Invest in Art
Of all the alternative assets available for investors, art is probably the most classic option. For centuries, art was collected for its cultural, emotional, intellectual, political and economic value.
Nowadays, collectors and investors turn to art for the benefits it offers such as asset protection, wealth preservation, portfolio diversification, low correlation with financial markets, profitability and other hedging possibilities in addition to its emotional and aesthetic qualities.
Explore how art investments can benefit your portfolio and learn how to invest in art with Splint Invest to help leverage all of art’s potential investment advantages.
Why invest in art
Art offers several intrinsic advantages to investors, including a high potential for value appreciation and hedging possibilities.
There are also the non-financial benefits of investing in art, such as cultural enrichment. Buying art is also prestigious, making it a perfect way to showcase your status and wealth.
Let’s go through the most significant advantages of art investments:
Long-term & reliable potential returns
The unique interplay between art's cultural and financial value results in high and stable investment returns, even amidst broader financial turmoil or turbulence.
In 2023, the global art trading volume equaled 65 billion USD (Art Basel). While this is a 4% dip from 2022 (68 billion USD), it’s still higher than pre-pandemic numbers.
However, it’s not just about the art’s trading volume but its performance as well.
To put things into perspective, let’s look at the following chart comparing art market indices to traditional market assets like stocks and bonds:
According to Maddox Advisory, with a $1.7 trillion portfolio value, art proves to be a profitable investment, consistently outperforming other asset classes. Over the period from 2000 to 2022, the S&P 500 index increased by 250%, while the contemporary art index of Artprice saw an impressive growth of 495%, and the all art index of Mei Moses recorded a notable increment of 125%.
There’s more…
Approximately 77% of high-net-worth collectors express a positive sentiment towards the art market, and a majority of them (55%) intend to make art purchases in the coming year. In specific markets, such as the US, this percentage rises significantly to 65%.
Dealers also anticipate improvements in sales, with 45% expecting a better performance, including 10% predicting a significant improvement. Similarly, mid-tier auction businesses forecast positive trends, with 48% anticipating improved sales, and 60% foreseeing an increase in online sales.
Portfolio diversification
Like many other alternative assets, investing in art offers an excellent opportunity to diversify your portfolio. That’s mostly due to art’s low correlation to financial markets.
Art often moves independently of traditional assets like stocks and bonds, providing a hedge against market fluctuations. Many investors also use art and other alternative assets to protect their portfolios against inflation and economic downturns.
Status & prestige
There’s something about owning a timeless piece of art that screams prestige. Art has always been a symbol of wealth and sophistication, which adds another layer to your investment.
Another reason to invest in art is a genuine interest in it. When you invest in something you're passionate about, you're more motivated to research and immerse yourself in its intricacies.
If a particular artist or time period fascinates you, you can deepen your knowledge by visiting auction houses, consulting art advisors, and discovering rare pieces for your collection, while also expanding your knowledge and pursuing your passion.
Art vs other alternative assets
Art is a popular alternative investment. However, it isn’t the only option you can add to your portfolio with Splint Invest. Here’s how art compares to two other popular alternative assets: rare whisky and luxury handbags:
|
Feature |
Art |
Rare Whisky |
Luxury Handbags |
|
Potential for Appreciation |
High potential, especially for renowned artists. |
High potential, especially for limited-edition bottles. |
Moderate to high, depending on brand, rarity, and condition. |
|
Liquidity |
Moderate to low; selling art can take time, often through auctions or private sales. |
Moderate; growing secondary market, but depends on rarity and demand. |
Moderate; can sell through resale platforms, auctions, or private sales. |
|
Storage & Maintenance |
High; requires careful storage (temperature, humidity control); insurance and security are essential. |
High; requires specific storage conditions (cool, dark place); risk of spoilage if improperly stored. |
Minimal; proper storage required to maintain condition, but less demanding than art or whisky. |
|
Enjoyment of Asset |
High; visually enhances living spaces, can be displayed and appreciated daily. |
Low to moderate; some enjoyment from owning rare bottles, but consumption decreases value. |
High; can be used and displayed, but frequent use may affect resale value. |
|
Investment Expertise |
High; requires knowledge of the art market, artists, and historical significance. |
High; understanding of distilleries, production years, and market trends is crucial. |
Moderate; knowledge of fashion trends, brands, and condition grading is important. |
Potential opportunities & risks of art investments
|
Benefits |
Risks |
|
High potential returns: High potential for appreciation, especially for works by established or emerging artists. Portfolio diversification: Art adds diversity to an investment portfolio, often moving independently of traditional financial markets. Tangible asset: Art is a physical asset that can be enjoyed, displayed, and admired daily. Prestige: Owning art can enhance social status and serve as a conversation starter or symbol of wealth. Market transparency: High-end art markets are often well-documented, with auction records providing some pricing transparency. |
Counterfeit works: Art forgery is the creating and selling of works of art which are falsely credited to other, usually more famous artists. High costs and fees: Since many interesting works of art are already very expensive, the entry price for an investment in a work of art by a well-known artist is very high. In addition, selling through an auction house can result in very high fees. Dependency risk: The art market is in the hands of a few very influential people who can significantly influence the price of certain collections or works of art. This is a risk because the actions of these influential people can't be predicted. |
How to find pieces of art to invest in
Finding pieces of art to invest in involves a strategic combination of research, networking, and a deep understanding of the market. Here are a few tips on how you can approach the process:
Educate yourself
Familiarise yourself with different art movements, periods, and notable artists to understand the cultural and historical significance of various pieces. Keeping up with market reports, auction results, and industry news from sources like Artprice, Artnet, and The Art Newspaper is also essential. This foundational knowledge will help you identify valuable artworks and make informed investment decisions.
