Considerations When Building an Art PortfolioAnchin Private Client CenterNovember 17, 2020
Fine Art has played an important role in the lives of high-net-worth individuals (“HNW”) and families for generations, adorning homes and nurturing souls. Fine Art taps a variety of passions very personal to the observer. At the same time, an increasing number of ultra-high-net-worth (“UHNW”) individuals have embraced Fine Art as an important part of their investment holdings.
Consider that the Knight Frank Luxury Index showed that, for the first time in nearly a decade, ultra-high-net-worth individuals spent more money on Fine Art in 2018 than on investment grade wine.
For the HNW and UHNW, collecting Fine Art means more than buying a print in an art shop or gallery or a sculpture at a local craft show. For those with a true appreciation for aesthetics, discriminating tastes and the right budget combined with an ability to find under-valued works of art, Fine Art allows them to celebrate their own tastes and leave a lasting legacy.
However, building a Fine Art collection takes time and knowledge. This is especially true if the collection is intended as an investment, which comes with its own unique opportunities, challenges and guidelines.
Before embarking on a Fine Art collection, the first question to ask is: why?
Are you an art lover or patron, or are you looking at art as an alternative investment strategy? How will you go about obtaining the art (private events, exclusive art fairs, e-commerce, art consultants, brokers)? Do you plan to keep the art for the long haul? How will you market or transfer the art if the time to sell arrives?
Whatever your plan, there are specific strategies to keep in mind as you design and build your collection:
- Plan and Research. Become knowledgeable. Serious collectors look at as much art as they can. Visit museums and galleries, and establish relationships with artists and art professionals. When you do see that perfect piece, you can act with confidence.
- Go beyond the painting. Artwork can take many forms beyond the canvas. Consider investing in other formats, such as photography, tapestries and archaeological items.
- Understand the total cost. Art acquisition comes with considerable extra expenses, such as protection, storage, transportation costs, commissions and insurance.
- Buy what you like. Sounds simple, but it’s one thing to be enamored with a piece in a gallery, online or in a catalogue – it’s another thing when it’s on your wall or mantle for years to come.
- Collect with your heart – and your head. There is no magic formula to identify which artists will be the most sought-after, and no guarantee of a positive return on investment (look at Vincent van Gogh: the painter sold only one painting in his lifetime, but years after his death, his “ Laboureur Dans Un Champ” sold at auction for more than $80 million).
The back end: Will the art stay in the family for generations? Will you pass it along to your heirs or create a foundation to hold and display the collection? Perhaps, you’ll want to donate the art to a gallery or charity. Managing the collection for the long-term is as important a consideration as any, especially as an investment asset. There are significant tax issues of which to be mindful; deciding on the best strategy early on can be of critical importance.
And, perhaps, the most important strategy:
- Seek help. You may have a passion for art, but especially if you are looking at art as an investment vehicle, work with an art investment advisor – someone who understands the specific opportunities and challenges.
If you are thinking about buying or selling art, please contact your Anchin Relationship Partner or Michael Belfer, a Partner in Anchin's Art Group, at firstname.lastname@example.org or 212-536-6838.