Is Art an Asset Class?

I don’t want you to think that I am changing my mind about the investment value of art.  According to the demand for the top-selling artists has remained consistently high and done better than most investment classes consistently over the last ten years.

During the last week I was asked by a trustee to explain the asset value of some works of art in an estate.  The key criteria for establishing an asset is that the price is set efficiently.  This requires an effective method of aggregating opinions into a price as is done on the stock market.  In the art market a very small group of people set the price.  Also a painting is only sold once in about 20 years.  Also it is not clear that value sets the price.  If art is sold at auction there are buyer and seller premiums that inflate the price paid.

So my answer to the trustee was: art is a wealth store.  It does not pay dividends or interest and can cost money to keep, such as insurance or cleaning.   But for those artists whose work is desired the tax free capital gain has historically been large.

Economists and financiers do have a soul and many of them are collectors not just because of the monetary gain but also because as humans we are natural collectors of things of beauty that up lift our spirits.  Art is probably top of the list of items that full fill this need as we live in our urban landscape.

So collect your art as a wealth store and enjoy it.