x Abu Dhabi, UAEWednesday 17 January 2018

These profits look great on paper

For many, collecting stamps isn't merely a hobby - it's their stocks and bonds, the lion's share of a retirement plan.

Investment opportunities are sometimes found in unexpected places. Stepping through sliding glass doors, I'm enveloped by bright yellow spotlights. I stand in the middle of a car showroom in Dubai, shiny new Suzukis all around me. But I'm not here to buy a car. "May I help you?" a salesman inquires. "Yes, I'm here for the Emirates Philatelic Association meeting. Can you help me?" I ask. He stares at me blankly.

"Stamps? I'm here to meet the president of the association?" "No stamps here. Only cars," he responds. I leaf through my notepad. "Abdulla Khoory?" He nods. Apparently I have uttered the secret password. Without another word he guides me through the back of the showroom, past several security guards and into a lift. We shoot up one floor, and moments later I'm in a boardroom, surrounded by eight of the country's foremost stamp collectors. Packed in boxes and spread out on several tables are stamps from around the world and the UAE, some dating back to 1909, when stamps first appeared in what was then a British protectorate.

These tiny pieces of paper are not, of course, for posting letters. The Emirates Philatelic Association (EPA), which boasts more than 250 members, recognises stamps not just as windows into history, but as substantial financial assets that considerably enrich investment portfolios over time. Indeed, many of the stamps on display are worth more than the brand-new cars on the showroom floor below. "Stamps are a hobby," says Mr Khoory, the president of the EPA and owner of the Suzuki car dealership. "But when you have a collection for many years, you can sell for much more. This is an asset you keep for years, and naturally it will increase in price." Mr Khoory is being modest. According to Stanley Gibbons, one of the world's leading stamp houses, rare and unusual pieces that were released prior to 1950 have enjoyed a minimum appreciation of 5 per cent annually. The UK's Great Britain Rarities Index, launched in 2004 but backdated to 1998, includes the country's top 30 stamps, which have seen an average annual compounded return of 12.8 per cent since the index's inception.

"But when you have a collection for many years, you can sell for much more. This is an asset you keep for years, and naturally it will increase in price." Mr Khoory is being modest. According to Stanley Gibbons, one of the world's leading stamp houses, rare and unusual pieces that were released prior to 1950 have enjoyed a minimum appreciation of 5 per cent annually. The UK's Great Britain Rarities Index, launched in 2004 but backdated to 1998, includes the country's top 30 stamps, which have seen an average annual compounded return of 12.8 per cent since the index's inception.

Listed on Bloomberg, the rarities index rose by an incredible 38.6 per cent in 2008, during the middle of the global financial crisis. As Bill Gross would ironically proclaim in June 2007, after selling his collection for US$9.1 million (Dh33.4m) at a New York auction: "It's beyond my expectations. It's four times profit. It's better than the stock market." Hyperbole aside, Mr Gross, the 63-year-old manager of the US$220 billion Pimco Total Return Fund, turned $2.5m in stamps purchased between 1998 and 2001 into that considerable fortune.

But you don't need to be a millionaire to profit. Mr Gross's foray into philately is part of a growing interest in "alternative asset classes", according to Keith Heddle, the investment director at Stanley Gibbons. It's a market, he says, driven by two key factors - scarcity, and demand from millions of collectors worldwide. Mr Heddle says that the demand has spurred his company to undertake a global roadshow, reaching out to foreign clients and firms interested in diversifying their portfolios.

And one of the ports of call for the show is Dubai. In January, Stanley Gibbons met financial advisers and agents at Gladstone Morgan, a financial consulting firm setting up shop in the UAE. Gladstone Morgan, along with its local affiliate, Howden Insurance Group, will be offering an array of financial services to UAE clients, including philatelic options. Mr Heddle says his company plans to return to the UAE later this year to solidify plans.

This Dubai tour represents just one of several new markets for Stanley Gibbons, and its roadshow also made stops in China and Singapore. Last month, Mr Heddle attended a conference at the Raffles Hotel in Singapore, and walked away with three significant leads involving companies interested in purchasing portfolios in the six-figure neighbourhood. "Of course, there is a whole collecting side to this, but in the last five to 10 years the investing side has really started to come to the forefront," he says.

