Art as an asset – now is the time for reappraisals
Investors, take note. While the future of the economic climate may not be clear, there is at least one market on the upswing – art collecting. While there’s no doubt that the financial crisis struck the art world hard in recent years, with famous art museums across the country saw endowments shrink and faced budget cuts and staff layoffs, values within the fine art community seems to be moving upward.
Based on data from Artprice quoted in Barclay’s Wealth’s 2011 report Profit or Pleasure? Exploring the Motivations Behind Treasure Trends, last year marked the best year ever for sales of art at auction. Large auction houses like Christie’s and Sotheby’s both showed increases in annual sales and profits. Art investment has become a strategic way for many investors to diversify their portfolios and distribute their assets outside of bonds and equities, along with gold, silver and fine wine.
This has not always been the case. About a decade ago, advisors may have viewed buying emergent art as a high-risk, speculative move, but today it’s considered a strategic and somewhat “safer” move for individuals to distribute their assets into alternative categories. As a result, shrewd investors have begun purchasing and including serious art in their portfolios, and contemporary pieces from lesser-known artists have gained impetus.
This type of “passion investment” has spread throughout the world, with fund managers investing in a range of fine art sectors in countries such as Australia, Brazil, China India and Spain. Experts claim that while the financial crisis highlighted risk management and transparency in the field, art and other passion investments can now serve as a vehicle for future success by building investor confidence.
This significant increase in value of so many works of fine art has made it imperative for collectors to have their pieces appraised. Given the surge in values, if a collection has not been reviewed within the last two years it is likely you are underwater in the event of a claim. Insurers recommend that clients appraise their works every 3-5 years in normal markets – but in light of this very favorable market a two-year timeline is the new norm. Doing so will ensure that you’re covered accordingly for any appreciation on this high valued asset.
About the Author
Bruce MacDougall is a Senior Vice President in the Property & Casualty group at WGA and leader of the Private Client Group. His responsibilities at WGA include developing relationships and serving as a resource for WGA clients in all areas of property and casualty insurance brokerage and risk management consulting.