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Portfolio > Asset Managers

Art an Asset Class? Wealth Managers, Collectors Say Yes

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Art in wealth portfolios is estimated at $1.5 trillion, increasingly becoming a larger proportion of individual wealth and increasingly being viewed as an asset class by art collectors.

According to the 2014 Art & Finance report published by the audit and consulting firm Deloitte Luxembourg, 61% of collectors (vs. 53% in 2012) see art as an asset class. Moreover, 76% of high-end art collectors are buying art for collecting purposes, with an eye on investment (up from 53% in 2012).

The rise in art prices and values in clients’ overall portfolio suggests that there is likely to be an increasing demand for professional services linked to these assets – leading the global wealth management industry to take a more strategic view on art as an asset class, according to the 2014 Art & Finance report.

“We are observing increased demand in the art and finance market. This positive trend is mainly being driven by the economic recovery that is having a positive impact on the growth of the global art market,” said Roger Dassen, global managing director of clients of services and talent at Deloitte Touche Tohmatsu Limited, in a statement.

The report points out that following the 2008 crisis many private banks outsourced their art advisory groups and most hedge funds left the space.

But, since then, the interest from ultra-high-net-worth individuals has essentially forced these institutions to provide services related to the management and planning of art as an asset class.

The 2014 Art & Finance report suggests there is increasing attention being paid by the wealth management community to what is happening on the art market. Over the past three years, wealth managers are becoming increasingly aware of the development of art as an asset class. According to this year’s study, 53% of wealth managers were aware/very aware of the developments linked to art as an asset class, which is up from 43% in 2012 and 33% in 2011.

“With the global art market reaching $65 billion in 2013, up 8% versus 2012, it is clear that art and collectibles have become an increasingly important part of the [ultra-high net worth individual’s] overall asset portfolio,” the report states.

The report’s findings showed that art buyers and collectors are increasingly acquiring art and collectibles with an investment view compared to years past (76% in 2013 vs. 53% in 2012).

According to the report, the wealth industry is likely to focus more on art and wealth planning services in the next 12 months. A majority – 57% of the family offices and 53% of the private banks – of those surveyed believe there is a strong case for including art and collectibles in traditional wealth management. As the report states, these findings indicate that “the wealth management industry is taking a more strategic view on art as asset class and how it could be used as a strategic tool to build stronger and deeper relationships with clients, by focusing on both the financial aspects of art as well as the emotional and social characteristics associated with this asset class.”

Dassen added in a statement, “We see significant opportunities for innovation and change, from the growth of art as a capital asset, to new sources of market liquidity, to growing demand for art banking. The world of art and finance will continue to converge for many years to come.”

The report found that the wealth management community is already responding to this new demand, with 88% of family offices and 64% of the private banks surveyed saying that estate planning around art and collectibles will be a strategic focus in the next 12 months. Meanwhile, 50% of the family offices surveyed stated that one of the most important motivations for including art and collectibles in their service offering was the potential role it could play in providing a balanced portfolio and asset diversification strategy.

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