Art as an Alternative Asset

Art has been used to grow and diversify wealth for centuries but has remained a dormant asset class for most investors because of the high buy-in, fees and required expertise.

Alternative Investments: The Role of Art

Fractional art investment breaks down these barriers and gives investors access to an asset with prestigious history and huge potential.

To get a sense of this and the evolution of investors’ portfolios, Mintus conducted a survey of wealthy investors from the US, UK, and UAE. The results illustrate the diversity of modern portfolios and the important role of alternatives, like art.

What does a typical investment portfolio look like?

In today’s landscape, investors are looking beyond traditional asset classes and allocations. Against a backdrop of the conventional equity/bond portfolio suffering its worst year on record in 20221 and inflation reducing gains, the pre-existing surge into alternative assets has compounded.

Based on our survey, the average wealthy investor portfolio now contains upwards of 50% alternatives2, and one of the fastest growing allocations is art. The typical investor had an average of 6.1 asset classes in their portfolios, including an average of 3.6 alternative assets. The wealthiest investors (with portfolios over $5mn) had the greatest exposure to alternative asset classes, with an average of 5 alternative asset classes accounting for 58% of portfolio value.

What is the role of art in a balanced portfolio?

42% of wealthy investors surveyed already invest in art, accounting for an average of 5.9% of portfolio value. The survey results also showed a correlation with wealth – 79.5% of the wealthiest investors have art in their portfolio, compared to 19.4% of those with $1m-$2m in assets.

Investors cited interest and a desire to diversify their portfolios as the main reason for investing in art, which is consistent with what our investors tell us:

“I have invested in art and jewellery, mainly watches, as part of my diversified portfolio for some time. These are personal passions of mine that keep things interesting, but the art market has shown great resilience during recent volatility, helping to add an element of protection against multiple attacks.”

– Mark Bedford, experienced investor and Mintus client

What about fractional art?

Those surveyed by Mintus that currently invest in fractional art cite the attractive returns and advice from their professional advisor as key factors in their decision. By lowering the barriers to entry significantly and offering curated investment options, fractional art is staking its claim within investors’ portfolios as a hedge against inflation with strong returns. That’s why although relatively new, the fractional art market is growing rapidly with annual investment boosting to +$150m in 20223.

Undoubtedly, like the Medicis, these five examples of buying, collecting, and gifting art to be enjoyed by others is a potent demonstration of success and of taste; their art investments providing a constant dividend of cachet and, as auction performances show, significant financial return.

What is the outlook for art investment?

Wealthy investors identified art as the second most popular alternative investment to pursue in the next twelve months, ahead of Private Equity, Venture Capital Funds, and Wine & Spirits. This positive sentiment is strongest among 30–44-year-olds, also showing the sustainability of this asset class as the investor base matures.

This outlook is supported by ArtTactic’s most recent Global Art Market report, which found 84% of art market participants viewed the outlook for 2023 as equal or better than 2022. Within the blue-chip (+$1m artworks) bracket, the sentiment is even stronger with 92% having confidence in the market maintaining or improving on its current trajectory4.

  1. CNBC, Why 60/40 portfolio is on track for its worst year ever
  2. Mintus surveyed 125 UK, US and UAE investors with >$1m investible assets in January
  3. ArtTactic, Fractional Ownership Monitor, December 2022
  4. ArtTactic, Global Art Market Outlook 2023

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