Bloomberg article and pics: $25 million Patek collection
Hi,
I read this article in 'Bloomberg Pursuit' magazine and wanted to share it:
Pictures:
http://www.bloomberg.com/slideshow/2012-10-11/a-25-million-watch-collection.html
Article:
http://www.bloomberg.com/news/2012-09-24/patek-philippe-collector-tops-s-p-with-18-gain-in-fund.html
Patek Philippe Collector Tops S&P With 18% Gain in Fund
As Alfredo Paramico pulls up in a blue Audi at the 178-year-old neoclassical Four Seasons Hotel des Bergues in Geneva, the staff snaps into action.
“Monsieur Paramico has arrived,” a doorman says into a microphone on his lapel, alerting colleagues inside the hotel.
With his handsome chiseled face, crisp white shirt, jacket by Neapolitan bespoke tailor Biagio Mazzuoccolo and slim jeans, Paramico looks like an actor. Located in the heart of a city that’s home to Patek Philippe SA and Rolex Group, the hotel pampers Paramico because he’s one of the world’s leading watch collectors, Bloomberg Pursuits magazine reports in its Fall issue.
These days, as everyone from Michael Schumacher to Usher to Arnold Schwarzenegger collects mechanical watches worth tens of thousands of dollars, Paramico is in a league of his own. Now 43, the Italian banker from Milan started buying Swiss timepieces more than two decades ago, before Geneva auctions overflowed with buyers. He has devoted himself to an intensive study of rare vintage watches and put together a grouping of 10 exceptional Patek Philippe timepieces.
His assemblage makes Paramico one of the top 10 collectors worldwide out of a total of about 50,000 enthusiasts, says Davide Parmegiani, a dealer in Lugano, Switzerland, who has sold luxury watches for 25 years.
“He doesn’t want to have everything,” says Arnaud Tellier, a consultant to collectors and watchmakers who ran the Patek Philippe Museum in Geneva for 11 years. “He selects only the cream of the cream.”
White Pateks
Or the best of Patek Philippe, a company founded in 1851 whose handcrafted parts and sophisticated mechanical movements set it apart from many of its Swiss rivals. Several of Paramico’s vintage pieces date back to the 1940s and ’50s, and all of his watches are encased in either white gold, platinum or steel -- rather than the more common yellow gold -- giving them the name white Pateks.
Six of them contain so-called complications that make the watches distinctive, such as a perpetual calendar that automatically adjusts to the start of a new month. Paramico says his collection is worth about 20 million euros ($25 million), or about 8 million euros more than what he paid for the watches starting in 2000.
“If I see the same patina on the dial, the same aging of the hands, the indices and the bracelet, this is what I love,” says Paramico, a discreet man whose face breaks into a smile when he talks about his collection. “The satisfaction that you can receive from a vintage watch you can never get from a modern one.”
Watch Fund
Paramico is now off on a new quest to show investors that watches can earn solid returns. In 2010, Luxembourg-based Elite Advisers SA, a firm that manages wine and jewelry investment funds, asked Paramico to start the world’s only regulated open- ended watch fund.
He already had a day job as head of global markets at the Italian branch of Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA), where his team in Milan buys and sells equity, debt and foreign- exchange assets. But Paramico couldn’t resist the offer and almost immediately said yes.
So, after arriving home each night from the bank, he typically retreats to his study in his spacious 19th-century apartment in Milan’s chic Brera district to manage his watch fund.
The study highlights his singular obsession. Its shelves are packed with more than 500 auction catalogs and about 1,000 other watch publications. His yellowing archival material contains minute production details of classic pieces. Paramico says he scours the catalogs and speaks to collectors and dealers often until 1 a.m. in search of his next prized timepiece.
Alternative to Securities
“I had more free time in the past, but it’s my passion,” says Paramico, who’s married but has no children. “I could talk about watches for a week.”
Paramico says investors seeking gains from hard assets are moving into his fund partly because the vintage watch market is not correlated with the movement of securities. At the end of August, his 19.5 million euro fund held 512 luxury timepieces -- mostly Patek and Rolex. He says the fund could eventually swell to 250 million euros.
It notched an 18.2 percent gain from inception at the beginning of 2011 through August 2012, beating the 11.8 percent rise in the Standard & Poor’s 500 Index. (SPX) To avoid conflicts, securities regulators in Luxembourg prevent any of his watches from coming into the fund.
Limited Supply
On a May morning in Geneva, Paramico shows a group of about 10 Swiss men and women the watches he has purchased for his fund. The pieces are mostly vintage and kept in an underground vault behind a series of security doors at the free port, a tax- free storage area.
