The global art market is, for the most part, completely uncorrelated to the world’s major stock markets. Investors can therefore use it as an excellent portfolio diversification tool in times of economic uncertainty. Post-Brexit, the UK is facing just such a period: the negotiations for the UK to leave the European Union are due to begin this year, and UK investors in traditional stock could be in for a rough ride over the next few years. So, is it time to consider art?
Capital Growth Potential
The acquisition of art as a high-performance asset class is no longer considered an alternative financial investment, but a key one. For example, take a look at the contemporary art segment of the Mei Moses Art Index. It reveals that contemporary art has delivered a compounded average return of 10.85% per annum between 1966 and 2016. Last year, Maddox Fine Art bettered these figures for a number of clients, who were able to re-sell certain pieces of work within months of ownership and achieve capital growth in excess of 20%.
Building a Portfolio
When thinking about adding art to your overall portfolio you should think carefully about your own attitude to risk, and strategise your acquisitions accordingly. You might want a mix of blue-chip (slower growth, but more liquidity), emerging (lower acquisition costs, potentially better returns, but maybe a fall in values) and established (a halfway house between the other two). The proportions in which you decide to mix the three will determine the inherent risk. With the FTSE 100 share index recently recording a new record high, and leading stock market analysts predicting a potentially drastic correction for inflated major share indices during 2017, the art market could once again act as a safe haven for investors’ capital.
How should you invest?
As with any investment, an important consideration is your budget: it is ideal to acquire the best you can afford. The better the work, the better the potential performance. Common mistakes include following obvious trends (if you’re doing it, so is everybody else); chasing a particular artist when no investment-grade work is available on the market; and buying on impulse without researching the artist’s potential. The art market is like all others: the more you know, the better chances you have.
Whom to buy
Artists showing significantly above-average returns in the market at present include New York urban contemporary painter Bradley Theodore, whose vibrant Día de los Muertos-style skull paintings of iconic figures such as Kate Moss, Anna Wintour and Coco Chanel have become highly collectible; British artist Bran Symondson, whose decommissioned AK-47 assault rifle artworks are beginning to attract a lot of attention; and also the pop art pieces by Michael Moebius. These emerging contemporary artists are showing a healthy return on investment (ROI) ranging from 20%-40% in less than 12 months.
Performance art
Collecting art should be a marriage of aesthetic appreciation and wise investment. There’s nothing quite like the marriage of an enriching appreciation of contemporary art and the financial satisfaction of potential investment performance.
For more information and to receive a complimentary copy of Maddox Fine Art’s 40-page Art Investment Guide, contact matthew@maddoxfineart.co.uk
