The art of investing in art

The art of investing in art

Investment in the art market: relevance today

Art has long been considered an "investment of passion", bearing not only aesthetic value, but also economic benefits. But only recently the art began to look through the prism of modern theory of the investment portfolio and to consider this so-called. "Alternative investment" as part of the investment portfolio. Although research continues to shed light on a market that has historically been impenetrable, research shows that in the long run, art can provide long-term probable profits that are incomparable with other types of assets.

The paradigms of the art market have changed dramatically over the past few decades, as newly emerged wealth in the emerging markets of China, Russia, the Middle and Middle East increased the number of new participants in the art trade, which in turn meant greater market viability. Not frightened by the tense economic atmosphere of recent years, collectors around the world are paying record amounts for top lots. Despite the attractive side of art, in which it acts as an investment, the lack of market transparency, its illiquidity and high prices for items provided the opportunity to participate in it only to a selected class of wealthy individuals. However, the growing interest in the art market prompted the creation of new investment products that create a new generation of investors open to the understanding of this market. In this study, we will analyze the specific aspects of the market, we will mark the latest trends, we will weigh all the pros and cons of investing in art and discuss ways to understand this unique type of assets.

Review of the world art market

The art market often remains a mystery for investors because of its incomprehensible nature. Unlike traditional classes of assets, such as securities or long-term bonds, the art trade can not be called transparent. The very process of trading is difficult to understand, since a large segment of the market is formalized through private transactions. The bulk of detailed information about them can be taken from the data provided by auction houses. Despite the existence of large and famous homes like Christie's and Sotheby's, there are also countless others around the world. This general lack of transparency makes the assessment of the size of the market difficult. So, what is the size of the world art market? According to TEFAF (The European Fine Art Foundation), the size of the world art market is approximately $ 60 billion; it also reflects information from auctions, the evaluation of art galleries and data of art-dealer auctions for 2011. This also indicates a six-fold increase in the market in size over the past 20 years.

There are several types of players in the art market. The buyer's side is represented by wealthy individuals and art collectors. Art dealers, collectors of antiques, corporations and museums are also the main buyers on the market. In a recent survey of wealthy citizens, almost 50% of the respondents have works of art and, on average, art occupies about 4% of the property of the average wealthy person. On the side of sellers are auction houses, galleries and the artists themselves. It should be added that such intermediaries as art consultants and private banks facilitate transactions through expertise, research and financing.

Since over the past few decades, the world's wealth outside of North America and Europe has grown exponentially, the art market has become much more globalized than ever before. According to the 2012 RBC / Capgemini World Wealth Report, which analyzes the economic factors that govern the accumulation of capital, the Asia-Pacific region has outperformed North America in terms of the number of wealthy people and has become the leading direction in this indicator. With increasing security, the demand for luxury goods is increasing. Growing three times China (including Hong Kong) surpassed the United States as the world's largest art and antiques market, representing 30% of the market in 2011, compared to 29% of the US


The structure of the art market in 2011 (and changes from 2010). Source: European Fine Arts Foundation

Source - JP Morgan

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