Trends of the Art World from an Investment Perspective with Catherine Alsing
June 13, 2016
It is widely reported that the finance industry increasingly views art as an asset. Reported from Art New York 2016, our panel of experts discuss this development and advise on the trends and financial benefits of this investment.
There is no doubt that art is a unique asset. Since 2008, there has been a move away from assets with a perceived connection to the financial downturn towards more tangible options. In addition to a traditional portfolio, art offers diversification as well as aesthetic appeal; immediate aesthetic reward with the promise of financial return down the road. As a result, not only are more and more collectors seeking to monetise their art and invest it in other interests, non-established art collectors are looking to art as a viable addition to their portfolio.
What needs to be considered before entering this seemingly opaque world of art auctions, fairs and galleries? Is this a suitable investment for all, or just those with insider knowledge?
According to our experts, it is essential to engage a specialist, advisor or curator before starting to collect. For the inexperienced, it can feel like a privilege working with an art advisor, so don’t be afraid to choose someone with a proven track record – as Madelaine D’Angelo, Founder & CEO at Arthena, stresses, “nothing replaces experience”. Ask copious questions around transactions, transparency and commission, to avoid any unpleasant surprises down the line.
At present, most art market data comes from auction results, which constitute only a small portion of the market overall. Our specialists were keen to point out that the phrase “The Art Market” can be misleading, in that it is fragmented – in reality it is several much smaller markets, all operating in tandem. Therefore, lenders and funds rely on diligence, trust, vigilance and human intelligence to glean the most accurate data. We hear from Terence Doran, Managing Director at Art Capital Group that his company has an invaluable “network of proprietary relationships built over time”.
Over the past ten years, we have seen a huge increase in the amount of specialised art lenders. Lending against an art collection allows for collectors to gain collateral without selling their works, unlocking funds to invest elsewhere. In terms of a comparable asset, D’Angelo cites real estate, in that it has value in the current market, requires maintenance, a passion factor and it is advisable to engage with a specialist before investing.
Doran points out that art lending is attractive due to the current low lending rates. Innovative new art funds offer investors an opportunity to buy high-end art along with a complete art service solution – individuals can obtain a mortgage rate against their collection, alongside a tailored concierge service to manage their portfolio.
And what about the art itself? With the aim to make more money than the cost of the debt, Doran prefers “underlying artists to have a quantifiable track record at auction”. Therefore, emerging contemporary artists are less likely to be considered. Title is critical when it comes to lending, with additional authenticity coming from provenance, bills of sale and auction results. D’Angelo backs this up with a requirement for good gallery validation, and our experts agree that if title is not identifiable, the deal stops there.
Innovative art finance firms offer investors something unique – the opportunity to borrow against an asset that they can, on the whole, retain on their walls to enjoy. Prior to this, it is essential to find the right people to work with – the right art advisor not only saves time and mistakes, but seeks to find clients the most cost-effective way to sell, when the time is right to do so. And with both experts agreeing that, despite conjecture, the market is not really softening, D’Angelo confidently states that now is “a really good time to buy”.
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