A Quick Guide to Investing in and Collecting Fine Art
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By
Priya Raj
on
11th July 2023
Is it a rich man's sport? Contributor Priya Raj takes readers on a deep dive into the world of the super-rich investor.
Investing in art is expensive, but it has also outperformed the S&P 500 YoY for over 20 years (according to the Citi Global Art Market chart). Art is considered a ‘passion’ or ‘alternative’ investment, along with collectible cars, watches, and fine wine [among others]. Passion investments are dubbed as such because they require the investor to have a sufficient level of passion and knowledge about the investment. The Knight Frank 2023 Wealth Report reported that “from an investment point of view, art currently leads all other sectors in passion-related luxury investment performance across the world – in fact, at 29%, it performs almost twice the average for this class of investment”. Though a lot of this performance can be attributed to the astronomical prices paid by investors for the art. To quantify the scale; sales of the collections of Microsoft founder Paul Allen and American investor Anne Bass produced in excess of US$2.5 billion.
Art Investment Funds: A Viable Alternative
For investors who like the sound of these returns but aren’t interested in physically owning art, which comes with its own long list of maintenance considerations, art investment funds are the way to go. With this option, investors don’t own the art, but put money into a ‘pot' that invests in art. Art funds typically invest in a diversified portfolio of artworks across various artists, mediums, and styles. This diversification helps mitigate the risk associated with investing in a single artwork. Art, whether its a physical painting or fund, is generally considered a relatively illiquid asset class; which refers to it not being easy or simple to turn the art into actual cash. When investing in an art fund, these typically have lock-up periods, during which investors cannot redeem their investments.
Tech, NFTs, and Emerging Opportunities
Tech founders, social media, and NFTs are opening up budding investors to a whole new world. Non-fungible tokens, better known as NFTs, became the talk of the art world in 2021 - when images like the Bored Ape Yacht Club - a collectible on the Ethereum blockchain started selling for millions of dollars. There are more affordable NFT’s available on the market, but it's still a relatively new and evolving industry, and therefore long-term investment viability is unpredictable.
Investing in Art with Limited Funds
The same sentiment goes for if you want to start investing in art with little funds. The cost doesn’t matter as much as your knowledge. Conart The App is a great way to get into buying art. The application provides a platform for users to buy art from approved artists. Soon to launch, this will be a fantastic starting place to learn about new artists and broaden your horizons. Art is generally considered a relatively illiquid asset class. When investing in an art fund, it's important to understand the fund's redemption policy and liquidity terms, as they can vary significantly. Art funds typically have lock-up periods, during which investors cannot redeem their investment, and liquidity events may occur at specific intervals.
Influence and Accessibility
At the centre of the world, Walpole'sThe State of London Luxury 2023 confirmed that “London nourishes and cultivates art and those who create it, celebrate it and invest in it. That is why London’s influence in the art world is critical to the marketplace”. But don’t be fooled; you don’t need to be living in a city with a rich art-scene to get involved in the industry. We spoke to Phoebe Minson, curator, writer and Head of Comms at Conart Global who gave a run down on how to start from scratch. “It’s easier than ever to get involved with the art world, social media is a great place to start. Look up your local galleries and follow their Instagrams, find artists and art writers or critics who post a lot about exhibitions". The popularity of art TikTokers has helped democratise the art world by making it more accessible and inclusive. They provide a platform for artists to gain exposure, connect with a broader audience, and inspire others to explore their creativity. A few of our favourites are ‘@girlandgallery’, ‘@wheresraya’ and ‘@sothebysinstitute’ on TikTok for finding out more about art, as well as new exhibitions and significant sales.
Finding Your Art Investment Approach
Minson explained that the best place to start is “by engaging with as much art as possible, and then once you’ve found the style of art that you like, you can begin researching that area.” The curator also explained that your approach changes depending on why you’re investing in art. “Are you looking for an emotional gain, financial gain, or even cultural gain? Some people invest in art the same way they invest in skincare because it elevates their sense of self and their mood” says Minson. It's important to note that investing in art carries risks, and the art market can be subject to volatility. If you’re looking to invest in art, the time is now. Information is free, as are exhibitions and galleries - and so perhaps it is the most approachable investment of all.
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