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The Intersection of Art and Finance: Developing Trends and Markets
Learn about art investment's trends, challenges and opportunities as an asset class and how your company can navigate the art world
Luz Hitters
Art collection has been a longstanding element of human culture, with its origins traced back to ancient civilisations like Egypt, Babylonia, China, and India. These collections were used to express spiritual and ethical values and to showcase the wealth of religions and rulers, displayed in temples, tombs, and sanctuaries. In Europe, a taste for art collecting_,_ per se_,_ first developed among the Greeks during the Hellenistic period, which saw an increase in avid collectors commissioning works of art_and_ a rising trend in its use for home and garden decoration.
However, it was only with the rise of the Roman Empire that art collecting came into its own with the creation of the art market. Modern-day collecting in the form of museums took place during the Italian Renaissance, where there was a theorisation of art collecting. Commissioning artworks and possessing vast collections were symbols of social status, erudition, and taste, and artists gained higher status and respect. In the 19th century, museums and institutions began acquiring artworks and the 20th century saw the rise of modern art movements and new art forms. Nowadays, the art market has become more accessible with new forms of art collecting, such as fractional ownership and art investment funds.
The blending of art and finance has opened up new and innovative ways for investors to engage with the art world. These new methods of art collecting have enabled a wider range of people to invest in and own artwork, as well as created new opportunities for artists and collectors alike. The expansion of the art market has prompted banks, wealth managers, insurance companies, and new market players to incorporate art investment into their service offerings.
According to Deloitte Art and Finance's latest report, ultra-high net worth individuals' wealth allocated to art and collectables in 2020 was estimated at around $1481 billion, and by 2025, the projection is estimated at $1882 billion. The European market is estimated to be 24% of the market share, meaning $437bn by 2025. The growth of this market goes hand in hand with a rising demand for personalised banking services as clients require holistic and tailored solutions that adapt to their specific needs, for which art investment can play a major role.
Art investment provides several advantages, making it an enticing asset class. Firstly, art has a history of appreciation and can offer attractive returns in the long run. Additionally, art can serve as a diversification tool, offering a hedge against traditional investments such as stocks and bonds. It also provides an opportunity to build a legacy and pass down valuable assets to future generations. Art collections can also enhance the corporate identity of companies, demonstrating their commitment to culture and the arts. Moreover, the rise in accessibility through fractionalised ownership and investment funds has made art investment more attainable for a wider audience. Lastly, investing in sustainable art can align with environmental, social, and governance (ESG) principles, allowing investors to make a positive impact while generating returns.
The evolution of art collecting has opened new ways for people to invest in and own art. The art market has become increasingly accessible in recent years, making it possible for people to invest in artworks at various price points. Indices like Art Price make it more transparent, while art funds such as Anthea Art Investment or Artemnudi Investment Funds provide interesting proposals. There has also been a growing trend of art and technology, incorporating blockchain into art services such as 4Art Technologies. In addition, new regulated proposals are also evolving, as in the case of Artex.io, an MTF (multilateral trading facility) for art investment regulated by the FMA in Liechtenstein and compliant with MiFID II. This proposal enables investors to invest in art shares and trade as buying and selling stocks.
However, as with any growingly-attractive market, art investment also comes with challenges, such as lack of liquidity, high cost of entry, and difficulty in valuation, storage, and maintenance requirements. For financial institutions to offer new services in this segment, it is vital to understand the market pain points and know how to mitigate risks. As such, the role of specialised management consultants is key in this new service offering, as they can support through the whole value chain, ensuring the smooth integration of art service into the banks' offering. At MMG Management Consulting, we have field experts that will smoothly help navigate this exciting field for your company, from ideation to implementation.
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