Supercar Investment Club offer the opportunity to invest collectively in supercars, with units starting at £500.
At time of writing, the company is yet to actually invest in a supercar; it has recently launched and is in the process of raising enough money to buy its first.
Once sufficient funds have been raised, the company will purchase supercars and hold them for a minimum of three years. After three years has passed, the supercar will be offered on the open market. If it can be sold for a profit, Supercar Investment Club will automatically sell the car. If an offer is received which makes a loss for investors, investors will vote on whether to accept it, in proportion to their invested funds. If investors holding a 50% majority share vote against selling it, the car will continue to be held.
During the three year period, if Supercar Investment Club receive any offers which would make a profit for investors, these will similarly be put to an investor vote. Offers during the three year period which would make a loss will be automatically rejected.
Supercar Investment Club charge a 6% initial fee, a 1% fee over three years and take 15% of any gross profits on sale.
Who are Supercar Investment Club?
Supercar Investment Club’s website provides no details of who is behind the business.
Companies House shows that Adam Sanderson is the sole director and owner of Supercar Investment Club Limited. The company was incorporated in July 2017.
Supercar Investment Club is regulated by the Financial Conduct Authority as an appointed representative of Prosper Capital LLP.
How safe is the investment?
To their credit, Supercar Investment Club makes extremely clear on their website that investors’ capital is at risk and that investors should take advice if they are in any doubt.
It is, as SIC says, perfectly possible to buy a supercar and sell it for a higher amount later.
However, this relies largely on luck and the whims of the market. A supercar is still a car and in the long term would be expected to depreciate in value, even if the rarity value of a well-maintained supercar can counteract this to some extent.
If, after the three year period is up, no buyer can be found who will offer Supercar Investment Club enough money to make a profit for investors, investors could find their money locked up indefinitely, until investors holding a 50% majority share vote in favour of cutting their losses.
Supercar Investment Club has the right to deduct “unexpected costs” from any sale price.
Investors could therefore lose up to 100% of their money if Supercar’s fees and any unexpected costs exceed the price that the car can be sold for.
Prior to being invested in a supercar, investors’ money is held with Mangopay, a company regulated in Luxembourg.
Should I invest with Supercar Investment Club?
This blog does not provide financial advice. The following is not a personalised recommendation, but a list of facts and general principles that investors should consider.
As mentioned above, it is perfectly possible to buy a supercar and sell it for a profit a few years later. But this is pure speculation, and relies essentially on luck. A supercar has no yield (in theory it could be rented out but this would result in more rapid depreciation; Supercar Investment Club say that the car will only be driven for yearly events, which precludes renting it out). This means investors are relying entirely on someone coming on along in three years and offering a larger sum for the car in the future.
“Luxury goods” investments such as supercars, fine wines and art are generally only suitable for high net worth investors who already have so much invested in conventional stockmarket investments that diversifying into assets with no yield starts to make sense.
The biggest attraction of a supercar as an investment for a high net worth investor is that even if it never makes a return, they can drive it around, or show it off in their garage. The same doesn’t apply to someone investing collectively in a supercar.
Supercar Investment Club’s fees (amounting to 2.33% per annum over the life of the investment, assuming there is an exit after three years, and 15% of gross profits) are extremely high compared to the fees charged on conventional stockmarket investments. Though SIC could quite reasonably say that this isn’t a conventional stockmarket investment, and that there is no real basis for comparison as there are virtually no other companies offering collective investment in supercars.
Before investing, investors should ask themselves:
- How would I feel if the market collapsed for the supercar I invested in and I lost up to 100% of my money?
- How would I cope if no profitable offers were received for the supercar after the three year period, other investors voted against selling at a loss, and there was no secondary market for my share, meaning that my money was locked into the investment indefinitely?
- Do I have a diversified portfolio with so much invested in assets with a positive expectation of return (such as equities, commercial property and fixed interest securities) that it makes sense to invest money in depreciating assets with no yield?
Investors should not be seduced by the glamour of “owning” a supercar. As they will never be allowed to drive their investment, they should view it as dispassionately as any other piece of paper they might invest in.