The Art of Investing in Art 2013-05-29

The Art of Investing in Art - understand what drives the art market

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    Art has long been considered an "investment of passion" that not only offers aesthetic utility but the potential of economic benefit. Only recently, however, has art been viewed through the lens of modern portfolio theory and considered a potential alternative investment as part of a portfolio of assets. Though research continues to shed more light on what has been historically an opaque market, studies show that art can offer long-term return potential that is uncorrelated with other asset classes.
    Market paradigms have shifted dramatically over the last several decades, as newly created wealth in emerging markets like China, Russia and the Middle East have increased new participants in the art trade, which has given the market signs of greater resiliency. Undeterred by a rough economic environment in recent years, collectors globally are paying record sums for top works. Despite art's attractive upside as an investment, the lack of market transparency, illiquidity and high object costs have generally kept participation to a select class of wealthy individuals. However, growing interest in the art market has spurred the creation of new investment products that invest in art and give a new breed of investors exposure to the art market. In the following pages, we will examine the unique aspects of the art market, highlight recent trends, weigh the pros and cons of investing in art and discuss ways to gain exposure to this unique asset class.