Art Investment

6 Reasons Why Long-Term Art Investment Pays Off

Explore how art investment offers financial returns and cultural value and what makes it a sensible choice for long-term investment.

Goldframer

10 Sep 2024 — 4 min read

Investing in art has become an increasingly popular strategy among savvy investors looking for unique and rewarding opportunities. Unlike traditional financial instruments such as stocks and bonds, art investments offer both financial returns and the intrinsic value of owning a piece of cultural heritage. This blog explores why art investment can be a lucrative and fulfilling endeavor, backed by data and sources.

1. Art as a Tangible Asset

Art is a tangible asset that offers intrinsic value beyond its market price. Unlike stocks or bonds, which are essentially paper or digital records, art provides a physical presence and aesthetic enjoyment. As tangible assets, artworks are also less susceptible to market volatility and can act as a hedge against inflation.

According to Deloitte’s 2023 Art & Finance Report, the percentage of wealth managers who believe that art and collectibles should be part of a wealth management offering shifted from only 53% in 2014 to around 90% by 2023. This suggests that art’s tangible nature is increasingly recognized as a valuable asset class, with the conversation shifting to how art can be implemented in wealth management rather than whether it should be.

2. Potential for High Returns

While art markets can be unpredictable, certain pieces or artists can experience exponential growth in value. Over the long term, the art market has shown consistent appreciation, with some segments performing particularly well.

According to data from The Art Basel and UBS Global Art Market Reports of 2022 and 2024, the global art market reached $65.9 billion in 2021, a 29% increase from 2020. The 2024 Report expresses that “Following two years of growth, sales in the art market slowed in 2023, falling by 4% year-on-year to an estimated $65 billion. Still, values remained above the pre-pandemic 2019 level of $64.4 billion.”

3. Portfolio Diversification

Diversification is a key strategy in risk management, and art can play a vital role in a diversified investment portfolio. Art investments often have a low correlation with traditional financial markets, which means they do not necessarily move in tandem with stocks or bonds. This can provide stability and reduce overall portfolio risk, especially during economic downturns.

A recent study by Citibank found that art has a low correlation with equities, suggesting that art investments can effectively diversify a portfolio. The study also noted that art tends to outperform other asset classes during periods of inflation or turbulence (such as the COVID-19 Pandemic period,) making it a strategic hedge.

4. Cultural and Emotional Returns

Beyond financial gains, art investment offers cultural and emotional returns that are unique compared to other asset classes. Owning a piece of art allows investors to enjoy its beauty and cultural significance, often providing pride and fulfillment.

According to the Hiscox Online Art Trade Report 2023, an average of 93% of the art buyers surveyed have expressed emotional benefits as one of their motivations while buying art. The data highlights that emotional benefits, such as passion for art, are the most significant motivation for buying art across all three years (2020, 2022, and 2023), consistently scoring above 90%.

5. Art as a Hedge Against Inflation

Art has historically been a reliable store of value, particularly during periods of inflation. When the purchasing power of money decreases, tangible assets like art tend to retain their value or even appreciate. This makes art an attractive investment for those looking to protect their wealth against inflationary pressures.

According to The Art Basel and UBS Global’s 2024 Market Report, the global art market has demonstrated remarkable resilience despite the challenges posed by high interest rates, inflation, and political instability. While there was a slowdown in activity at the top end of the market in 2023, overall transaction volumes increased, and the online art sector continued to grow, showcasing the market's adaptability and strength in 2024.

6. Growing Accessibility Through Fractional Ownership

Recent innovations in the art market, such as fractional ownership, have made art investment more accessible to a broader audience. Platforms like Goldframer allow investors to purchase shares in high-value artworks, democratizing access to this asset class. In other words, Fractional ownership enables investors to benefit from the appreciation of art without the need for significant capital.

Additionally, Hiscox Online Art Trade Report 2023 affirms the increasing interest in fractional art ownership. The report states that “Although only 9% of the art buyers surveyed said they had invested in a share in an artwork or collectible over the past 12 months, 61% said they were likely to do so over the next 12 months.”

Conclusion

Investing in art is more than just a financial decision; it is a cultural investment with the potential for substantial returns. With its tangible nature, potential for high returns, diversification benefits, and emotional rewards, art stands out as a unique and lucrative asset class. Furthermore, with the advent of fractional ownership, art investment has become more accessible, enabling a wider audience to participate in this exciting market. As with any investment, due diligence is essential, but for those willing to explore the art market, the rewards can be both financially and culturally enriching.

By understanding the multifaceted benefits of art investment, from its financial potential to its emotional and cultural value, investors can make informed decisions that align with their financial goals and personal passions.