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The advisor who sold his Ferrari

Let the race begin!

Throughout the course of a life many things can happen to a person. Sometimes good, sometimes bad. Some things you can control and others you can’t.

Sometimes great things happen that you didn’t think were possible even in your wildest dreams: a hole-in-one, a great job offer, a business that takes off and even that blind date with the prettiest girl in town that leads to a great marriage and wonderful children.

And then there was the Ferrari. The Ferrari California Turbo, to be exact. Let me tell you the story…

Some two years ago, I attended the launch of the Polo Village development, part of the greater residential development at Val de Vie, just outside of Paarl on the road to Franschhoek. For many years before that I had considered buying or building a house in Val de Vie. Twice I was tempted enough to buy a stand only for me to sell it sometime later as my personal plans had changed.

Polo players participate in a game on a polo field at the luxury Val de Vie estate in Stellenbosch. Picture: Waldo Swiegers/Bloomberg

A rapidly growing business, children happy at school in Johannesburg and other factors were the main reasons for me not making the leap and joining the great trek back to the Western Cape. But it also did not escape my attention that property prices in the Western Cape were galloping ahead while prices up north were languishing, as most of us up-country folk will know all too well.

I was looking for a property investment that was (a) not too expensive, (b) could generate an income, (c) I could use from time to time and (d) a lock-up-and-go.

The Polo Village at Val de Vie ticked all these boxes. The 60 units, designed by Stefan Antoni, are all one- or two-bedroomed upmarket apartments situated next to the pavilion on the Val de Vie estate.

Read: Residential property: A 10-year bear market

After a slight hesitation, I put my name down for one of these units. And oh, did I mention that one purchaser was to win a Ferrari California Turbo by means of a lucky draw, valued at around R3 million at the time, depending on the exchange rate?

And so it came to be, that on that fateful early summer evening sometime in October 2016 my name was the only one left standing after the 59 other owners were eliminated from the lucky draw.

I cannot tell a lie, as Abraham Lincoln once famously said, but I, together with my better half, were more than blown away. Imagine winning a Ferrari. A real Ferrari. It only happens to other people. It was an evening of champagne, joyous laughter and all-round merriment. I still get gooseflesh thinking about it.

And for a year we enjoyed driving around the Western Cape in our blood-red Ferrari. The petrol-heads among you will appreciate this joy better than most. The sheer power, acceleration and best of all: that unmistakable sound of a Ferrari in full roar. There is nothing on earth that sounds like a Ferrari at full throttle. That sound itself might explain why Ferrari has never spent a cent ever on direct advertising.

Holding costs

But then the financial advisor in me took over, calculating the opportunity, insurance and services costs and comparing that to the estimated costs of two students, one with three years to go at school and the other beginning a four-year university career this year, maybe more.

In the end it was a no-brainer: the Ferrari had to go, much as my ego was enjoying the ride…

The market for Ferraris, I found, is also affected by the economic cycles and it took four months before an acceptable new home was found: in this instance, the car went to a member of the victorious Rugby World Cup team of 1995.

And so I was left with the pleasant but equally daunting choice to make: how to invest the windfall-proceeds of R2.5 million after some small debts were settled.

Here was an opportunity to create a higher-than-normal-risk investment portfolio, enabling me to choose from any asset class anywhere in the world, and at the same time to track the value of this portfolio against the value of the Ferrari California over time.

Conceptually, the portfolio was chosen and forwarded to the editor of Moneyweb Ryk van Niekerk some two months ago, but I have been waiting for a suitable entry point as far as markets and more importantly, the currency, was concerned. So far the delay in executing this portfolio has been prudent as the US dollar has weakened sharply against the SA rand. Or as some commentators like to say, “The rand has strengthened…”

Read: Good grief, look what the rand is doing…

Dollar weakness coming to end

I think, however, that the bout of US dollar weakness/rand strength is coming to an end and have therefore decided to proceed with the launch of what I will be calling my Ferrari portfolio.

