Over the course of 2013 investors in bridging loans will have made a return of 10.8% compared to 5.1% for fine art, 1% for fine wine and a loss of 29% for gold.
Mark Abrahams, director at West One Loans, said the “feeble” yields offered by bonds and the subdued performance of the equity markets were driving investors to consider less mainstream options.
He said: “Private investors are looking at alternatives. And while fun investments like wine and art can serve as a partial replacement for lucrative mainstream investments they do not currently offer the stability or the potential returns that investments in real business projects can provide.”
The research showed that those who placed a £500,000 investment in bridging on 1 November 2012 would have made returns of £53,800.
The same investment in fine art would have produced a return of £25,500, fine wine £5,100 or a loss of £144,900 incurred from the same investment in gold.
Abrahams added: “Bridging loans offer the chance to invest in some of the most profitable assets in today’s economy, small businesses and property.
“But by combining such targeted investments with the security of property ambitious returns are achievable without significant risk to capital.”
Comparing the same asset classes by volatility, bridging loans proved the least volatile with a three month standard deviation of 0.1%.
Gold and fine wine had a three month deviation of 3.1% and 2.8% respectively while art followed closely at 2.1%.
Abrahams said: “With the transition to normal economic conditions fraught with complication no asset class is immune to a world of imperfect information and sometimes wild reverses of fortune.
“Sophisticated investors want exposure to a decent return but they also want a diverse portfolio that works to minimise volatility.”
The latest figures from the Association of Short Term Lenders showed that gross lending in the bridging market grew by 38% in quarter three last year which chief executive Benson Hersch said highlighted the growing need for bridging finance as mainstream lenders continued to “lag behind.”