Set your budget
Determine your investment capacity before diving into the art market. Art investments can range from a few hundred to millions of dollars, so knowing your budget will help narrow down your options. It’s also crucial to factor in associated costs such as insurance, storage, and maintenance, which are necessary to protect your investment.
Research artists
Decide whether you want to invest in emerging artists, who might offer high growth potential (but also come with a higher risk), or established ones, who typically provide more stable value. Research an artist’s sales history, exhibition record, and critical reception. Auction results and gallery sales can provide valuable insights into an artist's market value and future potential.
Consult art advisors
Hiring an art advisor can be a smart move, especially if you’re new to art investing. Advisors offer expertise in identifying valuable pieces and navigating the complex art market. Building relationships with trusted advisors, curators, and dealers can also provide insider knowledge and access to off-market deals.
Explore online platforms
The digital age offers numerous platforms for discovering and purchasing art. Online marketplaces like Artsy, Saatchi Art, and 1stdibs provide a wide selection of artworks, from affordable pieces by emerging artists to high-end works by established names. Additionally, major auction houses like Sotheby’s, Christie’s, and Phillips offer online catalogues and live bidding options, making it easier to participate in auctions from anywhere in the world.
Now, while these good practices should help maximise your art investment opportunities, they don’t guarantee returns on your investments. Like any other investment, art comes with several risks that hamper its potential performance. Following the above tips, however, will help minimise them.
How to invest in art
Investing in art isn’t just about finding the right pieces. It’s also about deciding how to invest in it. When it comes to that, you have several options to get started, ranging from direct ownership to more innovative approaches like art investment funds and NFTs.
Let’s explore those in more detail:
Art ownership
Direct art ownership is the most traditional way of buying art. This method involves purchasing physical artworks, which you can hold as tangible assets.
If you opt for direct ownership, you can buy art on the primary or secondary market via an auction house, or privately, through an individual seller, dealer, brokerage, or gallery.
|
Primary Market |
Secondary Market |
|
The primary market involves purchasing art directly from the artist or a gallery representing them. Here, you're often acquiring a piece that has never been sold before, making it exciting, especially if you're investing in emerging artists. Prices are typically set by the gallery or artist, offering a straightforward pricing structure, though the value is less established. This means the investment carries more risk but also greater potential for appreciation if the artist gains recognition. |
The secondary market involves buying art that has been previously owned, typically through auctions, galleries, or private sales. Art in this market usually has a known sales history, providing more insight into its market value, which can offer more security in your investment. The secondary market is where you’ll find works by more established artists, with prices influenced by past sales, artist reputation, and demand. However, these prices are often higher, reflecting the artwork's established value, and competition can be more intense, particularly at auctions. |
Direct art ownership typically involves a long-term commitment, as the value of art often appreciates over time, especially for works by established or emerging artists. However, it requires more research and in-depth knowledge.
The enntry barrier is also usually higher, as well as the investment risk. Of course, that risk also means that there’s potential for higher returns, but if you’re new to art investments, direct ownership can be overwhelming without professional guidance.
Art investment funds
Art investment funds, available through our very own Splint Invest, offer an alternative to direct ownership, allowing you to invest in art without purchasing individual pieces.
These funds pool capital from multiple investors to create and manage a diversified portfolio of artworks. Managed by professionals, these funds aim to generate returns from the appreciation of the art collection over time.
One of the main benefits of art investment funds is diversification. By investing in a range of artworks, the fund reduces the risk associated with any single piece.
Art funds also provide accessibility for those who may not have the expertise or financial resources to invest in high-value art independently.
However, it’s important to research the fund’s performance, including the track record of its managers and the types of art they invest in. Art funds typically have lower liquidity compared to other investments, as they often operate on a fixed-term basis, selling the artworks at the end of the fund’s life and distributing the proceeds to investors.
NFTs
NFTs (Non-Fungible Tokens) represent a more modern form of art investment, leveraging blockchain technology to create digital ownership of unique artworks. NFTs are digital assets that verify ownership of a specific piece of digital content, such as art, on the blockchain. This makes each NFT unique and immutable.
To invest in NFTs, you can explore various online marketplaces like OpenSea, Rarible, and Foundation, which offer a wide range of digital art.
Just like with physical art, it’s important to evaluate the artist and the specific NFT you’re interested in. Consider the artist’s reputation, the uniqueness of the work, and market demand.
The underlying blockchain technology also plays a crucial role, with Ethereum being the most common platform for NFTs, though others like Solana and Polygon are emerging.
NFTs offer greater liquidity compared to physical art since they can be easily traded on digital platforms. However, the NFT market is highly volatile, with values fluctuating rapidly based on trends and demand.
Additionally, the NFT space is relatively new and unregulated, which presents risks such as market manipulation and intellectual property issues.
Due to these risks, we, as Splint Invest, do not release NFT art on our platform. Our funds focus on physical art pieces, carefully chosen by our expert advisors.
Invest in art with Splint Invest
Investing in art can be a savvy financial decision. Art has the potential to appreciate over time, offering diversification to your portfolio and serving as a hedge against inflation and market volatility.
By investing in art with Splint Invest, you can protect your portfolio while potentially enjoying significant returns. With the guidance of our top industry professionals, you can strategically build a diverse collection of art through our pre-vetted art investment fund.
Start your journey today and tap into the immense potential of art investments!
