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Press article: Why should art be considered as an asset class?

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Introduction

For three years now, Deloitte organises an annual conference to explore the emergence of art and other collectible assets as new financial asset classes alongside traditional asset classes such as bonds, equities or real estate and gold. This year it took place on 20 and 21 October 2010 in Paris.

The main question that we will try to address briefly in this paper is: Why should we look at art as a new asset class?

The main characteristics usually used to define art markets can be summarised in the following way: high-risk investment, illiquid, opaque, unregulated, high transactions costs, at the mercy of erratic public taste and short-lived trends. Artworks do not generate any cash flows that can be discounted, except to the extent that income can be obtained through lending and incurring expenses in the form of storage, insurance and associated costs. The art markets are also currently virtually ‘unhedgeable’. This short description of the art markets might be enough to discourage many to look at it.

However, if we take a closer look at the latest trends which are directly or indirectly affecting the art markets’ environment, they suggest the emergence of a financial fine art market where fine art is considered as a new asset class. The simultaneity of those trends creates an environment that in the past has never been very favourable to supporting the materialisation of such a transformation.

While this analysis mainly focuses on paintings, a similar phenomenon is experienced by other groups of collectible assets, such as fine wines, rare watches, precious stones or stamps.

‘Paintings’ is one of the categories of the fine art markets which includes various subcategories, such as drawingwatercolour, painting, tapestry, prints, posters, sculpture-installation, photography as well as audiovisual and multimedia. The fine art markets are a subset of the arts and antiques market.

The paper is structured around three sections: a set the scene section, an analysis covering some of the factors explaining why art is considered as a new asset class and finally a glance at the market size of this new asset class.

To read the complete article, click on the attachment below.

Contacts

Name:
Adriano Picinati di Torcello
Company:
Deloitte Luxembourg
Job Title:
Directeur - Art & Finance
Phone:
+352 451 452 531
Email
apicinatiditorcello@deloitte.lu

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