Exploring Art As An Asset Class. Is art a traditional asset class or something more hybrid? Vengerick asks this very question often. While many examples demonstrate art as an asset class and even more that support art as hybrid asset as well. Even so, how art is defined has little impact on its value.
Specifically, this article will explore no mater how you label art, you must own it. We will try to keep this complicated topic as simple as possible.
I’d like to live as a poor man with lots of money. – Pablo Picasso
Art As An Asset Class? If So What Kind?
The Market of art Investing.
Granted art is used as a store of value, investment and tax avoidance tool. However this does not help us really understand what asset class art is and if it is a good investment. Let us take a detailed look at the art world.
Outline of the art market.
- Specifically the art market in 2021 was a very good year. With aggregate sales of art and antiques by dealers and auction houses reaching an estimated $65.1 billion. Representing a 29% increase on the previous year.
- The total value of the worlds art market is estimated at over $1.7 trillion.
- Over 80% of art transactions occur in just three countries: UK, USA, and China.
- Specifically 3 classifications of art buyers exist, investors, traditionalists, and aficionados.
Comparatively defining these 3 art buyer classes.
- Investors: For profits and store of value.
- Traditionalists: To maintain family heritage or for religion/culture.
- Aficionados: Comparatively for decorative, conspicuous consumption or emotional fulfillment.
Even though the three art buying classes appear to have different motives. Recent research shows, over 70% of all collectors purchase art for investment purposes.
As a result, art collectors have more diverse reasons for buying art, than stocks or bonds. However there is a common link between art buyer groups . The majority of art purchasers actually view themselves as collecting, but with a financial investment view.
But wait, if it sounds confusing now, it gets even more interesting.
3 Categories Of Art
The general definition of art is based on the period and style of the creation. The three main categories of art, modern, contemporary and old masters.
Blue Chip Artist, is a term you must know, are masters whose art’s value has consistent years of sales that are confirmed at auction. These are most of the artists that grab all the big headlines for record art sales at auctions. For example Picasso Rothko and Klee.
Yet another important art term term, emerging artist. Emerging artist is in the early stage of their career. An artist that caught the eye of an art critic and/or gallery, but hasn’t yet established a solid reputation. These emerging artists have a great deal of upside. Also they are exciting to collect and support.
The graphic above shows the balance in the art market for art sold in 2021. To point our the market for under $20,000 paintings sold shows a massive amount of interest.
Alternative Investment, or Luxury Good?
Art as an alternative investment.
Two of the most well known alternative asset classes today are real estate, and gold.
Real estate is at the foundation in the rise of capitalism during the 19th century. Real estate investing has been around for over 200 years.
Since the beginning of time gold has been the foundation of civilizations, trade investment, and economies.
While there is no argument that gold and real estate is a strong alternative asset class. We must study the chart above to discover how impressive art performs compared to other asset classes. Comparatively art has performed at least twice as good compared to other asset class losses.
All things considered its safe to say art is best classified as an alliterative investment asset class.
But for those of you who still are not sure. Let us look at the classification of art as a luxury good.
In contrast, is art really nothing more than a luxury good?
Granted some people in the investment wold don’t view art for more than a luxury good. They believe even if someone makes 10x returns with art they will just run around and loose it all on the net art purchase. However this scenario may sound familiar to many of you. It sounds a lot like venture capital, and there is no doubt what asset class it is.
So why do a large group of investment professionals hate on the art world? There could be a lot of reasons. But we believe the number one reasons these investment professionals hate on the art world, they have no way to collect their massive fees from art collectors.
Art As An Asset Class, 5 Reasons You Must Own Art!
Admittedly the majority of our art collectors have no interest classifying what asset class art is. The real focus of our collectors is can art make them money and protect their assets.
Let us explore the 5 top reasons you should own art.
- You Own It. You physically own art, NOT the government, NOT your stock broker, only you have possession of art. This is a tangible investment object that does not have the government involved in any way. Therefore, if you choose to resale , will be quick and efficient. Unlike real estate, there are no causal financial markets that interfere with the price. Only you will look after your investment, and 100% responsible for its outcome.
- Economic value / Low Correlation. Art proves time and again its superior consistent performance against traditional investments. Especially in down markets, recession, and inflation art outperforms. Art, especially the contemporary and blue-chip variety, is known to have a low correlation with stocks and bonds. Thus offers diversification possibilities, over time, and across the economic cycle. For example, 2020 Deloitte stated, “In times of inflation, art prices rise above average compared to the prices of other goods.”
- Life Style of Rich and Famous. The fastest way to rub elbows with the rich and famous is through art. The perception of art ownership and collecting such an item adds a cachet level to the owner’s reputation and importance. Thus modern art portfolios show those who have the means to invest are doing so and diversifying 5-7% into the art world.
- Portability. Yet another characteristic of art which distinguishes it from other asset classes, is portability. One can easily ship artwork to the most opportune markets, and be sold anywhere globally. Compared to other physical assets such as real estate and gold that do not posses such ease of mobility.
- It Is Simple. No matter the reason to buy art, it stirs our emotions and creates strong attachments. Simply viewing art brings enjoyment and appreciation. Just a few reasons why art likely increases in value.
Art Buying Bonus:
Exclusive 125% buy back guarantee. For instance Vengerick offers special edition paintings with a buy back 125% guarantee. Thus helping new art investors take part and learn about the art world with very little to no risk.
What asset class is art?
Time and time again art proves it can not be easily classified into an asset class. The most important thing is arts protection from volatile markets, offers privacy, and portability for the majority of collectors.
Can any investors take advantage of art or just the ultra rich?
Regardless if your ultra rich, or building your financial empire, art has something for every economic class.
Is art a safe investment?
If you love the artwork you collect then yes! If you love something then its always a safe investment because no mater what you will enjoy it.
Where is the best place to start?
With someone you trust. This can be an art dealer, auction house or gallery. Even artists focused on collectors and their financial goals.
Vengerick Art is always here to help answer art collecting questions. Feel free to reach out today. Contact.