In a world dominated by traditional investment options, discover how art is emerging as a preferred alternative asset class among many investors. From Indian artworks gaining international recognition to the size of the global art market, this article explores the financial aspects and potential of investing in art.
The Context
Art and our culture share a deep connection, with their roots dating back to ancient settlements.
However, in today’s world, where good taste seems to be confined to food delivery apps and hyped-up NFTs, the idea of discussing art as an investment class almost feels like a forbidden subject. This notion has been further marred by AI engines—Mid Journey and Stable Diffusion, which have contributed to a fleeting dream. Fortunately, the situation is not as challenging in the exclusive markets of the United States, where renowned marketplaces and auction houses like Sotheby’s have thrived for more than 200 years.
To support and empower our investing community, regardless of their literary background in the field of alternative investing and fine arts, we have taken a unique approach among the popular DIY finance blogs. We will extensively dive into the realm of art as an alternative asset class. So, if you’re a passionate investor who seeks comprehensive coverage and doesn’t want to overlook any opportunity, you can count on us to provide the information you need.
The Art Landscape
With conventional asset classes like Stocks, Bonds, Gold, and Real Estate taking all the limelight, art as an investment is often overlooked by common investors in India, leading to the perception that it is only accessible to the ultra-wealthy.
However, for many affluent individuals, collecting art serves as a means to express their tastes and values, as well as to showcase their status and sophistication. The ownership of valuable paintings or sculptures can serve as a status symbol, signifying wealth, refinement, and a discerning eye.
Now, before you start feeling apprehensive about this post, let us assure you that we are not exclusively referring to investing in iconic masterpieces like those by Van Gogh and Picasso, which are essentially unattainable for common folks. Indian art is also gaining prominence on the international stage, making it a worthwhile consideration for investment purposes.
In the previous year, an untitled painting by V.S. Gaitonde, one of India’s most renowned artists, fetched a staggering ₹42 crore, marking one of the highest prices ever paid for an Indian artwork.
Further in the mentions of the evolution of the art landscape, in late 2022, the Indian Institute of Management Ahmedabad (IIMA), in collaboration with Aura Art Development, introduced an art index to assist stakeholders in estimating the market value of artworks. This initiative aims to bring order to the Indian art market, enabling enthusiasts, insurers, and investors to determine the fair market value of art.
According to details mentioned on the IIMA website, the initial data batch for this index included auction results for nearly 9,000 artworks by Indian artists, spanning over 20 years from April 1, 2001, to June 30, 2022, and encompassing auctions conducted by 11 different houses worldwide. Remarkably, this index reached an all-time high in the third quarter of 2022, reaching a new peak at 3,576.
The Size Of The Art Market
Until recently, the appreciation potential of art was primarily known through stories involving the ultra-wealthy. The lack of quantitative research on the financial aspects of art as an asset has hindered broader participation from the investment community.
However, advancements in technology and increasing interest from investors in alternative investments have led to a better understanding of the financial characteristics of art. This understanding is further facilitated by the securitization of the art market, making it more accessible.
As mentioned earlier, while the investment landscape for art in India is still in its early stages, globally, the art market is surprisingly significant. With an annual transaction volume of around $60 billion and an estimated total global value of $1.7 trillion, art represents a massive asset class. It is comparable in size to other major private markets, which attract participation from hundreds or thousands of institutions.
According to the Chartered Alternative Investments Analyst (CAIA) Association, within the collectibles market, which includes items like jewelry, watches, sports memorabilia, collectible cars, and wine, art accounts for approximately 75% of the annual transaction value.
On the other hand, it’s important to note that Indian art is still considered a niche market. Consequently, prices of Indian art are relatively lower compared to Western art, presenting a potentially promising investment opportunity at present.
Conclusion
Art investment has gained significant traction worldwide, and Indian investors are increasingly recognizing its potential. Investing in art not only provides the joy of owning beautiful artworks but also offers the possibility of financial returns and portfolio diversification. The sector is witnessing advancements and transformation, such as the introduction of India’s art index called the IIMA-AuraArt Indian Art Index.
In summary, art continues to establish itself as an asset class among high-profile investors who have explored traditional avenues like stocks. The development of this sector as an investment option is certainly worth monitoring. As you continue to enhance your knowledge as an investor through our blog categories, we hope you found this article informative and enjoyable to read.
Invest wisely!
