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Investment in art soars

Record prices being paid for top-end art work and a big increase in insurance cover for them show the asset class is more popular than ever, as demand for tangible investments continues to flourish.

Record prices being paid for top-end art work and a big increase in insurance cover for them show the asset class is more popular than ever, as demand for tangible investments continues to flourish.

Sotheby’s recent sale of impressionist and modern art in New York managed to raise the second-highest amount in the category since the financial crisis began in 2008.

Highlights of the $230 million (€243 million) auction included $41.6 million paid for Paul Cezanne’s “Les Pommes”. The painting of apples on a plate was estimated at $25 to 35 million. Other headline sales were Amedeo Modigliani’s 1909 “L’Amazzone,” that sold for $25.9 million.

The record prices paid at the auction are likely to be duplicated at upcoming contemporary art auctions in New York and London, as appetite among investors for art remains as keen as ever. Over the 10-year period to the third quarter of 2012, fine art as measured by the Knight Frank Luxury Investment Index, which aggregates a number of indices including the Old Masters 100, Modern Art 100 and Contemporary Art 100, rose just under 200%. Over the same period, top-end London residential property rose by just over 100%.

Strong demand comes at a time when insurance cover for high-end art has soared. London-based multi family office Stonehage said that 30% of the value of all insured assets of its ultra-high net worth clients now comprises art. One of the firm’s investment managers said the number of clients with insured art assets managed by Stonehage has more than doubled in the last two years.

“The long-term performance of the art market, particularly at the high end, has delivered impressive returns, so collectors increasingly need to ensure they have the right cover in place,” says Steven Kettle, an executive director at Stonehage.

Investors have piled money into passion investments like art for some years now, with demand for classic cars, rare coins and stamps reaching record levels. But the financial crisis and subsequent recession in much of the world economy has fuelled demand even further as investors sought refuge in tangible investments.

Nevertheless, art returns aren’t always as spectacular as many investors might think. Pop singer Madonna sold a Fernand Leger painting for $7.2 million at the Sotheby’s action, but she bought it in 1990 for $3.5 million. That doubling of returns over a period of 22 years would not impress too many investors. 

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