Art as an investment
Investing in art as an alternative asset class is considered a good hedge against inflation
For centuries, art was collected for its cultural, emotional, intellectual, political and economic value. Art's intrinsic advantages, such as low maintenance costs, portability, low volatility, hedging possibilities, and potential for value appreciation, contribute to its appeal as an investment. Moreover, the unique interplay between art's cultural and financial value results in high and stable investment returns, even amidst broader financial turmoil or turbulence.
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.
In 2022, the global art trading volume equaled $67.8 BN.
To put things into perspective, check out this chart from our art expert. It compares the value of art to the 2 most prominent indexes.
According to Maddox Advisory, art is transformative and not only influences our emotions and thoughts but also offers significant financial rewards. 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%.
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.
Salvator Mundi | 394 million CHF | Year Sold: 2017
Salvator Mundi (Latin for 'Savior of the World') is a painting attributed in whole or in part to the Italian High Renaissance artist Leonardo da Vinci, dated to c. 1499–1510, became the most expensive work of art ever sold when it was auctioned at Christie’s, New York, on November 15, 2017, for $450.3 million. (approx. 394 million CHF) Arguably, the most controversial painting of the 21st century.
Counterfeit works: Art forgery is the creating and selling of works of art which are falsely credited to other, usually more famous artists. Art forgery can be extremely lucrative, but modern dating and analysis techniques have made the identification of forged artwork much simple.
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.
Market conditions: According to Artnet indices, returns on Old Masters have stabilised, with no significant growth or decline since 2017. The Global Impressionist and Modern Art markets show comparable trends and have been unable to regain the momentum seen a decade ago. There is a risk of negative influence on the Contemporary Art market.
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.