A passion for collectors and speculators
The Art as an Investment conference at the MUDAM is organised with an experienced partner: Deloitte Luxembourg were the first to get the ball rolling when they organised their Art & Finance event in Luxembourg two years ago. Held last year in London, their third conference will take place in Paris on October 21st. Adriano Picinati di Torcello, Senior Partner at Deloitte Luxembourg, gives us some reasons why passion investments have a serious role to play as a new financial niche.
Why invest in art?
Art is a consumer durable that yields an aesthetic return and a capital asset that tends to appreciate in value over time. Even if it is not easy to assess returns over a given period, historical performance monitored by ‘valuable indices’ (such as the Mei Moses All Art Index, Art Market Research, Art Price, etc.) tends to demonstrate that over the long term art generated moderate positive real returns. However, as the functioning of art markets is complex, people with extensive inside knowledge can make substantial profits.
Do you have to be an expert to invest in art?
The motivation to buy art depends on individual preference and ranges from pure collectors to pure speculators. However, there are a number of risks and costs to consider. Depending on the amount of the investment, it is always better to be guided by trustable experts.
What is the correlation with other financial assets?
Art has a low or negative correlation with many other asset classes and can play a positive role in portfolio diversification. Some academic studies claim that art or collectibles should represent around 5% of a well diversified portfolio.
Is the art market the reserve of the rich?
With the growth in knowledge and the increase in transparency due to the publication of indices, sales information and prices achieved at auctions, a much larger community has started to be interested in collectible assets. No minimum investment is required. The large transactions that are reported in the press only represent a small fraction of the market.
Why do you think passion investments have a serious role to play as a new financial niche?
People have always invested in emotional assets. However, with trends such as the long term worldwide wealth increase alongside the growth in knowledge on collectible markets, more people will invest in collectible assets. As a consequence, since collectible assets are sought after and scarce, prices will most likely be pushed higher.
In addition to that, many investors who lost a lot of money in the financial crisis by investing in products they did not understand are now turning back to things that are closer to their heart and which at the same time offer protection and a return on investment.
This environment provides room for innovation. Most likely we will see new financial products offering opportunities to invest in these new asset classes and services to support customers, such as tax, wealth structuring, insurance, conservation, trading, etc.
Can Luxembourg become a centre of competence in this domain?
Being an international centre for investment funds and private banking, the Grand Duchy offers a wide range of investment vehicles and services to international investors. We believe that art and collectibles is essential to any UHNI, HNI and family office diversification strategy.
Moreover, developing these activities will have ripple effects on other sectors such as the logistic sector, the cultural sector and tourism, provided that appropriate measures are implemented.
In collaboration with the government, Deloitte has started several initiatives aiming to create an art/collectible and finance cluster in Luxembourg, such as for example the annual Art & Finance conference which will take place on 21 of October this year in Paris.