Gabrielle Segal, our Fine Art Business Development Manager, was recently featured in an article published by Market Currents Wealth Management to answer the question, “Is Fine Art a Good Investment?”
In 2005, a consortium of art dealers paid $10,000 for a damaged painting at a New Orleans auction. What the dealers initially described as one of many damaged copies of a long lost masterpiece by Leonardo Da Vinci turned out to be the original Salvator Mundi or Savior of the World.
In November 2017, Prince Badr bin Abdullah bin Mohammed Al Farhan bought the restored piece on behalf of the Abu Dhabi Department of Culture & Tourism for $450.3 million, making it the most expensive painting ever sold. Although the piece had changed hands several times along the way, an investor who bought in at the original price would have experienced a compounded annual return of 144% over the 12-year period.
Not ever painting goes from obscurity to multi-million dollar sales like this, but lucrative deals in the art world have started to attract the attention of investors from across the globe. According to data from Artprice.com, global sales of art doubled between 2002 and 2013. In 2013, there were more assets under management for art investments than venture capital.
Research conducted by Elroy Dimson emeritus professor of finance at London Business School and Christophe Spaenjers of HEC Paris, an international business school, sheds some light on the returns investors have experienced from investing in what they call “emotional assets.” According to data they collected on art deals completed in the U.K. between 1900 and 2012, art as an asset class delivered a better return than gold and government treasuries.
Art generated a compounded annual return of 6.4% in nominal terms and a return of 2.4% in real terms. Twentieth century contemporary Chinese art outperformed the rest of the asset class by delivering a 14% compounded annual return over the past 15 years.
Gabrielle Segal, business development manager at the fine art department of Borro Private Finance, says the returns of art investments are “shaped by esoteric factors and trends. [Art] follows a value trajectory independent from, and potentially surpassing, the larger economy. This cements art’s value as a potential hedge against inflation and market volatility.” Segal believes art provides investors….