It is widely accepted that the key to creating wealth is through building a diversified portfolio of investments with a long-term horizon. The recent performance volatility in world markets, particularly in the traditional asset class of equities has demonstrated the benefit of including alternative investment strategies as part of a diversified approach, especially those that have an established trend of showing capital appreciation over a longer term.
Study has shown that art holds demand in the market during an economic boom as well as a slowdown. Investing in art is one alternative investment strategy, which has been gaining increasing acceptance around the world. The increasing activity of art auction houses over the last decade has provided an important secondary market which has resulted in liquidity, promoting art not only as an object of pleasure but also as an inevitable asset.
The Indian Art Market
Art is an inherent part of Indian culture. Its presence plays an important role in Indian history and society.
The following are the trends in the current Indian art market scenario:
Contemporary art grows as economies globalize: it is happening here and now.
Growth of GDP and the economy as a whole.
An immense increase in purchasing power of HNI’s and NRI’s.
Art is regarded as a trend for safe haven emulated by HNI’s and NRI’s.
NRI’s looking for identity.
Indian affluent looking for a new status symbol.
Availability of documentation and authenticity of works of art.
Awareness about artistic significance and pricing of paintings.
Growth of services and expertise within the art world.
Market infrastructure is falling into place.
Growing secondary market has resulted in liquidity.
No secondary market for any other collectable category.
‘Never sell culture’ resulting in limited supply.
Increasingly being viewed as a component of portfolio analysis and investment.
An increasing realization regarding the limited supply situation for great works of art; hence they tend to command a high premium in price.
Investment in a new age market. Enter in early growth phase.
Supply side has matured over 3 decades with established art history, artists and galleries.
Buy side is consolidating after a break out.
Market is firmly in the sight of affluent Indian Diaspora.
Early mover scenario is still on offer.
Asset has a long term investment perspective.
Established artists have sustainable value.
Younger artists have higher risk/higher return.
Best value as an investment in times of economic depression.
Art Investment VS Other Investments
5 years
With a simple buy and hold investment strategy, Indian Art has given a 2000% return over the last 5 years. This figure has been calculated by taking an average appreciation in value of paintings by 50 artists over the last five years.
The best Equity Mutual Funds have given a return of 1100% over the same period as compared with the Sensex which has appreciated by only 200% and property which is considered a safe investment has given a return of 250% over the same term.
Thus, compared to the other asset classes Art has out performed them considerably giving the highest returns.
Benefits
Buy side will dominate market for many years driving prices and growth.
Market width and depth increasing every day.
Well managed early movers will reap the whirlwind.
Above average returns only expected from ‘niche’ asset classes such as paintings.
Research should be carried out before buying a painting
Profiling of artists and their works in recent years with careful attention to emerging artists.
1. Age of the artist.
2. Academic qualifications.
3. Full time / part time / Art teacher.
4. Awards / Citations / Merits received.
5. Participation in National / International shows / workshops etc.
6. Quality of the work.
7. Contents of the work.
8. Medium of the work.
9. Artists ability to explain the work.
10. Technique and style of work.
11. Buyer list.
12. Critic’s perception of the artist.
13. Association with art galleries.
Analysis of market trends.
Analysis of acquisition trends.
Identification of artists bought by distinguished art buyers.
Review of recent auction results (works of art, if applicable).
Consideration of the impact of other economic or industry trends.
Identification by Art Adviser of acquisition opportunities based on the above research.
Development of acquisition strategies based on timing and works of art to be purchased.
Beware of sudden fluctuation in prices of young artists.
Investments in Mutual Funds are subject to market risks. Please read the offer document carefully before investing. Insurance is a subject matter of Solicitation