"The stamp market itself is worth about $60 billion. It's a market driven by collectors, because they chase it. It's an obsession. Everyone starts with the easy stamps, but over a period of time you get to the premium stamps." Mr Khoory, 47, the president of the EPA, certainly fits the profile. While as a young boy in Dubai he casually enjoyed collecting, it was only much later in life that he developed a keen interest in rare and unusual stamps - and became a regular customer at Stanley Gibbons.

Entire rooms of Mr Khoory's home are filled with stamps from around the world, including the Emirates, the US, the UK, South Africa and Europe. He estimates he owns more than 10,000 items, but is reluctant to discuss the total value of his collection. "I won't answer because I don't know," he laughs. "There are too many to count." One prize in his collection he will discuss, however, is a stamp that is known as First Definitive of Abu Dhabi: Sheikh Shakhboot Bin Sultan Al Nahyan. This piece, which was released in 1964, features the brother and predecessor of Sheikh Zayed bin Sultan Al Nahyan, the father of the UAE.

However, when Sheikh Zayed came to power in 1966, he ordered these stamps "surcharged"; lines were crossed through the former ruler's face, and the stamp's denomination, 30 fils, was printed along the bottom in both English and Arabic. However, during early print runs the Arabic translation of the English "30 fils" was written incorrectly, and instead reads "20 fils". There are only five of these stamps in the world, two of which are in Mr Khoory's possession, which he purchased in 2000 and 2004 from Stanley Gibbons. Another is owned by a dealer in the UK, the fourth is in Bahrain, and the fifth and final stamp, Mr Khoory says, is missing. As the story goes, its owner died in Morocco years ago, and its whereabouts are unknown.

Mr Khoory couldn't recall what he paid for the stamp he acquired in 2000. But in 2004, he spent £3,950 (Dh22,100) on the second stamp. He says each piece has an estimated value of £6,000 ? a hefty sum for a stamp from a region that has a young postal system. "In fact, it's the most valuable single stamp in the UAE, " he explains. Mr Khoory would know, as his special focus is the Emirates. Another unusual item in his philatelic portfolio is titled Second Independence Definitive Overprinted UAE. Featuring the side profile of a youthful Sheikh Zayed (see cover), this 1972 stamp was printed in Abu Dhabi to commemorate the country's second anniversary. However, when they were first produced, these pieces had only "Abu Dhabi" printed on them, rather than "UAE". The omission was quickly corrected, but during early print runs to make the correction the word "UAE" was stamped upside down.

Although Mr Khoory isn't sure of the exact number, he says only a "handful" of the errors are known to be in existence. He owns a block of 10 of these inverted stamps, which he says is worth an estimated Dh40,000. They are but a small part of his comprehensive UAE collection, a portion of which will go on display next month at the London 2010 International Stamp Exhibition ? a festival attended by collectors from 86 countries. And for now, Mr Khoory is content picking up awards and accolades, and has no immediate plans to sell his investments.

Nick Salter has more specific plans for his precious stamps. Mr Salter, 47, is the sales director for an aviation business in the UK. But on the side he runs a website called The Philatelic Investor (www.philatelicinvestor.com), which provides financial advice to stamp collectors and helps clients gain a reputable foothold in the market. "I started it a couple years ago as a bit of fun," he says. "There didn't seem to be anything out there concrete for investors ? just collectors. If you're the man on the street and want to diversify your portfolio into stamps, there is little information. I'm an unbiased facilitator for stamp investing."

Mr Salter has dozens of clients with various financial stakes in stamps, but he says they all have one thing in common - a desire to diversify into a more reliable market as a hedge against riskier assets. For example, he says a client from the US called him two weeks ago seeking to invest between US$5,000 and $10,000. However, that's a relatively low sum, he says, and serious investors should consider committing at least $15,000 to $20,000 to a portfolio. The more money you have to play with, he says, the more rare and valuable the stamps you can purchase; this strategy has been paying off for investors, such as Mr Gross, for years.

