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Deloitte report: Economic uncertainty drives global interest in art and collectibles as investors look to spread risk


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Published: 17 April 2013

As economic uncertainty has led investors to shift focus from equities and bonds to physical assets, and demand in arts and collectibles has risen, a new type of global professional services in art and finance has emerged.  This is according to the second annual Art & Finance Report 2013, published by Deloitte Luxembourg with Art Tactic.

The report surveyed more than 200 private banks, art collectors and galleries and found that, along with the rise of the global art market, comes with it an increase in attention to the concept of art as an asset class.

“For wealth managers, competition is no longer the main motivation for including art in traditional wealth structuring: the key driver is client demand,” said Adriano Picinati di Torcello, Art & Finance Practice Director, Deloitte Luxembourg. “This is a trend the private wealth management industry cannot ignore, considering that clients are sitting on an estimated US$4 trillion of assets.”

In addition, the Deloitte Art Tactic Art & Finance Confidence Indicator revealed an increase in confidence in the next 12 months among wealth managers in the development of the art & finance industry. The barometer, which measures sentiments towards art as an investment, art secured lending and the general economic environment, was up this year from 32 to 42 percent. The report also projects demand to grow: 60 percent of wealth managers surveyed believe the industry will see even stronger demand in the future for ‘collectible and emotional’ assets.

Technology has also contributed to the growth of art as an asset class. According to the report, more than 300 online art ventures have been launched in recent years, covering segments such as data, information and research, social communities, auctions and galleries, business-to-business and consumer-to-consumer art transaction platforms.

“Technological advancements are driving change within all industries,” said Roger Dassen, Global Managing Director, Clients, Services & Talent, Deloitte Touche Tohmatsu Limited. “This is a development from which the industry can only benefit. New online transaction platforms add liquidity to the art market and will broaden the scope and depth of art market data available, potentially improving transparency and facilitating more accurate art valuations.”

The report also provided a snapshot of this new investment fund by market:

  • China: Despite a drop in sales, the market fueled growth registering a 69 percent increase and reaching US$1.62 billion at the end of the year. Last year, an estimated amount of 83 art funds and art investment trusts were in operation, among which 58 have been set up in China since 2009.
  • Latin America: Remained a growth region, with 25 percent reported auction sales. Sixty-seven percent of art buyers surveyed expected expansion to continue into 2013.
  • United States: Market attention will turn to, and likely move, into Europe.
  • Europe: Traditional art lenders such as Emigrant Bank Fine Art Finance that offer art finance in Europe strengthened its market presence.
  • United Kingdom: Russian sales raise renewed interest. The Russian Modern and Contemporary art auction market in London grew by 18 percent, signaling increased attention in this collecting segment.

Evolution of art in wealth management
The report also found that the increasing value of art might trigger banks to provide new wealth management services. In 2011, none of the banks surveyed were projecting to add art investment funds to their investment platform in the next two to three years. However, in 2012 18 percent of banks surveyed indicated they might include art investment funds as part of their product platform in the next two years.

“As a consequence of changing client demand, the role of art in wealth management is evolving and moving from client entertainment to art wealth management services” said Picinati di Torcello.

In addition, the report found that private banks will also increase their focus on art and philanthropy in the next two to three years. With significant sums involved in the intergenerational transfer of wealth (financial and non-financial assets) taking place, the report found that wealth managers will have to offer advice regarding art legacies and the most effective way of preserving their emotional, financial and cultural value.

Additionally, according to the report there is a rising tendency for collectors to use their art collection as collateral for loans with 41 percent of collectors surveyed saying they would use their collection for this purpose; 36 percent of collectors would use it to invest in other business activities; 39 percent to buy more works of art; and 18 percent to refinance other loans.

The complete version of the report, which has recently been presented at the 6th annual Art & Finance conference in front of an audience of 200 professionals, can be downloaded here.

Contacts

Name:
Wilfred Lee
Company:
Deloitte Touche Tohmatsu
Job Title:
Public Relations Senior Manager, Clients & Markets
Phone:
Email
wilflee@deloitte.com.hk
Name:
Bonita Chan
Company:
Deloitte Touche Tohmatsu
Job Title:
Manager, Clients & Markets
Phone:
Email
bonchan@deloitte.com.hk
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