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Chrome Jewels

By Markus Hotz, Photos von N Drew

Classic cars have always been regarded as an investment. While, in the past, collectors used to invest out of passion, value growth is increasingly becoming an important driver – especially with the international press reporting record prices at auctions. It doesn’t come as a surprise then that even companies are now looking to invest in classic cars. An interesting investment option is the Classic Car Fund operated by Filippo Pignatti Morano di Custoza since 2011. With a range of investment routes available – including the traditional option of purchasing shares in the existing collection, endowing the fund with one’s own vehicle for value protection (while continuing to chauffeur it), or taking out a loan by smartly using a precious vehicle as a security – institutional investors rely on the fund manager’s expertise. Pignatti offers investors the opportunity to participate in the booming classic car market while providing them with access to exclusive automotive events as part of his customer service.

Incidentally, Pignatti is a descendent of an old noble family from Modena. The connection to famous luxury carmakers like Maserati and Lamborghini basically runs in his bloodline, and it’s no coincidence that his brother runs the Ferrari museums in Maranello and Modena, and that the entire family is well-connected in international collectors’ circles. On Location spoke to the Count about the market for classic cars and his multifaceted business model.

Treasure Chest: the „car stable“ from Filippo Pignattis „The Classic Car Fund“ is shining in opulent chrom-jewellery in all rooms

Classic cars are a ‘moving investment’ offering a whole lot of potential. With a view to achieving maximum value growth, it isn’t advisable to buy an expensive top model, which tends to stagnate in value while at least remaining a safe investment. There’s also no definitive answer to the question of “vintage car versus modern classic?” when it comes to growth potential. It’s thus important to not just keep an eye on the already rather confusing vintage car market but also on the modern classics market. But this effort is worth the while: In 2011, the launch year of Filippo Pignatti’s Classic Car Fund, for instance, one could invest in the famous first-generation Alfa Romeo Spider (also known as the “designer wedge”), which has since seen a magnificent increase in value by some 70 percent compared to a starting price of about 25,000 euros at the time. For fund managers like Pignatti, however, the trick is not to perform retrospective analyses of value growth tables, but to know what’s valuable today and holds a solid (rather than a speculative) growth potential for the future. Since its inception over five years ago, the fund has developed solidly, seeing an annual growth of six percent.

Sector indices such as “Hagi Top” or the German Classic Car Index (Deutscher Oldtimer-Index (DOX)) not only leave traditional stock indices such as the S&P 500 lagging behind. Deutsche Südwestbank has created its own classic car index, the OTX, which it compares to equities and German government bonds: “While the German benchmark index DAX has grown by 169.76 percent since 2005 and the Euro Stoxx 50 Performance Index has gone up by 59.98 percent, the OTX has seen a growth of 321.39 percent. During the same period, the REX-P for German government bonds achieved a growth of 59.75 percent.” Even ‘concrete gold’ is lagging behind the chrome jewels. In addition, Pignatti sees it as an advantage that classic cars are “mobile assets, which can easily be moved between countries. If the market or the legal situation change, houses leave you rather inflexible while classic cars don’t.”

Networker: Pignatti in a 1958 Jaguar Lister Knobbly, owned by the world famous Jaguar-expert and friend Dr. Christian Jenny

In his eyes, the fund is an interesting investment alternative for those who don’t want to spend too much time familiarising themselves with the classic car segment but do have a penchant for this market. “In contrast to investing in company shares, vehicle investments bear no bankruptcy risk”; while their value may be subject to fluctuations, the condition of the underlying assets remains unchanged. And it goes without saying that all cars are insured against theft or other losses. “Find me another investment where this is even possible”, Pignatti points out. Collectors’ vehicles are limited and the demand for classic cars is on the rise year after year. Meanwhile, even the upper middle class and the upper class in South America, India, and Asia increasingly invests in such assets.

The difference to traditional collectors is that investors, who see classic cars from a value growth perspective, are not prone to sentimentality. After all, not every owner wants to drive their vehicle themselves. “Some are not even able to move a modern car with manual transmission, let alone an old one”, explains the fund manager. “And yet, they still want to invest in classic cars – and we offer them this opportunity.”

