Alternative investments comprise many types of assets, including real estate (i.e., commercial and residential property, land), businesses, and almost anything one can conceivably securitized.
As investors take a more hands-on approach to wealth management and portfolio diversification, the world’s wealthiest are looking to find adventure in new territories.
• Heightened exposure to alternative investments is building acceptance.
• “Investments of passion,” as an alternative to more mainstream asset classes like equities, has grown significantly.
• Pleasure is reported as the main motive for spending on collectables or “investments of passion,” and investment – for capital growth or as a “safe haven” – is reported as the second motive.
The role of art is changing. • Art is no longer just appreciated for its aesthetic value and the expression of its lofty ideals; it is now, more than ever before, considered an investment. • Prices paid for certain art pieces have gained international publicity, and art as an object of investment has become particularly alluring, e.g., Ben Enwonwu’s “Seven wooden sculptures” sold for £361,250 and “Mystery” for £300,000, and Edward Munch’s “The Scream” for nearly $120 million.
“Although the overall art market is slightly down from its 2011 peak, according to figures from Art Market Research, contemporary and post-war works achieved some record auction results last year, proving that buyers are still prepared to pay a premium for the most desirable works. ‘The sheer range of buyers is helping to drive up prices. …In the first quarter of 2013, Christie’s reported registered buyers from 128 countries.’”
The art industry is now worth over $3 trillion and has an annual turnover of $30 billion.1
• Art as an investment has an increasing demand, coupled with an absolutely limited supply, and the ability to survive the economic downturn.
• Art as an asset is in a class all of its own.
• As assets are grouped together based on the characteristics of their underlying companies, art is grouped based on the period in which it was made, the artist (whether they are living or dead), style and medium.
• Art acts as an asset because it is owned and holds monetary value, and it can be exchanged for such a value.
• The main attraction and the prime reason for the resurgence of art as an investment is its low correlation with other financial assets.