Beyond its emotional and intellectual value, we believe art is a real and tangible asset that appreciates over time. It has proven to achieve attractive returns, with low volatility and low correlation with respect to equities, which in turn helps to diversify an investment portfolio while reducing risk.
Art as an asset
Benefits
Financial
Low/negative correlation with equity
Low cost of maintenance
Hedging possibilities
Financial "antifragility"
Global market
High returns
Portability
Low volatility
Grows tax free
Arbitrage opportunities
Diversification possibilities
Does not depreciate but can be depreciated
Cultural
Estate planning legacy
Defines cultural standards
Patrimonial qualities
Aesthetic qualities
Intellectual qualities
Unique asset
Limited asset
Emotional qualities
Individual/national identity
Aesthetic awareness
Builds historic memory
Enriches and improves quality of life
Peace of mind
High art is the perfect instrument for asset protection from frivolous lawsuits, even better than gold, certificates or real estate.
Hedge against all odds
High art’s inherent value has a proven track record for constant appreciation. It is highly uncorrelated to financial markets and macroeconomic effects, and its value is invulnerable to any financial crisis, no matter their length or severity. Even in war-like scenarios, art is a perfect hedge against all odds when everything else is worthless or illiquid. There hasn’t been a time in history, over 500 years when a Leonardo hasn’t incremented its value. In contrast, the permanence of the likes of Enron or Lehman Brothers are not guaranteed. Even countries have ceased to exist.
Capital preservation
Should bank deposits be at risk, you may want to consider allocating some resources in safe harbors. Equities and other financial instruments are in a never-ending bubble? debt instruments are not entirely risk free and the yield is zero; commodities are a gamble of nature and other unpredictable forces; real estate can potentially dig into your investment if rents don’t come in. And none of the above combines asset protection and preservation like a Picasso does.
Minimal expense
Art grows tax-free and the cost of caring for an art portfolio is less than US$1,800 per million per year. In a fund, the expense ratio is as low as < 0.8% AUM, among the lowest in the alternative investment industry.
Positive returns
Art appreciation is supranational, and art the most valuable and coveted cultural object in existence. The rich are not only getting richer but also growing in numbers, and fascinated by art. The Picasso Artprice index has grown 547% in the last 20 years in the painting category, compared to the 179% growth on the S&P 500 in the same period.
Art market in numbers
In 2021, global art sales of dealers and auctions reached $US65.1 billion, surpassing pre-pandemic highs and recovering from the dip in 2020 (Art Basel UBS)
While the S&P 500 and NASDAQ index dropped during the first months of the year, the public art market figures of Q1 of 2022 reported a 32% increase in comparison to the first quarter of 2021. (ArtTactic)
US$16.6 billion worth of fine art sold at auction in 2021, exceeding any other year on record in Artnet Price Database (Artnet)
Over 60% increase in 2021 in comparison to art market turnover of 2020; and 25% increase compared to 2019 (Artnet)
Modern art was the second largest sector by value in the auction market in 2021 with a share of 22% and sales increasing 23% in comparison to 2020 (Art Basel UBS)
The low volatility of art was accurately demonstrated during the 2008 recession, when art indexes dropped 4.5%, while the S&P abruptly dropped 37.5%.
Between January and May 2022, auctions totaled 5.7 billion USD, exceeding the previous record mark of 2018. (Artnet)
The average price for a work of art sold at auction during this period was 48,670 USD, which is an increase of 180% from 2020 and 26% from 2021 (Artnet).