The art of investing

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Key points

  • Collectibles now account for 10% of ultra high net worth individuals’ portfolios.
  • Australian art market is going through a transition.
  • Although local market is dictated by a sense of caution this does not mean it’s time to stay away.

In a recent white paper, Barclays Private Wealth Management (in London) stated that collectibles now accounted for over 10% of portfolios held by individuals described as Ultra High Net Worth Individuals (UHNWI - investable assets over US$30M). Of those holding collectible (or treasure, as it is described in the paper), 85% hold fine art and sculpture. It is perhaps no surprise that those from the BRICs economies feature heavily in these statistics, as do those from the UAE, who have had a long predilection with tangible assets. This data is further verified by the CapGemini / RBC World Wealth Report that states despite property and heavy investment back into the equities markets over the last 24 months, ‘Passion Investments’ still feature strongly.

The global market

October is an important month for the art market as a whole as the world’s key collectors / investors descend on London for the pre-eminent contemporary fair, Frieze (and its associate fair, Frieze Masters) and the evening sales held by the big four auction houses. It also allows Christie’s and Sotheby’s, in particular, to whet the appetite with the preview of major lots ahead of the blockbuster New York sales in late November/early December.

The energy is almost palpable. The media coverage is now enormous, particularly as with every major evening sale, art history is being written as world record prices tumble with such consistency that we are running out of superlatives to describe the sale that was and the sale that is yet to come. As Barclays point out however, boom times for auction houses don’t necessarily mean boom time for investors. While sales such as Christie’s extraordinary May Contemporary Evening sale in New York, which realised US$750 million on the evening, are alluring, they lack substance, with results born from emotive rather than cognitive reactions. While I think this is perhaps a broad-brush view, what the paper does highlight, is the need for the art investor to understand that Fine Art, like all good things in life and all investment classes, carries risk.

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