables. As technology continues to democratise the luxury asset investing space, the market entry cost continues to drop. This will make luxury assets more accessible to young people at the beginning of their financial journeys. As a result, in 2025 we expect to see more engagement with luxury assets driven by Gen Z and Millennial investors.”
Per Deloitte, ‘Gen Zs and millennials are cautiously optimistic about the economy and their personal finances… Just under a third of Gen Zs and millennials believe the economic situation in their countries will improve over the next year… This optimism is also reflected in Gen Zs’ and millennials’ outlook for their personal financial situations, although financial insecurity continues to plague these generations.’
Fractional investing
In a rapidly changing investment landscape, fractional ownership has emerged as a game-changer in the luxury industry, offering diversification and hedging advantages. It’s poised to shape the industry’s future. Fractional ownership facilitates diversification, reducing investment vulnerability to market fluctuations and hype-driven risks.
Global luxury markets, particularly Asia Pacific and the Middle East, are booming. Chinese consumers are driving luxury spending, and the Middle East, notably Saudi Arabia, is emerging as a luxury frontier. The surge in demand for luxury items is set to increase rare asset prices, benefiting fractional investors who can enjoy price appreciation while mitigating risks.
Eran Peer, co-founder and CEO of Konvi, comments, “Thanks to improvements in fractional investing technology, this year, we’ve witnessed a significant and much-needed expansion in accessibility to previously unattainable luxury asset classes. 2024 has been a record-breaking year for our sector, with global investments in fractional ownership increasing by over 35%, surpassing a total of $1.2 billion. Technology is driving this surge, enabling individuals to diversify their portfolios with luxury asset investments that were previously reserved for only the wealthiest of individuals.
“This growth highlights the shift we’re seeing in the investment landscape over the year, as more individuals are looking to alternative assets that can offer resilience against market volatility and inflation. Fractional investing has lowered the entry cost for luxury investments, democratising the space and empowering a broader demographic of retail investors with access to these opportunities.”
“Looking to the year ahead, we expect to see further innovation and participation in the fractional luxury asset investment space, with advancements in blockchain technology, enhanced asset authentication and expanding asset categories leading the charge. Luxury asset investing is becoming more accessible and inclusive than ever before, and we’re looking forward to helping pave the way to increased participation in 2025.”
FAQs on Luxury Investments: The New Frontier for Portfolio Diversification
What Are Luxury Investments?
Luxury investments refer to alternative assets that include high-value items such as rare art, vintage wine, luxury watches, collectible cars, designer handbags, and high-end jewellery. These items are sought after for their scarcity, craftsmanship, and ability to retain or increase in value.
Why Should I Consider Luxury Investments for Portfolio Diversification?
Luxury investments provide a hedge against traditional market volatility. As tangible assets, they maintain value during economic downturns when other asset classes, such as stocks, may experience losses. Additionally, many luxury investments have shown consistent appreciation over time due to their rarity and growing global demand. Including them in a portfolio can reduce overall risk and enhance returns.
What Are the Risks Associated with Luxury Investments?
While luxury investments offer unique opportunities, they also come with risks:
- Illiquidity: These assets may take time to sell, particularly in niche markets.
- Valuation: Determining the market value of luxury items is dependent on expert opinions.
- Storage: Collectibles require specialised storage, insurance, and upkeep to retain its value.
- Market Trends: Demand for luxury goods fluctuates based on economic conditions.
How Can I Start Investing in Luxury Assets?
To begin investing in luxury assets:
- Research the categories of luxury investments that align with your interests and risk tolerance.
- Consult specialists such as art appraisers to ensure authenticity and value.
- Spread investments across different luxury categories.
- Explore auction houses, online marketplaces and funds that facilitate luxury investments.
What Kind of Returns Can I Expect from Luxury Investments?
Returns on luxury investments vary depending on the type of asset and market conditions.
Jasmeen Dugal is Associate Editor at FashionABC, contributing her insights on fashion, technology, and sustainability. She brings with herself more than two decades of editorial experience, working for national newspapers and luxury magazines in India.
Jasmeen Dugal has worked with exchange4media as a senior writer contributing articles on the country’s advertising and marketing movements, and then with Condenast India as Net Editor where she helmed Vogue India’s official website in terms of design, layout and daily content. Besides this, she is also an entrepreneur running her own luxury portal, Explosivefashion, which highlights the latest in luxury fashion and hospitality.
