Dubai: As high net-worth individuals (HNWIs), defined as those with $1 million (Dh3.67 million) or more in investable assets, cautiously re-entered the financial markets, after the economic crises that ravaged the world up to 2008, they also returned to investments of passion.

Compared to pre-crisis levels, outright global demand in 2009 remained weaker in many categories, including luxury collectibles such as automobiles, boats and jets, art, jewellery, gems and watches. However, such demand lifted in the latter half of 2009, according to the World Wealth Report 2010 released by Capgemini and Merrill Lynch last week.

"With financial markets still in flux, some HNWIs indicated that they also approached their passion investments as ‘investor-collectors', seeking out those items perceived to have tangible long-term value," the report said.

The two categories that were most attractive to these "investor-collectors" were art and "other collectibles", which include coins and antiques.

The demand for passion investments overall is likely to increase this year as wealth levels rebound, evidenced by the fact that auction houses, luxury goods makers and high-end service providers all reported signs of renewed demand toward the end of 2009, and in the early part of 2010.

After an 8 per cent drop in sales in 2009, the global luxury goods market is expected to witness a 4 per cent increase in revenues this year, Bain and Company said in a research report last month.

The market will grow from 153 million euros (Dh694 million) in 2009 to a projected 158 million euros in 2010, it said. Bain estimates that the projected full-year increase of 4 per cent will result from a particularly strong growth spurt of 5 to 10 per cent in the first half of the year, followed by a second-half increase of 0 to 5 per cent.

Core market regions

According to Bain and Company, China and Asia (excluding Japan) continue to drive growth for the global luxury industry, with 15 and 10 per cent growth, respectively, forecast for this year.

It has forecast 4 per cent growth for the Americas, and 3 per cent for Europe, both of which are luxury's core market regions. Only Japan will see further decline, by 3 per cent versus 2009, it said.

According to Capgemini and Merrill, luxury collectibles remained the primary HNWI investment of passion in 2009. Objects such as luxury automobiles, yachts and jets continued to account for the largest portion of millionaires' passion investments last year, or 30 per cent of the total among millionaires globally.

North American millionaires allocated the largest share of passion investments to luxury collectibles (31 per cent), followed closely by those from Europe and Latin America (30 per cent each).

While global yacht sales tumbled 45 per cent in 2009, sales in the US reported a near 30 per cent increase in the first quarter of 2010 as compared to a year earlier, illustrating the resurgence in demand for such collectibles. Jewellery, gems and watches became the second largest allocation of these investments, at 23 per cent.