Sunday, September 2, 2012

Key observations of a research agency on art and investing

A detailed research and analysis recently done by Dan Scott and Marc Häfliger of Credit Suisse show that not only has art as an asset class clearly outperformed bonds and equities, it also creates an attractive diversification opportunity, being ‘tangible’ in nature, making it ideal for hedging against stiff inflation.

To put it in the words of Dan Scott and Marc Häfliger: “Fine art as an asset class offers several further attractive characteristics, including generally low correlation with other assets, such as stocks, bonds and gold. This low correlation makes art an excellent portfolio diversification tool.

“Additionally, given current concerns over high government indebtedness and loose monetary policy, art can provide inflation protection as a tangible real asset, and has shown it can perform better in an inflationary environment than equities.”  In essence, the researchers emphasize that it’s worth considering as an investment avenue provided you seek right expertise and approach specialists.

While the past decade is considered the ‘lost decade’ for stock markets, the AMR Index has surprisingly more than doubled (146%). Since 1985, the index has given an average annual return of close to 10%. The MSCI world has produced an average annual return of just 5.9% in the same period. It is worth pointing out that the higher returns also come with lower volatility. While the former has an annual volatility rate of just 12%, the MSCI World Index showed a volatility rate of 16%.

The investment advisory group is among the world’s top financial services companies, which advises clients in different aspects of finance. It offers high-net-worth private clients, companies and institutional clients, as well as several retail clients worldwide. Apart from comprehensive solutions, it provides diverse investment products in keeping with the prevailing market conditions. Two of its researchers have prepared a new document, entitled ‘Art Investing: A Screaming Success?’ that discusses various aspects that emphasize the various factors that make art an attractive investment proposition.

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