INVESTING

It is clear that art is a financially attractive asset class that offers significant opportunities, which explains why the financially astute have been collecting art for generations. Today, art has become especially popular in the current wealth boom as the global rich and cultured professional classes turn to it as a safer, less volatile store of wealth.

The art market has grown 252% over the past 10 years or an annual growth rate of 15% (Raconteur 2015). This was despite the 2008 financial crisis which was on par with the Great Depression of the 1930s and the tech-wreck of the 2000s. The art market is predicted to boom for the next 10 years (Philip Hoffman, 2013). The global art market reached a total of over $67.4 billion in 2018, a rise of 6% from 2017 (The Art Basel and UBS Global Art Market Report 2019). 

“Barclays Capital claimed in 2005 that if 10% of a financial portfolio was allotted to art over a 10-20 year period, it would lower portfolio risk” – ‘Understanding Art Markets’, Dr Iain Robertson, 2016

Now more than ever, we are witnessing a positive shift in market paradigms due to the globalisation of the artworld and with this a worldwide boom. Countries are spending billions: Qatar is buying the world’s most celebrated paintings; UAE is developing Saadiyat Island in Abu Dhabi, which includes their newly opened Louvre (over $1.2 billion deal with France) and still developing Guggenheim; Indonesia is building art parks; South Korea has the most privately founded art museums in the world; and China is opening museums at a rate of one a day.

‘The net effect is that more money, from more places, has poured into the art market than ever before, inspiring ever more creative ways to put this capital to work’ – The Art of the Deal, Noah Horowitz

The art world’s stringent tried and tested validation procedure recognises artworks of deep intrinsic artistic value and abiding substance by artists with a proven track record and serious exciting potential. Hence, it is the validated art that is a tangible asset of great significance, which operates outside of the financial markets:

‘The volatility of art was lower than equities as well as commodities during the last 25 years…art had almost no correlation with US equities and was negatively correlated with fixed income and real estate investment trusts (Reits)’ – J.P. Morgan

‘Fine art has shown a durable record of price retention and a low correlation to more conventional assets’ – Glenmede Trust

Case studies

Sir John Maynard Keynes, one of the finest economists and investors of his time, built up a substantial collection of now priceless artworks including works by Cézanne, Picasso, Degas, Seurat, Braque and Modigliani.

Roald Dahl, the children’s author, bought Francis Bacon’s ‘Study for Head of Lucian Freud’ in 1967 for £2,850 with the proceeds from his book ‘Charlie and the Chocolate Factory.’ It was sold in 2014 at Christie’s for £11.5 million

Stuart Evans, founder and curator of the Simmons & Simmons art collection, bought Peter Doig’s ‘Iron Hill’ for a few thousand pounds but the value increased so quickly that it was sold for insurance purposes. It was sold at auction for £500,000. Then, a year later it sold for over one million and its current value is now around £7 million.

In ‘Art as an Investment’ 1961 Richard Rush posited, ‘it is doubtful whether collectors have ever been unmindful of the investment value of art’.

Reports: 

Art as an Alternative Asset Class
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We have also explored the investment potential of art in our streamlined and focused report:

Art as an Alternative Asset Class: No Country for Speculators. Small Budgets are a Must

These reports contain authoritative research discussing the investment potential and financial benefits of art collecting:

Art is a significant asset class
The global art market is booming
Collect as part of a balanced portfolio

The art world’s imperative rigorous tried and tested validation procedure
Art operates outside of the financial markets
Art as a store of wealth in these uncertain times
Art as an effective hedge
An asset that can be passed down to loved ones

Disclaimer

The services described or recommended in our marketing materials or on the website may not be suitable for all people. You should seek your own professional advice as to the suitability of any such service before you enter into any transaction. The art market is not a regulated market. None of the statements contained in this chapter are intended or should be construed as investment advice. Past performance should not be taken as an indicator of future performances. Therefore, investors may not get back all they invest. Consequently, art collecting for profit should be considered as an asset class only by those who fully understand and can afford the risks involved. We highly recommend that you consult the compliance section.