Money managers discover a profit in rare coins
They aren't pushing pennies into little blue folders, but a lot of pension fund managers are becoming coin collectors these days. A tiny but growing proportion of pension dollars are being invested in rare coins, many of them in such near-perfect condition they look like they never saw the inside of a cash register.
The value of such other valuable assets as gold, silver, and diamonds can change as more of them are mined or as large quantities move in or out of the market. But there are only so many rare coins -- and stamps -- in the world. So their prices largely depend on sales among investors and collectors.
For the last five years, coins and stamps have appreciated at an annual rate of about 20 percent a year. And for coins alone, says Lynnwood P. Rumley, director of financial planning at New England Rare Coin Galleries in Boston, this 20 percent annual appreciation rate has been going on for more than 20 years. An even better record was compiled for coins in the years between 1972 and 1979, when they gained at a 35 percent annual rate, according to the US Numismatic Investment Group in Dallas.
Returns like these have prompted an increasing number of professional pension fund investors to add coins to their portfolios, says Mr. Rumley. A year and a half ago, his firm was bringing in $350,000 a month from coin investors. Today, it is hauling in about $1 million a week, including money from some of the largest Fortune 500 firms. Mr. Rumley would not name his clients.
While pension managers and their cleints may be pleased with the growing value of their glittering assets, many of the people who have been collecting coins for a long time are not happy at all. They have watched the prices of coins being pushed up dramatically by institutions with millions to spend, making it much more difficult for these individuals to enlarge their collections.
Still, one of the virtues of coins and stamps for investors, said Robert C. Green, president of US Numismatic, is the existence of "a major collector base in coins and stamps." In addition to all the people who collect a few coins and stamps as a hobby, Mr. Green says, there are over 1 million others who spend more than $20,000 a year to enhance their collections. This means, he explained , that when an investor or collector wants to sell something, finding a buyer is much easier than with antique Ball galss jars, for instance.
One thing that many dampen the accelarating prices of coins, stamps, and other collectibles, believes Alan Reynolds, a vice-president-economist at the First National Bank of Chicago, is the election of Ronald Reagan as president. Even before election day, Mr. Reynolds says, there was evidence these collectibles were losing some of their value as hedges.
One reason is that common stocks have been doing better lately and Mr. Reynolds believes they will continue to do so -- especially with a Reagan presidency.
The other reason collectibles are not as attractive to Mr. Reynolds is that they are attractive to too many other people. "If everybody expects inflation to continue and moves into hedges, the price of the hedges will drop to reflect current prices," he said. "The only way something becomes a hedge is if inflation becomes worse." Mr. Reynolds does not think this will happen under a Reagan administration.
Even Mr. Rumley of New England Rare Coins says there are limits to wise coin investing. A balance pension portfolio, he says, should not contain more than 15 to 20 percent coins, a figure Mr. Reynolds agrees "probably is not unreasonable."