Art and Finance Report 2011

International accounting and consulting firm Deloitte Luxembourg has published a white paper on the art market and the financial industry. The general theme is given the growth of the market over the past 10 years, it is now time to consider art as an asset class.  The growth in the art market over the past 10 years, according to the paper, has paralleled the growth in world wide high net worth individuals (HNWI).

The whitepaper gains insight from art tracking firm Artactic as well as 19 banks and over 900 wealth managers and 140 art professionals.  The full report is well worth downloading, reading and keeping for future reference art market reports. The report is a solid 50+ pages, so it contains much excellent market data for the appraiser.

Deloitte reports on the whitepaper

The growth of the art market and its infrastructure in the last 10 years is fuelling an increasing interest in art as an asset class, which means we now can start talking about the early stages of an Art and Finance industry.

The lack of institutional interest in art as an alternative investment, and the reluctance of private banks and wealth managers to get involved in something as esoteric as art, have often been used as arguments as to why this market will not evolve beyond its current form. However, this report suggests that this could change in the next two to three years, as private wealth managers surveyed by Deloitte Luxembourg and ArtTactic, are showing an increasing interest in offering wealth management services related to art and collectibles.

The positive performance and growth of the global art market in the last 10 years have coincided with a dramatic increase in the global High Net Worth Individual1(HNWI) population, which was estimated to be 7.2 million in 2000 and has increased by 51% to 10.9 million in 20102. With art investment accounting for 22% of HNWIs’ investments of passion3, it is likely that the art market will continue to grow in line with the global population growth of HNWI. But how is the private wealth management industry responding to this change? What are the challenges and how could they be addressed? These are some of the important questions we have attempted to highlight in this report.

Methodology and limitations

Deloitte Luxembourg and ArtTactic conducted the research for this report between July and October 2011. We surveyed 19 large private banks predominantly in Luxembourg, employing more than 900 private wealth managers. Our aim was to establish the perception, motivation, as well as the current and future involvement with art as an asset class. At the same time, we conducted a similar survey among 140 international art professionals (galleries, auction houses and art advisors) and 48 top international collectors to establish whether the issues and concerns in the art market were of a similar nature as those experienced in the wealth management community. We have also been in contact with 34 art investment funds during this research process.

We are delighted to be able to publish three interviews with some of the key figures behind new Art and Finance initiatives in Europe: the freeport in Luxembourg, SplitArtTM (the planned, new art exchange in Luxembourg) and recent research findings from Tutela Capital Capital on the financial performance of the art market.

Testing a new approach

Deloitte Luxembourg and ArtTactic recognise that the findings are only indicative. They may be influenced by the fact that the focus was largely on private banks and wealth managers in Luxembourg. However, due to the global nature of these banks, we still believe that the findings reflect a broader perception within the global wealth management sector.

In the future, we will expand the sample of private banks and wealth managers to capture not only general trends, but also how these trends vary from region to region.

Source: Deloitte Luxembourg (Click to download the whitepaper)