A study, with data from 29,002 global auction rooms from 1998 to 2017, was used to ascertain the classic car Sharpe ratio (a measurement that takes into account the volatility of returns i.e. how much the price rises and falls, as well as growth of an asset). Regarding the gross annual Sharpe ratio of classic cars versus those of other asset classes over the sample period it was found that:

• classic cars, overall, have a higher Sharpe ratio (0.35) than the S&P 500 Index (0.21), the MSCI World Index (0.16) and art (0.07). However, adding dividends would boost Sharpe ratios for the equity indexes to round about 0.30;

• classic cars have a lower Sharpe ratio than global government bonds (0.40) and gold (0.40);

• correlations between classic car returns and those of other asset classes are generally low, indicating the diversification benefits within a portfolio of other classes.

The study found that the value of classic cars bought and sold at these 29,000+ auctions was $1.3 billion p.a. Although private sales could boost this figure substantially, the global value of classic cars is estimated to be $130billion.

In a survey carried out in the USA by Bank of America it was found that, among its High Net Worth (HNW) clients, there was an average asset allocation to assets of 55% stocks, 21% bonds, 15% cash, 6% alternatives  and 4% other. These conclusions imply that the potential demand for alternative and other types of investments, such as digitised exposure to ‘non-traditional’ assets, is very real. So, how long before we see a variety of digital assets giving exposure to assets which have, to date, not been available? Interestingly, when the same cohort of HNW clients were asked, “What would make life better?” - more time and more friends and family were by far the most desired, as opposed to more trinkets i.e. more ‘stuff’!

What would make life better?

Source: Financial Samurai.Com

Akin to classic cars, there is a range of other assets which are rare, illiquid and require specialist knowledge to select, store and find in the first place. So, what other assets could be targeted in order to be digitised? Well, Knight Frank (a UK-based estate agent/realtor) has been tracking the performance of luxury goods for a while, and some of the assets which have performed well over the last ten years have been rare whiskey, coins, wine, art and cars.

Knight Frank’s performance of luxury goods

Source Knight Frank.com

In September 2019, European Central Bank (ECB) board member, Benoit Coeure, was reported as saying, “The bank should ‘step up’ its thinking on a public digital currency”. This was then followed up in November 2019 when the bank, itself, added, “The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies including by considering concrete steps to this effect.” One suspects that this statement was, in no small part, fuelled by concerns regarding the threat of a private organisation, such as Facebook, which could thus undermine the influence and control that the ECB has over Europe.

There would now appear to be several European countries jostling to launch some kind of Digital Euro. Indeed, in Germany, the Association of German Banks (a group of 200 private German banks) has been asking for regulators to issue a Digital Euro. Holland and France have both been asking for a while to see a Digital Euro and now the Italian Banking Association (ABI), comprised of 700 Italian banking institutions, has also urged for the process of introducing a Digital Euro to be sped up. A statement from the the ABI reported that, “A programmable digital money represents an innovation able to profoundly modify the way we conceive currency and exchange. This transformation can potentially deliver a great added value, in particular in terms of efficiency for both operational and support process. This is the reason why is so important to dedicate attention and energies to develop, quickly and in collaboration with the entire ecosystem, new instruments able to primarily support the development of the Euro area”.

It is not singular to Europe that Digital Currencies are being taken more seriously. According to the Bank of International Settlement (BIS) there are 44 central banks seriously contemplating CBDCs. As the World Economic Forum stated, “CBDC may be issued for general use (“retail” CBDC) for peer-to-peer payments and payments from consumers to merchants; or for use by commercial banks and clearing houses (“wholesale” CBDC) for more efficient interbank payments that occur outside traditional correspondent banking and other payment systems”. Indeed, it has just been announced that in Thailand the authorities are proceeding with the launch of a CBDC. This announcement follows on from both the Bank of Thailand and Hong Kong’s central banks revealing in January 2020 that they had moved a step closer to issuing digital currencies that could be used to make payments between the two countries far more efficient than at present.

Siam Commercial Bank (SCB) believes it needs to become digitally sophisticated in order to meet the potential challenges from multinational organisations such as Alibaba, Amazon or Samsung Electronics. SCB has also signed an agreement with the Bank of Thailand. SCB has been working with Digital Ventures (DV), a leading fintech venture capital firm, since 29018 using DV’s Blockchain-powered platform for to speed up procurement, invoice, and payment processes for companies. The platform reduces procurement processing time by 50% and reduces cost per transaction by 70%. As a result, over 4,500 business partners are on this platform within two years.