The Reality of Handling an Art Portfolio for Growth

Art is now firmly established as an asset class, albeit a non-traditional one. High-net-worth (HNW) collectors buy art and collectibles (antiques, jewelry, classic cars) for enjoyment but with a strong secondary motive: They hope that their collection will prove to be a store of value and ideally even appreciate over time. Additionally, collectors increasingly use their art as a financial tool, for example as collateral for a loan. As a result, most private banks now offer art loans, either in-house or through third-party boutique lenders.

According to Deloitte’s Art & Finance Report (2016) (Report), only 10 percent of wealth managers interviewed believe that the art investment industry will expand in the next couple of years. This makes sense. Art has been recognized as a financial asset; a potential inflation hedge due to its relatively low correlation to the financial markets. That said, it isn’t necessarily a great investment asset. Works of art are highly illiquid and traded in an opaque, unregulated market. They don’t generate an income, but they do generate high transaction and ownership costs. Lastly, artwork is a risky investment from a title and authenticity perspective.

Read the rest of the article in Trust & Estate Magazine's Art, Auction & Antique section by clicking here.