In times of high market volatility and economic uncertainty, alternative and hard assets become increasingly appealing to investors. To better understand the options available for investors to round out their portfolios, we looked at the most recent numbers around returns from art investing and the future outlook for this asset class compared to other potential investments.
At the end of 2018, the Wall Street Journal asked: What were the best investments of the year?
As it turns out, the answer is… luxury collectibles! Art and Wine appeared to be the clear winners, ahead of classic cars, bonds, gold and global equities. The WSJ reported that “investors who put money into art at the beginning of the year saw an average gain of 10.6% by the end of November.” In the same time period, the S&P 500 was down 5.1%. As a result, those who diversified their portfolio with collectibles were able to offset losses in the financial markets with stable gains on other investments, and their economics were better than had they not invested in art, for example.
In thinking about how to allocate among asset classes, investors take into account more than just the projected growth rates. Other important characteristics that must be weighed include an asset’s liquidity, whether or not it provides passive income, its riskiness and volatility, the minimum requisite investment and the correlation it exhibits with other asset classes.
While 2018 performance speaks volumes about why art has become popular with ultra-high-net-worth investors, we wanted to put together a more comprehensive illustration of how art price growth projections compare to more traditional assets. In order to do so, we relied on research by Citigroup, Callan, Mei Moses and other leading sources to compile an easily digestible summary.
Art appears to be less volatile than Real Estate, Private Equity and the S&P 500, while price appreciation is expected to exceed growth in all six of the listed asset classes over the next ten years. Moreover, with Masterworks, the minimum investment in Art has become one of the lowest among alternative assets.
1. Callan, 10-Year Projections, 2018–2017
2. Deloitte, and ArtTactic Art & Finance Report, 2016
3. World Gold Council, website accessed Jan 7, 2019
4. Citi GPS, Global Art Market Report, 2015, US Fixed Income used for Investment Grade Debt statistics