Corn Roast
“Corn’s been going up in price over the last few years,” says Paul Ashworth, chief North America economist at London- based research firm Capital Economics Ltd. Ashworth said he believes corn and other agricultural commodities are overpriced and that what he calls a bubble will burst in the next few years. “We’re talking about low interest rates to buy farmland and also higher yields for corn per acre,” he says.
For wealthy individuals, alternative investing isn’t just about hedge funds and commodities. They also sink their money into collectibles such as stamps, coins, art and wine. Among those more-exotic investments, the top performers were classic cars and coins, with indexes that track prices of those collectibles up more than 15 percent annualized over three years.
Art connoisseurs lucky enough to own paintings by the late American artist Adolph Gottlieb (1903 to 1974) saw the value of his works rise by 65.5 percent annualized over three years. One Gottlieb painting, Balance, was sold at a Christie’s auction on May 15 in New York. The auction house’s projected sale price was $800,000 to $1.2 million. It sold for $3.3 million.
Buy Bordeaux
Meanwhile, wine investors who had been holding on to a bottle of 2004 Chateau Pavie Bordeaux saw its value rise 107.3 percent over three years. The wine sold in June for as much as $400 a bottle.
The alternative asset class that has made Blackstone a hot stock, private equity -- aka leveraged buyouts -- has benefited greatly from the post-crisis low-interest-rate environment.
“It’s one of the consequences of the great financial crisis,” TorreyCove’s Fann says. “In many cases, the large deals that were undertaken during the boom period got salvaged because of quantitative easing.”
One beneficiary was Apollo Global Management LLC, the New York-based firm run by Leon Black. Apollo was able to refinance crisis-era debt in companies such as Harrah’s Entertainment Inc. that the firm bought at high prices during the bubble.
Today, private equity is bigger than ever. Global private- equity holdings surpassed $3 trillion of assets under management in 2011 for the first time, according to London-based research company Preqin Ltd., and have continued to grow. KKR & Co. -- run by billionaires Kravis and George Roberts, his cousin -- owns companies that employ about 980,000 people. Blackstone’s portfolio of companies boasts more than 730,000 workers, while Apollo companies employ 370,000.