As the investors examine the watches, Paramico, who also speaks French and English, tells them that rare, high-quality pieces will continue to appreciate because of the limited supply and growing demand, particularly from Asia. Prices of a particular type of Rolex Cosmograph Daytona, which gained fame partly because the late actor Paul Newman owned one, climbed to $105,000 last year at a Christie’s auction from about $33,000 in 2002. Paramico’s fund owns several Paul Newman models.
When Paramico first started going to auctions in Geneva run by Christie’s, Sotheby’s and Antiquorum in the 1990s, demand for watches was scant. There were a lot of empty seats, and a few buyers could have bought most of the catalog between them. Now, collectors compete for seats at standing-room-only auctions, with bids by phone coming in from all over the world.
Bidding at Auction
During a packed Christie’s auction at the Hotel des Bergues in May, Paramico eyes a rare vintage Rolex for his fund. The yellow-gold piece has a slightly rounded case back, a black- lacquer dial and star-shaped indices. The one shortcoming: It lacks a mechanical complication such as a chronometer or stopwatch function.
Bids in at least eight different currencies come in by phone and are displayed digitally on a wall covered in blue fabric behind the auctioneer.
Paramico, seated near the back of the chandelier-lit room to better scope out his competition, waits patiently before making his move for the Rolex, now at 260,000 Swiss francs ($270,000).
“New bidder, blue shirt, 265!” declares the auctioneer as he points to Paramico.
He and a rival get into a bidding war. The Italian banker raises his offer several times by 5,000 francs before shaking his head to withdraw, refusing to top 300,000 francs, the winning bid that’s twice Christie’s high estimate.
Childhood Fascination
Paramico says he calibrates values based on quality, age, uniqueness and complications and is careful not to overpay, particularly when buying for his fund.
“When we reach 300,000 for a time-only Rolex, even if very rare and very particular, we need to say stop,” he says.
The son of an engineer, Paramico recalls first becoming fascinated with watches as a young child in Naples, Italy. A family photo shows him as a 6-year-old coveting his mother’s Zenith.
Small yet weighty objects appealed to him, and to this day, he often carries a watch in his pocket because of the sense of security it gives him. As a teenager, he began buying inexpensive timepieces, partly with money he earned making deliveries for a pastry shop.
He graduated from Bocconi University in Milan with a master’s degree in econometrics and took a job trading options on government bonds at Bankers Trust (BNKR) in London in 1994. Armed with a bigger salary, he began plunking down $200,000 on high- end pieces.
Banking Experience
Seeking even higher quality, he honed in on Pateks, buying one in 1999 with a pink-gold case, calendar, chronograph and function showing moon phases. He paid the equivalent of 225,000 euros and sold it a few years later for 450,000 euros after deciding to refine his collection to just white Pateks.
“White is considered more chic, and there’s nothing more exclusive than white Pateks,” Parmegiani, the dealer, says.
Paramico has spent more than 1 million euros for several of the watches in his personal collection. He estimates he has devoted about 90 percent of his career earnings to his watches, with enough left over for his 2009 599 GTB Ferrari and paintings by Italian postmodernists such as Mario Schifano.
“When you work in finance and start running a book, you basically need to take a view, and this is where my success in watches comes from,” Paramico says. “Every important watch I bought, when I bought it, many people said I overpaid. Now, the prices I paid look ridiculously cheap. I take a view, and usually my view is to go for high quality and rarity.”
Opaqueness of Market
His strategy helps reduce the risks of investing in an opaque market where timepieces are often privately exchanged and values are based mostly on a collector’s taste rather than hard data. Paramico says watches from newer brands often lose up to 40 percent of their retail value when they sell at auction.
“Not to discourage people from investing in treasure assets like watches for the financial return, but there are a lot of pitfalls to be aware of,” says Emily Haisley, an analyst at London-based Barclays Plc. (BARC) “It’s very difficult to get a correct picture of what these markets are doing; it’s very rare you have a reliable market index.”
Paramico, who gathers pricing data from auctions and other collectors, made the biggest watch purchase of his life in 2007.
Most-Sought-After Watch
Four years earlier, he began his pursuit of the first of only four known steel Pateks, reference number 1518, that feature a perpetual calendar and chronograph. Paramico knew the owner --the world of elite watch collectors is small -- and contacted him. But the owner, an Italian in the textile industry, didn’t want to sell the Patek.
Paramico persisted, often meeting him for dinner during auction weekends in Geneva and in Italy. In 2007, at Hotel des Bergues, the owner told Paramico he was selling his vintage watches to focus on contemporary models. Paramico could have the steel Patek for 2.2 million euros, almost five times what the owner had paid in the early 1990s. The banker said yes on the spot.
“It’s one of the most sought-after watches ever,” says Paramico, sitting next to the table where he struck the deal. “When I shook his hand, I felt like I could have walked on the lake.”
Well, he's younger than me
What a story!
