Investment In Arts

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 & NRI’s

 Art is regarded as a trend for safe haven emulated by HNI’s & 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

Percentage Return

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