In uncertain times, the fine art market offers a reassuring investment opportunity. Largely immune to political change, it is less volatile than currencies or capital markets.
The global market was worth more than US$45 billion last year, a 1.7% annual increase, according to the European Fine Art Foundation Report 2017. Prices have fallen back a little from the peak of July 2015, but are around 15% higher than in the market trough of November 2012 and the market is “stable and robust”. The outlook is optimistic.
Wealth managers are looking beyond traditional investment products and there is a strong demand from investors – 88% of private offices and 75% of high net worth (HNW) and ultra high net worth (UHNW) individuals want art in their portfolios, according to the 2016 Deloitte Art and Finance Report.
However, the market can be daunting to newcomers. It has a reputation for being opaque and the major auction houses charge fees of up to 30%. Global auction house sales fell last year by 18.8% while sales by dealers increased by 20% to US$27.9 billion. Looking more closely at these figures, it turns out the big auction houses conducted more of their business privately, which does nothing for transparency in the market.
Most investors are not in the art market purely for sentimental reasons – the emotional benefit of collecting is a pull, but Deloitte Touche found that strong returns were more important to 64% of investors. They see art as a tax-efficient asset with the upside of capital appreciation and want as diverse a portfolio as possible.