The beauty of investing in classic cars is that it’s not just exciting to look at the appreciation rate on paper, but also to experience them live in the Swiss Alps. Real jewels can be worn on an evening out – but they usually stay in the safe. Chrome jewels, on the other hand, can be shown and experienced much more often. And sold, of course. The fund business thrives on buying at low prices and selling at the greatest possible profit. “There are no F40s, F50s, or Lamborghini Miuras in our fund, as their prices already begin to stagnate right from the top”, explains Pignatti. “Our focus is on beautiful and affordable vehicles instead, which we can quickly resell for one or two hundred thousand. After all, our job is to sell and not to collect.” Finding cars, inspecting them on site together with experts, and assessing and analysing them together with specialists takes time and costs money. And even the tricksters in the market are becoming more and more sophisticated, which is why Pignatti doesn’t want to drive up the value of his fund artificially, but acts with a steady hand. The fund currently consists of 13 vehicles – “not an awful lot, but the right ones”, says the Conte gleefully about “a Ferrari 365 GTB/4 Daytona, a 1976 Ferrari 308 Fiberglass, of which only 712 were made, as well as a 1994 Ferrari 348 Spider with a limited edition of only 1,090”.

Acquiring shares in the fund by means of one’s own vehicle is another of the services offered by Pignatti: “If you own a classic car worth one million euros, for instance, you can endow the fund with its value. The value of the fund goes up by one million, and the owner gets a return on his investment, and can continue to drive the car and keep it in their garage. It’s insured via the fund and also protected against third-party access.” But this type of asset protection is interesting for other target groups, too: “Especially the older generations, who’ve accumulated a nice collection and are soon going to pass it on to the next generation – who, in turn, are less knowledgeable and less interested in engaging with classic cars in much detail – will find an option to protect the value of their assets here.”

And the fund even provides an option for those wishing to take out a loan. instead of selling a car, one can use its value (e.g. one million euros) to acquire shares in the fund by exchanging its value for shares of the same value and immediately selling a proportion of these shares (e.g. 200,000 euros) in order to convert them into cash. The car is still there – right in front of the owner’s home – and can be maintained and used there. The loan is repaid by means of the returns. And the best bit is that it’s utterly discreet. “In Europe, there are banks which offer this option – but they’ll keep your car in custody, their interest rates and fees are unattractive, and your car will no longer be available for you to use it. This loan and asset protection is an interesting option with our fund”, explains Pignatti.

What’s more, the fund provides evidence in the form of business and audit reports, because “many who trade in classic cars only talk about their successes – but never about their failures – and they never provide a complete expense report. They simply sell a classic car, offset the original purchase price against the current selling price, and talk about phenomenal profits”, says Pignatti. “But running costs such as the trip to Goodwood and the expensive garage built specifically for the car are rarely taken into account, and there’s no audit report on all the overall costs. In our case, that’s entirely different: we have to provide evidence of all actual costs, of course, and we still have to make a profit.”
Another option is to use the fund as a ‘transmitter’ in order to build a specific collection for a customer by using the vehicles in the fund one is an investor of as if they were one’s own while benefiting from the complete infrastructure and know-how of the fund in the background. “We’re sort of advisors for vintage car and modern classics”, confirms Pignatti. “And with our audited track record, we can create a collection for individuals or institutions – without the conflicts of interest an auction house or a car dealer would be subject to because their primary role is to sell ‘their’ cars.” Unsurprisingly, Pignatti also acts as a broker, and provides support in the purchase and sale of vintage cars and modern classics, as well as new limited-edition cars such as Ferraris, Porsches, or Ford GTs.
His own car is a Range Rover Classic Sport. “Even my brother, who runs the Ferrari museums, doesn’t drive to the office in a Ferrari”, says Pignatti with a wink. The fact that he doesn’t like to talk about the social and charitable causes he supports, is also part of his understatement. He prefers to refer to the family motto derived from the affiliation of many Pignattis to the Order of the Knights of St John: “We are not noble by birth but by our deeds.” And there’s still plenty to do for Pignatti.