Art as an Asset

The Gulf News (Middle Eastern) has an article on investing in art as an alternative to mainstream investment.  It quickly looks at the growing trend of the wealthy to diversify and include part of their portfolio in alternative assets such as art.

The article also states several trends to look for, including growth in the Latin American sector, and some contemporary artists may see some declines.  Its overall view of the art market for 2013 is strong.

The Gulf News reports

With the wide acceptance and recognition of art as viable alternative investment, one has to emphasize the difference from traditional asset classes, such as equities or bonds: the first being that artworks are illiquid assets with high transaction costs. For these reasons, art qualifies best as a long-term investment and the non-financial dividend should be a key motivator behind any art investment.

Two trends are likely to materialize in the short to medium term. Firstly, the Latin American art is poised to grow. Fuelled by economic growth and wealth creation, coupled with a ‘state of the art’ art market infrastructure (the Gagosian installation in Rio and the White Cube in Sao Paulo) and increasing collector base, the Latin American art market is likely to provide decent returns this year.

Secondly, the contemporary art market will witness some kind of discrimination (artists such as Damien Hirst are likely to be discreet this year) and might lose part of the momentum acquired over the past 3 years in profit of blue-chip Modern Art.

Finally, public auctions will be focusing even more on works that are commercial, exceptional and fresh to the market. It might be a difficult year for tier-two artists with weaker reputations and, in the short term, it is safer to buy an artist with a broad market and sustained demand.

We can safely assume that as a result of growing global wealth (especially in Asia) and the emergence of new private and institutional buyers, demand for art should continue to rise in 2013.

Source: The Gulf News