Friday, May 31, 2013

Growth trajectory for art market

The more meticulous and serious art lovers get about collating a classy collection, the more finicky and careful they must become about their end choices, experts feel. Raj Sharma, a known private wealth adviser at Merrill Lynch with a string of high net worth clients (worth $25m plus), thinks when aware investors put aside 10-20 percent of their overall portfolio to art 'the collection can be termed a sub-asset class' in itself.

Opting to venture into the segment of fine art & collectables demands immense caution as well as specialized advice from experienced experts in the field. “You might love a piece at the first sight but the broader marketplace might not. The better idea would looking at it both as a choice of passion and as an investment. What should come first and what will come later, is anybody's conjecture.

Contemporary art tends to go in and out of public favor, cautions another expert. “When you're dealing with popular contemporary artists, keep in mind the fact that their career and popularity graph can change rapidly, and so also their work. Still, market appreciation is not the primary motivation of investors or it shouldn't be so, advisers state.

Even though we classify art as an attractive class, not all art looks and performs the same way as an asset class, a research report by Credit Suisse last year emphasized. While capital markets continue to remain in some stress world over, auction marks in the modern and contemporary art market are scaling new peaks, moving from one level to the next. Demand for quality artworks should keep up rising, with the emergence of new institutional and private buyers coupled with growing global wealth, according to the study by Dan Scott and Marc Häfliger.

The various subsectors and categories of the art market, like contemporary art, modern art, old masters, European 19th century art, European and North American sculpture, contemporary Chinese art, and of course, contemporary Indian art have displayed varying performances, as well as in their characteristics and returns.

Though deemed more a ‘passion investment’ with emotional value as the key factor, not only has art as an asset class clearly outperformed bonds and equities, it also enjoys a low correlation with these asset classes. Apart from creating an attractive diversification opportunity, it’s also ‘tangible’ in nature, making it ideal for hedging against stiff inflation to some extent.  To sum it up, art is a completely justifiable and attractive mode of investment that offers good scope for return.

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