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The Art of Smarter Wealth Management (PART 1)

April 12, 2011 12:42 by shafeer

Investment diversification has extended to art, as investors shift concerns from weathering the financial crisis to anticipating the inflationary effects of rising government debt globally. Art, like gold and commodities, is considered to be a ‘real asset’ and has a proven record as an effective hedge against inflation.

The launch of a number of art investment funds and clubs–which offer investors the chance to invest indirectly into the art market–has also resulted in art attaining its own status as an alternative asset class.

According to research by Capgemini and Merrill Lynch last year, HNWIs are returning to investments of passion. With financial markets still in flux, many HNWIs surveyed indicated considering art a good financial investment, and sought out those items perceived to have tangible long-term value. The report highlighted that art investors in places such as India, China and the Middle East have a higher predilection to hold tangible assets – such as art – as a possible inflation hedge.

As art increasingly becomes part of HNWIs’ portfolios, two distinct strategies in this regard are emerging.

• The first is designed to emulate the world’s top collectors who tend to focus on specific sectors of the broader art market. Here, investors pursue goals of medium- to long-term capital appreciation by managing portfolios that cover the most established art sectors (ie Old Masters, Impressionist, modern and contemporary). These are identified for having significant size and maturity of collector base; independent market behaviour and a long transaction history allowing greater predictability.

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Tags: Art, art investment, asset management, banking and finance, consumer, diversification, financial investment, high net worth individuals, hnwi, HNWIs, inflation, investment, investment portfolio, tangible assets, wealth management