It's always good to read of others who are successful and know where to channel their funds 
Thanks for sharing this inspirational
Stephen
All this makes for an interesting read..
and somewhat glamorizes the astute watch collector with a midas touch; who then monetizes his collection with arbitrary pricing showing an impressive ROE.
It may send the wrong message to would be collectors who may see this as a type of 'investment' or hedge against inflation. Some people may have been lucky selling or auctioning their watches for huge gains. Usually, these will be rare pieces that have been in the family for a long time or were acquired at an early stage (if you are late to the party......guess what?)
Regarding the watch fund, I find it incredulous that a proper valuation is possible. How do you ascertain the NAV of the fund? Auction prices of similar pieces (but not identical nevertheless when it comes to vintage) including their hefty commissions as a guideline? It's not like they are tradable assets like list companies or securities with quoted and up-to the-minute market prices. Liquidity would also be a big problem if for whatever reasons investors in the fund wanted to redeem. How do they go about disposing of such assets under short notice?
Which brings me to a line I recently read somewhere: " if you can't figure out who the sucker is on the table within half an hour, then you are the sucker." Make of it what you will. 
Thanks for reading my views on the matter.
Cheers
fernando
Hahaha...fernando...my thinking exactly...
The way to make a small fortune investing in watches is to start with a large one...
Not to say people can't (and haven't) made money with their collections, but like anything, values tend to be cyclical and fad buying from Asia can only last so long. Buy watches because you love them, not because their ROR is better than Bordeaux wine or General Electric stock..
Just my 2c...
Eric, I fear we are nearing the end of the boom cycle..
when there's so much talk about the 'investment' angle in timepieces. Luckily for genuine lovers of these horological wonders it wouldn't make much difference in their enjoyment of them whether their price chart is on an uptrend or downtrend. The inherent qualities haven't change a bit, only their perceived value, which somehow manage to affect their desirability and collectability for some folks.
Cheers & thanks for your contribution.
Fernando
This is a perfect example of your participation on PPRO, my dear friend.
Brilliantly put.
Nicolas, the sucker.
I wish I could do a fraction of what you are doing here.
Your influence and great motivation is what spurs us on.
Sucker - not you! You have fun with your watches and most definitely won't put them in a fund.
Best, my friend
fernando
The Midas Touch
It is quite frequent that we read on these blogs that watch collecting can not be profitable. Infact, some here will look at this Bloomberg article and be quick to point out the dangers of assuming that noone can achieve fiduciary gain by collecting and/or "investing" in watches. To believe in that possibility is akin to going to the "dark" side. These pundits consistently compare the idea of collecting or buying watches for profit as a charade , an exercise in futility, a task not to be ventured lest we lose our families ,friends and all our wordly posessions. It would be a fools venture to travel down the road of horologic investment . Really, a venture that could never be compared to buying stocks, bonds , realestate or the like.
I am really fatigued by this nonsense. Of course , If one were not experienced, learned and disciplined in the design of investing in watches he/she would likely not succede in the endeavor. I would suggest the same be true in traditional investment modalities. "Chance favors the prepared mind." This is as applicable to traditional investment ventures as it is to more traditional investments. In fact, including both in your portfolio is neither foolish nor is it fiscally irresponsible. The two can balance themselves and provide for a better long term financial plan. When the economy globally is poor people do tend to flock toward tangible goods for security. Gold, Silver, coins, art, collectables and the like predictably become attractive. This is irrefutable. When your country's currency is down it may be difficult to sell your watch locally but it is refreshing that there are watch collectors / investors all over the world. If you have a true investment grade watch you will be able to sell favorably in this invironment abroad. Likewise the opposite be true when your currency is strong. Perhaps then you may well have opportunity to buy from abroad.
I have collected watches for 30 years and I have consistently grown my collection largely by achieving profit, trading up , bettering my watches. I was the proud owner of the black glossy star dialed watch mentioned in the Bloomberg article. It was not my first success nor will it be my last. I was not fortunate to simply be in the game at the beginning and reap a profit out of luck and timing. I have achieved this success countless times in the past thirty years. The watch market is real. Just as is the wine market, the art market....... etc. To asssume that nobody can consisitently profit by this commodity is akin to putting your head in the sand and hiding from the fact that it can not be done simply because you have not achieved that success. It is no different than assuming now that the stock market can not consistently give positive results because you have seen the internet / tech bubble, 9/11 losses, or the world economic collpse most recently and precipitous fall of the more traditional equities.
Chance Favors the Prepared Mind. If you understand your niche you stand a better chance of personal gain whethter it be financial , intellectual or purely a joyous endeavor.
There may indeed be a bubble......there are bubbles in every single investment arena that I have seen. Listen the vast majority of contemporary and vintage watches fail to bring consisitent profits. However, I know more than a handful of people who have done well by investing in watches .....consisitently over these past 30 years.
