From being a status symbol, today art is viewed as a high-profile investment. Art Dubai, Dubai’s primary international art fair, welcomes its visitors around this time of the year annually – perhaps making it the right time to take stock of art’s value as an investment if you have ever considered it.
Why art could make for a good investment:
Art offers an alternative to park excess funds, which you may not want to bank. Some analysts also believe that art provides the greatest long-term return of any asset class and enjoys a low correlation with traditional assets, which facilitates portfolio diversification. Tradable in different currencies, art also makes it easier to move funds.
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Why is art considered a double edged sword by others:
Art has no inherent worth and actual or economic utility unlike gold or realty. Art valuation is subjective while prices are volatile. There’s plenty of scope for manipulation during the dealing process such as staging bidders at auctions.
There is lack of data on art sales and the composition of different art indices. Some indices claim that art can give annualized returns of 10-12% while others estimate it much lower at around 4%.
The fancy towards a particular work, artist or movement and in turn pricing is largely out of the investor’s control. The cost of buying, selling and owning art are steep.
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Buying Art:
Art can be bought from galleries, fairs and auction houses such as Christie’s and Bonhams or directly from private owners.
If you are just starting out, gather market knowledge. Visit auctions and fairs such as Art Dubai, Sharjah Biennial and Abu Dhabi Art. Study the careers and pricing of artists that grab your attention. Most importantly, beware of dealers and pieces that cannot be authenticated.
Are there any finance options for this in the UAE?
In the UAE, there are no specific financing products for art. However, if you have your eyes set on a particular piece and are looking for ways to finance it, taking a personal loan could be an option.
Insurance:
If you do decide to invest in art, you should insure this high-value asset against theft, fire and other natural calamities. You can approach AXA, Zurich, and AIG among others.
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The Art Funds:
If you are skeptical of dealing in art directly, you can opt for art funds, which may also offer advisory services. In the Middle East, you have several funds including Daman Middle East Art Fund, Emirates NBD’s Managed Art Portfolio Service (MAPS) or the Fine Art Investment and Research Service (FAIR).