|Art Is Coming Into Its Own As An Asset Class And May Be Part Of An Appropriate Investment Strategy For Some Of Your Clients|
|Wednesday, May 09, 2012 14:18|
You may not have thought about art as an asset class before or as a viable investment for your clients. But the last few years have seen art emerge as a more serious contender for asset class status.
Case in point is the stunning price a well-known work fetched last week at public auction. Edvard Munch’s “The Scream,” commanded a tidy—and record breaking—$119.9 million.
It's an asset whose time appears to be coming. And growing interest from the global investment community both as an asset class and an alternative investment means that affordable entry points for your clients may be in the offing.
In a nutshell, art holds some pretty interesting properties as an investment:
A recent study released by Tangent Capital identified four periods since the early 20th Century when art outperformed the S&P 500 during a recession.
By late 2011, notice was made that returns on works by Damien Hirst and Andy Warhol had outperformed the S&P 500 since 2002.
Hirst’s work had tripled in price since 2002 and values on Warhol’s work had quadrupled. The S&P returned around 7% over the same period.
And like any other asset class, there are risks to be managed.
If your clients don’t have the millions it takes to purchase a piece at auction or at a private sale, there are other ways they can invest.
A $20 million fund started in 2007 offered private placement minimum investments of $100,000. It reportedly returned over 28% between 2007 and 2010, investing in works of 20th and 21st Century artists.
If art-based ETFs or closed end funds are created as predicted, art investment may soon become accessible to a broader range of asset levels.
Even now, independent art advisor Peter May says that if you have clients with $10 million in investible assets, it’s not unthinkable that $3 million to $4 million of their portfolios could be invested in art.
That 30% to 40% needs risk management and its impact should be taken into consideration in managing the rest of the portfolio.
Art’s emergence has accelerated within the last few years. As the investment community gets behind the movement, further development could happen quickly.
At the very least, knowing about art from an investment perspective can give you another ‘in’ to attracting high net worth clients.