Here are a couple of ground rules that will be followed as far as the portfolio is concerned:

  1. All the funds chosen will be available to any investor in SA, on one or more local investment platforms. I have selected the Investec platform.
  2. All investments will be done at normal retail rates, with an advisory fee included, so as not to distort the returns.
  3. It will be aggressively managed by myself and any changes will attract capital gains tax, if applicable.
  4. I hope to report back on the performance of the portfolio every six months. The investment portfolio has a five-year investment horizon. It is an aggressive portfolio and will have a high degree of volatility.
  5. It will, in a sense, represent my best investment views for all to see – a daunting prospect, I will be the first to admit.
  6. This exercise is not meant to represent investment advice in any shape, form or manner. Any investor following this portfolio him/herself will do so at their own risk.

I spent a considerable time over the December break reading and contemplating views and forecasts from a wide range of investment commentators, locally and abroad. I have tweaked the portfolio somewhat since first presented to Moneyweb, but here we go:

Sygnia 4th Industrial Revolution fund: 15%

Coronation Emerging Market: 30%

Prescient China Fund: 15%

Sanlam India Fund: 15%

MI Plan Global Macro Fund: 25% 

I have done a full Morningstar analysis on this portfolio, which is too voluminous and technical to reproduce here, but interested readers are welcome to request one from me, if you are having trouble sleeping at night. I will also track this portfolio against the values of similar Ferrari Californias over time, to determine which is best: portfolio investments or hard assets.

So as they say in the classics: let the race begin and may the best man (or car) win!

Magnus Heystek is investment strategist at Brenthurst Wealth. He can be contacted at magnus@heystek.co.za for ideas and suggestions.

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COMMENTS   33

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Even though I’m all for capital gains, I would have just kept it!

Ferrari’s are old hat now – as awesome as they are there are too many of them and too many new exciting hypercars out there for modern day Ferraris to ever appreciate in value. Besides in 2040 you won’t be able to drive them.
Good call and no brainer.

Keep the Ferrari and sell the deadbeat overpriced Cape Town property….values are plumetting as we speak…

Well Magnus that’s a really bold move putting yourself out there like that. I’ll be watching you with keen interest. Good luck!

At last, an article that doesnt end with go and see a financial advisor.
Thank you sir and congrats on your good fortune.
Looking forward to future updates.

It was George Washington, not Abraham Lincoln, who could not tell a lie and GW probably didn’t say it anyway.

All the best and will keep tracking the performance of the funds selected over the given duration of the investment.

Enjoy your writing. Well done on your win and good luck with the funds.

What?! You let go of a full-blooded Scuderia, to place your kids’ education first? Mamma mia…disastro! As a man, you got your PRIORITIES TOTALLY WRONG sir!!

(…sorry, had to crack that one…couldn’t resist 😉

I read Mark de Villiers represented you by taking delivery.

Good timing for foreign investments, given current strength of the rand. Sygnia 4th Indus Rev fund I like, had stellar returns, but perhaps was due to strong run on global equity markets the past few years. Nevertheless, with a strong ZAR and global equities that took a temp dip, would still go for it…instead of speculation on Bitcoin, rather invest in the companies behind technology I’d say.

China & India funds, being that Asia will be the next global powerhouse (US, UK, Europe slowly giving up economic relevance to the East, which is still rising). A good long term bet. China’s growing military power already has US worried. China’s world influence is rising. Once China starts to increase commodity/oil futures trading in yuan, bad news for USD world domination. Since the ZAR is strong…invest abroad.

Back to cars:
Here is THE BEST advice of the day. To let the Ferrari go is heartbreaking in anyone’s book…but hey, take a fraction of that money, and go purchase a (red) FIAT 500..especially a high-end model with the two-tone or checkered/striped seats, and chrome strips on the exterior 🙂 At least you would be driving a (very) stylish car, that would not look out of place parked next to an Aston or Porsche in the Heystek driveway. Although the 500 is not the most practical/roomy car around, you wont be worse off than the 2-seat California, practical-wise…and besides, its bumper will easier clear the sloped driveway & parkade ramps in the city.

One would drive in relative style, and still attracts more fond attention than in a BMW, Merc or Audi, with are so COMMON(place). The 500’s interior style is refreshingly cheerful, unlike the terrible sombre black found in most German cars. Fiats are way safer from hi-jacking. Plus…a FIAT has a smidgen of Ferrari-DNA in it.

So there you have it…you can still enjoy a (red) Italian stallion, don’t let that chance go by. (Plus it’s a varsity car of one of the kids. The latter a stealthy reason to get past the Mrs to approve any ‘irrational’ car spending 😉

Great article thanks and will follow progress. I’d say that matching the ongoing value of that Ferrari is going to be tough – the truly high end performance and classic cars just seem to increase in value relentlessly.

