Contemporary art is one of the most requested genres in the art market today
Investing in art has become an increasingly popular way to diversify investment portfolios. Over the last 10 years – apart from the disruption during the Covid pandemic – the art market has consistently outperformed the S&P 500. However, post-Covid, the art market declined less than the anticipated 22% in 2022. It returned to stronger than pre-pandemic levels in the year’s second half. This proves that the value of art is not necessarily subject to the same fluctuations as the global economy. Hence, it can be a sound hedge against inflation and recession.
What type of art should I invest in?
Investors consider selecting the right piece of art as a crucial factor in achieving a positive return. The art market has recently witnessed a shift towards contemporary art. The popularity of works by emerging and mid-career artists is rising, leading to increased sales. In 2020, contemporary art sales accounted for 55% of the total sales, up from 49% in 2019[1].
Investors who wish to make returns through art investment must purchase the right artwork, which involves considering various factors such as the artist, subject matter, condition, size, and many others. Advisors can assist investors in navigating the market to find the appropriate artwork, negotiate the best prices, arrange tax-efficient storage, and ultimately make the purchase.
What are the different investment structures for art investment?
Over the past few years, there has been a significant increase in the number and variety of investment structures available for art investment. An art advisor with experience in the art investment sector can be an excellent resource for investors. They conduct due diligence on the investment structure and provide detailed advice on the artwork and the price at which it should be purchased.
Art funds
Art funds are investment vehicles that allow investors to pool their money together to buy art. Professional investment managers with expertise in the art market manage these funds. Art funds can provide investors with access to a diverse range of artworks, as well as provide professional management and expertise. However, they often require high minimum investments and charge high fees due to the requirements to have audits and general partners overseeing the fund.
Private and direct Investment
Private accounts are managed by individual investors (or their advisors) who buy and sell art independently. This art investment method requires significant expertise and knowledge of the art market and access to private auctions and galleries. Private accounts can provide investors with greater control over their art investments. However, they also require a substantial amount of time and effort. An advisor can alleviate the requirement for the investor themselves to source, negotiate, and carry out due diligence on every artwork.
Fractionalisation
Fractionalisation allows investors to own a portion of a larger artwork. This can give investors access to valuable works they may not be able to afford independently. Fractionalisation can also allow investors to diversify their art portfolios, as they can invest in multiple artworks with smaller amounts of capital. However, fractionalisation can be complicated, and fees can be high.
Joint investment
Joint Investment allows investors to pool their money to buy a single artwork. This can provide investors access to larger, masterpiece artworks that they may be unable to afford independently. Joint Investments can also allow investors to share the risks and rewards of an investment with others. However, like fractionalisation, co-investment can be complicated and does require legal expertise to set up.
Source: [1] The Fine Art Group
Blue-chip art offers historically solid performance, averaging 8.9% annual growth since 2000, over 3x better than the S&P 500, according to the ArtPrice 100© Index. It is among the best-performing asset classes, with a market size of $67.8 billion in 2022 (UBS & Art Basel Art Market Report 2023) and an estimated $1.7 trillion in art globally (Deloitte & ArtTactic, Art & Finance Report 2019),compared to $9.8 trillion in private equity funds (WealthBriefing, ‘Will Private Markets Overtake Public Markets?’, 16 August 2022).
Looking to invest in contemporary art?
In the world of investments, diversification is key. Stocks, bonds, and real estate often make up the bulk of an investor’s portfolio. But there is another asset class that savvy investors are turning their attention to contemporary art.
Contemporary art possesses an intrinsic value beyond its monetary worth – it’s a piece of culture, a moment in time, and a reflection of societal values. But how does one navigate this complex and often opaque market? That’s where Zurani Advisory comes in.
The value of expert guidance
At Zurani, we understand that investing in contemporary art is more than just buying a painting or sculpture. It involves understanding the artist, the art market, and the potential for future appreciation. With our expertise and experience in the art market, we can guide you through this process, ensuring that your investment is financially sound and personally rewarding.
How can Zurani assist you?
Whether you’re a seasoned collector or new to the art world, Zurani can provide the guidance and support you need. We offer various services, including art acquisition, portfolio management, and market analysis. Our approach is tailored to each client’s specific needs and objectives.
We believe that investing in contemporary art should be an enjoyable and rewarding experience. That’s why we strive to make the process seamless and straightforward.
Ready to explore the possibilities of contemporary art investment?
To discuss how Zurani Advisory can assist you, please contact Benjamin Tomkins, Founder and Chief Executive Officer, Zurani. You can reach him via email at benjamin@zurani.com or telephone +971 58 593 5523. Investing in contemporary art is a journey, and we’re here to guide you every step of the way. Let’s embark on this adventure together.
THIS ARTICLE DOES NOT CONSTITUTE FINANCIAL, TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
