portfolio
Flickr/Kanu Hawaii
Hawaiian Legacy Hardwoods offers clients the ability to invest in rare
koa tree groves.
Wine, Wood
and Song
The urge to diversify drives interest
in exotic assets — including trees and
violins — for high-net-worth clients.
By Elena Mannes
When a client first said four years ago that he planned to invest in Hawaiian koa
wood trees, Gary Hutto was skeptical. Hutto, a financial advisor in
Orange, Calif., didn’t argue because
the amount was relatively small, less
than $10,000.
The next year, when the client
said he planned to multiply that
amount by five times, Hutto balked.
He decided to investigate. Since then,
he’s invested more than 20% of his
own retirement assets in the trees.
Disillusionment with returns on
traditional financial investments is
driving more high-net-worth clients
toward niche alternatives. Former
presidential candidate Mitt Romney’s
extensive IRA holdings, for example,
include a variety of private, non-traded entities.
Other options gaining favor among
wealthier investors include rare
coins, wine, art, real estate and musi-
cal instruments. (Or baseball cards:
See “Let Me Help You With That,” on
page 67, for a story of an advisor who
helped a client find a highly collect-
ible Honus Wagner card.) In some
cases, like the koa wood offering,
investors of more moderate wealth
are placing their investment bets far
beyond the securities markets.
Investable Format
Hawaiian Legacy Hardwoods, the
asset in which Hutto and his client
invested, sells koa trees that the
company planted on the big island
of Hawaii.
Koa is an exotic wood prized for
furniture and musical instruments,
such as guitars. It’s also scarce. That’s
typical: Limited supply and built-in
demand are two factors that make
niche assets — whether they are
wood, rare coins or wine — attractive.
Mike Wilson, director of sales for
Hawaiian Legacy Hardwoods, says
the company projects that a single
lot of 100 trees, purchased for a bit
more than $9,000 at current prices,
will appreciate over the 25-year fixed
term of the investment, when all the
trees have been harvested — for a pay-
out of $285,000.
‘a tenth oF a pIcture’
“There are no funds,” Healy notes,
“which would be a typical way of organizing an investment that multiple
smaller clients can invest in. If you’re
an investment manager, it’s hard to
obtain a tenth of a picture or to create
a diversified portfolio of paintings.”