I am passionate about every watch that I own and every watch that I consider. I miss the great ones that I have sold or traded. I hope that more often than not the watches that have replaced the ones gone are more dear to me now. this has not always been the case and i try to learn from mymistakes . I love collecting watches it is not a means to achieve my financial goals. It is a hobby a long love that has kept me sane , stimulated and interested for 30 years.
I would wager that the sellers of the finest, rarest, and most original watches in the sales this season bring profit to their owners. However, I would agree that the more pedestrian examples might dissapoint and bring lack luster results . It is no different than the stock market or betting on substandard bonds by not doing your due dilligence on the triple A rated fixed income opportunities and sticking to what will always be there and be there in high demand.
Just my two cents.
Really? No Midas in his touch?
It is quite frequent that we read on these blogs that watch collecting can not be profitable. Infact, some here will look at this Bloomberg article and be quick to point out the dangers of assuming that noone can achieve fiduciary gain by collecting and/or "investing" in watches. To believe in that possibility is akin to going to the "dark" side. These pundits consistently compare the idea of collecting or buying watches for profit as a charade , an exercise in futility, a task not to be ventured lest we lose our families ,friends and all our wordly posessions. It would be a fools venture to travel down the road of horologic investment . Really, a venture that could never be compared to buying stocks, bonds , realestate or the like.
I am really fatigued by this nonsense. Of course , If one were not experienced, learned and disciplined in the design of investing in watches he/she would likely not succede in the endeavor. I would suggest the same be true in traditional investment modalities. "Chance favors the prepared mind." This is as applicable to traditional investment ventures as it is to more traditional investments. In fact, including both in your portfolio is neither foolish nor is it fiscally irresponsible. The two can balance themselves and provide for a better long term financial plan. When the economy globally is poor people do tend to flock toward tangible goods for security. Gold, Silver, coins, art, collectables and the like predictably become attractive. This is irrefutable. When your country's currency is down it may be difficult to sell your watch locally but it is refreshing that there are watch collectors / investors all over the world. If you have a true investment grade watch you will be able to sell favorably in this invironment abroad. Likewise the opposite be true when your currency is strong. Perhaps then you may well have opportunity to buy from abroad.
I have collected watches for 30 years and I have consistently grown my collection largely by achieving profit, trading up , bettering my watches. I was the proud owner of the black glossy star dialed watch mentioned in the Bloomberg article. It was not my first success nor will it be my last. I was not fortunate to simply be in the game at the beginning and reap a profit out of luck and timing. I have achieved this success countless times in the past thirty years. The watch market is real. Just as is the wine market, the art market....... etc. To asssume that nobody can consisitently profit by this commodity is akin to putting your head in the sand and hiding from the fact that it can not be done simply because you have not achieved that success. It is no different than assuming now that the stock market can not consistently give positive results because you have seen the internet / tech bubble, 9/11 losses, or the world economic collpse most recently and precipitous fall of the more traditional equities.
Chance Favors the Prepared Mind. If you understand your niche you stand a better chance of personal gain whethter it be financial , intellectual or purely a joyous endeavor.
There may indeed be a bubble......there are bubbles in every single investment arena that I have seen. Listen the vast majority of contemporary and vintage watches fail to bring consisitent profits. However, I know more than a handful of people who have done well by investing in watches .....consisitently over these past 30 years.
I am passionate about every watch that I own and every watch that I consider. I miss the great ones that I have sold or traded. I hope that more often than not the watches that have replaced the ones gone are more dear to me now. this has not always been the case and i try to learn from mymistakes . I love collecting watches it is not a means to achieve my financial goals. It is a hobby a long love that has kept me sane , stimulated and interested for 30 years.
I would wager that the sellers of the finest, rarest, and most original watches in the sales this season bring profit to their owners. However, I would agree that the more pedestrian examples might dissapoint and bring lack luster results . It is no different than the stock market or betting on substandard bonds by not doing your due dilligence on the triple A rated fixed income opportunities and sticking to what will always be there and be there in high demand.
Just my two cents.
Some of us are just smarter than others.
Good for you in turning what most of us regard as a pleasurable, passionate hobby into a profitable venture!
Unfortunately, most of my watches are not 'investment grade' and will simply be amortized by the years of pleasure I receive from them.
Intellect does not confer success and success does not confer intellect
I am very happy to hear that you are perfectly happy to enjoy your watches amortized over time. We are in total agreement in that regard with respect to our priorities and motivation for collecting watches. I wish you well with your collection. I hope that all of us can be open minded to the idea that what we currently accept as truth may be redefined by the discovery of new information.
We should all enjoy our endeavor with benign intention.
"Passion": 1 time , "love": 1 time, "$": 6 time, "euros" : 8 time , "million" : 9 times
no need to say more.
