Saturday, May 25, 2013

Global art market and ‘passion for investment’

Among ostensible investment avenues of ‘passion’, fine art is the one that has appreciated by almost 200 percent in the past decade or so, suggests the Luxury Investment Index of Knight Frank. The same is calculated on basis of the weighted performance of different indices for total nine classes of collectables, comprising fine art, classic cars, coins, Chinese ceramics, furniture, jewelry, watches, stamps, and fine wine. Investors are clearly taking a much closer look at all these real assets going beyond their emotional and aesthetic values.

“What’s changing is the subtle investment angle perhaps,” a recent essay by the FT, UK columnist, Mariana Lemann quotes Knight Frank’s Wealth Report editor, Andrew Shirley, as saying, “Previously, people would like to collect so as to possess beautiful things and have the best possible collection. Traditional investments, however, have lost much of their intrinsic value and that the earlier neglected investments of passion are becoming attractive.”

Appreciation of fine art pieces to go with recent wealth creation spree, especially in the emerging markets, has infused fresh money flow into art. “There’ve been several new buyers who are coming into the art market,” New York-based art expert and advisor, Mary Hoeveler, points out: “What apparently comes with that, sadly, is some amount of speculation. The Wall Street sure takes notice; people enter the market solely as investing.”

The global art market’s sheer size makes it appear large and liquid in nature. It totaled nearly $61 bn in 2011, estimated Clare McAndrew of Arts Economics, but it can still get topsy-turvy. The touch of allure carries its own high risks. Take the British artist, Damien Hirst, whose artworks often include dead animals that are preserved in formaldehyde or a skull sculpture that is encrusted with over 8,000 diamonds. A few of his pieces have fallen in market value by no less than 30 percent in the last five years.

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