Art As An Alternative Investment
Art investment is quickly gaining popularity as an alternative asset with around 55% of wealth managers now reporting requests from their clients for assistance in purchasing art and other collectibles. If you are considering taking the plunge into the art market, there are plenty of reasons why art can be a very sound investment as well as bringing aesthetic pleasure in your home or office space.
Significant Potential Returns
In recent years the art market has enjoyed bullish conditions and there is significant potential for capital growth. In May 2019 Jeff Koons’ “Rabbit”, a stainless steel sculpture of a child’s toy, sold at auction for $91.1 million and set a new record for the most expensive work by a living artist. In total, art sales in 2019 exceeded $67 billion according to Art Basel and UBS Global Art’s annual report.
Taking a longer term view, art prices have shot up over 1000% over the past forty years according to Art Market Research. Another key market health check is the performance of the Sotheby’s Mei Moses index which tracks repeat auction sales for a particular artwork over time are instructive. Between 1950 and 2018, the most recent set of figures available, the index shows an average annual compound growth of 8.8% per year.
Asset-Backed Investment
A clear advantage of art as an investment is that you will always have a physical asset with a defined value. Unlike other investments like stocks and shares, this tangible asset can be reassuring in times of economic turbulence since it has very low correlation to the stock market.
Diversification
Since the art market is not correlated to the performance of major stock markets it can be a useful way to diversify your investment portfolio. The art market has been known to grow even during times of economic uncertainty, making it an ideal choice for investment in the good times and the bad. Losses made on other investments may be at least partially offset by the stability of fine art prices.
The Joy of Ownership
Another clear benefit of investing in art is the enjoyment you will get out of seeing your acquisition hanging in your home or office. Although your piece won’t yield an annual income, a well-chosen investment piece can change the feel of your space and spark joy on a daily basis. This enjoyment also extends into the future as you play your part in owning a work that may well become a piece of history in years to come.