“We want to offer a way for investors to invest in things beyond the stock markets. Hedonova had piloted as a platform where investors would choose to invest in specific alternative investments but we quickly realized that people would simply filter with returns and invest in whatever was offering the highest return at that time with no heed to risk. Because of this, we pivoted to a fund structure,” says Suman Bannerjee, Chief Investment Officer of alternative investment firm Hedonova.
Besides the usual asset classes of equity (both listed and unlisted), cryptocurrencies and NFTs, the fund also owns paintings of Manu Parekh and VS Gaitonde, a vintage of Macallan 36 (Scotch whiskey), Rihanna’s album ‘Don’t Stop the Music’.
Pointing out that there are more alternative investment offerings than stocks on NYSE, he says there is no research done on such alternatives.
The maverick money manager, who handles over $300 million, keeps the allocation small at around 5 per cent in such collectibles because there is no liquid market for these assets, hence it’s hard to find things to buy in the first place.
“We look at different auction platforms and cold call private collectors, which as you can imagine, is quite a tedious process. There are also challenges related to storage and moving the assets across borders,” Bannerjee says, adding that the size of the market is also quite small and there are not too many investment-grade collectibles.
Can art and other collectibles prove to be a good investment vehicle despite all the issues related to liquidity? Data collated by the AIF says that in the last 25 years, annualized returns on contemporary art have exceeded 14 per cent – better than S&P 500.
“They’re not really a long-term investment, but rather a trading asset. The collectible market is very synthetic as the assets usually change hands between a small set of collectors. Whenever there are economic downturns, collectors just stop buying and selling because of which there is no proper price discovery. In the US and London markets, there is also a very mature infrastructure of lenders who lend against collectibles which leads to collectors not selling at all. Given these, investors have to be very careful hence allocation is usually small,” he says.
Some of the other alternative asset classes include equipment finance, litigation finance, P2P lending and agronomy.
NFTs too form a small part of the portfolio but Bannerjee says he doesn’t take it as an investment asset class. “Think of it like this – today an investor’s shares are held by a central body, a depository. With NFTs it can be held in a decentralized manner and verified publicly. NFTs can be the cement and concrete of future investment infrastructure, but not real estate,” the fund manager said.
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