Generally speaking, a stamp of investment quality will cost at least $1,000. Mr Salter's role is to mediate; he never physically buys the stamps. Instead, he links buyers with auctions and private dealers, and helps ensure fair deals. For his efforts, he takes between 1 and 5 per cent of the sale, depending on the size of the transaction. Mr Salter's expertise in this area has been honed through a lifetime of experience.

As with so many other philatelic enthusiasts, he started at the age of seven with a "schoolboy collection", consisting of what he calls "impractical stamps from 70 countries or so". But when he was 15, he put his album in an old teak chest, and there it would stay, gathering dust for decades. It was forgotten, wedged between the knick-knacks he acquired over the years from his travels, such as a sacrificial knife from Africa and a lump of marble from the Taj Mahal.

Then, when he was in his early 40s, Mr Salter was leafing through an old Stanley Gibbons catalogue in a used bookstore in London. He was struck by the worth of many of the stamps in the catalogue, and was impressed with the way they had appreciated. He decided to return to the hobby of his youth - but this time as an investor. "I still have my old stamps," he says. "Value-wise, they would be worth pennies each. Now I own very few stamps for investment, but in total they are worth around £30,000 [Dh169,916]."

While Mr Salter won't say exactly how much he has invested, he speculates that he spent somewhere in the range of several thousand pounds amassing his collection. "I see them as a pension, to be quite honest," he explains. "I get a lot of pleasure from them. But at the same time, I am confident they will appreciate. It's not for the short term - you're not buying now and selling in a month's time."

Mr Salter's collection is varied. He owns a Penny Black from the UK, the world's first adhesive postage stamp used in a public system. While millions were printed in 1840, only a portion of these survive in collections, and their value will vary, anywhere from £100 to about £20,000, depending on the stamp's quality. His Penny Black, he says, is worth £1,500. Another of this collector's favourites is his series of stamps issued from Sierra Leone in 1933 to commemorate the abolition of slavery. He bought the 13-stamp collection in the US two years ago for £300. Now, according to the Stanley Gibbons catalogue, they're worth at least £700.

Mr Salter's portfolio has recorded annual gains of between 8 to 12 per cent. "Not bad when you see what interest rates are like at the moment and how the stock market has performed in recent years," he says. Keith Heddle agrees, although you might need to dig a bit deeper to invest at Stanley Gibbons. While anyone can buy a collection of individual stamps, Mr Heddle says that the company also deals with around 20,000 clients who have assembled philatelic portfolios as part of their overall investment strategies. Each of those clients has invested at least £10,000 into their portfolio.

To get started, he recommends that prospective investors sign up for the company's newsletter at www.stanleygibbons.com; a full investment guide can also be downloaded from the site. Mystic Stamps (www.mysticstamp.com) is another popular resource, which provides similar services and focuses on US stamps. But you needn't have expert knowledge of stamps to get in on the action. In fact, Stanley Gibbons, if instructed, will select pieces on your behalf, and guarantee your investment.

"Our recommendation is closer to a £40,000 investment," he explains. "As with any other market, you get what you pay for. We're looking at premium stamps which will show an increase." Mr Heddle says investors enjoyed returns of between 4 and 7 per cent on average in 2009. Stamps that Stanley Gibbons buys on your behalf - from auctions, dealers and private collections around the world - are kept in the company's climate-controlled vault on Guernsey, one the UK's Channel Islands.

When in London, clients can request to see their investment at any time, and the company will arrange to have them shipped to its headquarters on the Strand. However, the world of stamp investing isn't always so glamorous. Every day, Mr Heddle says the store receives a steady flow of random collectors off the street, seeking to strike it rich. "Every now and then someone comes in and walks out with tens of thousands of pounds," he says. "Last year, just before Christmas, a fairly unkempt man brought in some stamps in grubby plastic bags.

"We politely had a look, and he had stamps worth £45,000. I don't know whether they were just under his bed, or whether someone passed them down to him. But he can now certainly afford some new clothes." jtodd@thenational.ae