Good decision selling the Ferrari, as we all know the cheapest car has right of way in SA.

From my experience, it’s the car with the most dents…

well written and a very nice read ! – the portfolio looks impressive

What’s happened to Robert in Sydney.He’s always the first to comment on Magnus’s articles.He’s gone really quiet in 2018!

He was very old. Like sand through the hour glass, so are the days of our lives….

He said some time ago that he had cancer

Perhaps that is taking its toll

Geez, Magnus, you buy and sell non-income-generating plots twice in succession even as you advise the world that the property market is doomed, then blow a new Beemer’s price on driving a Ferrari for a year, to invest the balance rather belatedly in speculative niche investments to fund the kids’ education. Hey, but you’re richer than me, so who am I to question that wisdom?

Not a bad mix for current entry and for the foreseeable future.
Good thing there is no fund with full exposure to USA general equities, except for a portion to a niche segment through the 4th Industrial Revolution fund and some proportionate exposure via the Global Macro Fund.
With the unit price of property Reits down as much as they are and with their income rate sitting at close to 10% you might consider to add some when opportunity presents – especially those with a UK and Europe focus.

Magnus, my broker, PSG, does not have the funds available on their platform. I checked with Investec and was informed that they are only available on their CFD trading platform. Which other brokerage would have these funds available?

Quidditas – all these funds are available on the Sanlam Glacier online platform.

Thanks. So does PSG except that their help desk is not very helpful …

PSG are junk

Got advice from them just over 2 years ago. Invested based on their advice. I’ve made close to -5% because of fees.

Nothing else.

These are unit trust funds, not stocks. These funds are 10000% available on the Investec Platform. Or maybe give Magnus’ company a call?

I don’t see any mention of a key decision-making equation – which becomes more key as one gets older and sees the sudden passing of friends:

living and enjoying the now vs holding out for a better tomorrow

Live now, enjoy the Ferrari now – who knows how many more tomorrows you have.

first you win the lottery. Bravo, well done

Then you pop the balloon by investing in 5 funds.

Real sports car owners don’t invest in Funds. They pick 6 individual stocks, possibly 3

Should have sold it and bought an old Ferrari. That’s an appreciating asset.

….even, an old vintage VW Beetle “Volksie” holds up it’s value well when looked after. Cheap…but they don’t depreciate nowadays.

I’m thinking of selling my Aston Martin to buy NET1, ….takes care of emerging markets, Asia ( south Koreaand possibly even North Korea if today’s news is something to go by!) technology and algorithm banking plus, in addition also, South Africa’s distribution of social grants and all the opportunities that go with it!

+1 Mac. NET1 may serve you well as investment. It should take care of EM exposure, including Asia.

Not sure about “taking care” of North Korea(?). A few Google searches keep on pointing back to the same investment product: you’ll need a LGM-30G Minuteman-III

Don’t think Magnus has ever got a ZAR call right…..

Should have kept the Ferrari. I’m learnt that life is about experiences.
+95% of the population (locally and globally) are saving for a “retirement”, paying a mortgage, own a house (of varying sizes) – in other words, experiencing common life.

How many have had the experience of a Ferrari.

The sound of that engine is justification enough.

I disagree that a Ferrari will become or is common as there are so many players in the market. A Cursory look at their Share price – which is one of the best performing stock’s globally makes for a solid investment case, and unlike other manufactuer’s, this is revenue driven excuse the pun).

If I sold a Ferrari, I’d use the cash to buy shares in Ferrari.
Santosh

What no one gets, is if you are pushing the years and the boep is bulging somewhat,
the Ferrari is the worst car to own. Getting out of it, you are unbalanced, not that crisp and flexible any longer, and thus have to roll out on to the tar mac. In the senior years you want a raised SUV that’s easy to get into and that you can actually climbed out of, instead of making a parachute roll as a toppie. Also the SUV gives you everything you need (which the Ferrari don’t) to take the grand children with you on weekend trips. No thanks, I will take the money any time above the trouble of owning a Ferrari. The insurance premium by itself would take up all the money one could rather spend on good trips, good meals and good wine or whisky.

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