Art & Finance report 2013 | Whitepaper
It is only 14 months since we launched the inaugural Art & Finance Report, and in this short space of time we have seen significant shifts in perceptions of the role of art in finance, as well as the role of finance in art.
If there is one key word we could take away from this report, it must be ‘convergence’. What emerges from the report is a gradual convergence in the motivation and interests of key stakeholders in the art market and wealth management community as regards art as an asset class, and this trend is driven by the client.
The survey of wealth managers shows that industry competition is no longer the main motivation for including art in a traditional wealth management context; in fact the key driver is client demand. With clients sitting on an estimated US$4 trillion of treasure assets, the private wealth management community has good reason to take notice.
One of the main factors increasing client demand is the current economic uncertainty, which has created a stronger investor appetite for real assets that have a low correlation with traditional investments such as equities and bonds. Moreover, against a backdrop of further quantitative easing and the risk of inflationary pressures, art and collectibles are increasingly viewed as a diversification tool by High Net Worth Individuals (HNWIs).
The focus has clearly shifted from looking at the returns that can be made on art to the role of art as a diversification and capital protection tool. However, the emotional return remains the key driver for art buyers and investors, and needs to be embedded in the wealth management approach to art. The client-driven trend towards services that protect, maintain and enhance the value of art assets will force a more holistic and integrated approach to art in the context of wealth management.
One of the key challenges for the future is the required shift in the current wealth management approach from looking at art as a ‘softer’ service (mostly client entertainment) towards developing a set of wealth management products around the art asset itself.
Methodology and limitations
Deloitte Luxembourg and ArtTactic conducted the research for this report between June and November 2012. We surveyed 30 private banks predominantly in Luxembourg, but also in Spain and Poland, which enabled us to give a wider perspective of perceptions in the European wealth management community. Our aim was to establish the perceptions and motivations related to art as an asset class, as well as the current involvement with art and future expectations.
At the same time, we conducted a similar survey among 112 art professionals (galleries, auction houses and art advisors) and 81 important art collectors (up from 48 in 2011) worldwide to establish whether the issues and concerns in the art market were of a similar nature to those experienced in the wealth management community. Due to the broadening of the sample of private banks from 18 in 2011 to 30 in 2012, which included additional banks from Poland and Spain, some regional variations in the findings were to be expected.
We have highlighted these regional differences where we felt they had an impact on the interpretation of the overall findings.
This year we also launched the Deloitte ArtTactic Art & Finance Confidence Indicator, an annual barometer for wealth manager sentiment towards art as an investment, art secured lending and the general economic environment in the next 12 months. We hope this confidence measure will give an insight into how wealth managers see the immediate future, and together with the other survey findings, help us to better understand the opportunities and challenges facing the evolution of the Art & Finance industry.
To provide a market context to survey findings we have given a broad, international overview of recent developments across various regional modern and contemporary art collecting categories. Most of the data is collected from Sotheby’s and Christie’s, as these firms represent a substantial share of the auction market, although certain regional markets such as China, India and Russia also include domestic auction data.
We have estimated the size of the global art fund industry, combining data and information from interviews with U.S. and European art funds, as well as public records on art investment trusts and art funds in China.
We are also delighted to be able to publish interviews and opinions from key figures in the Art & Finance industry: Pierre Valentin, Partner at Constantine Cannon, on the subject of European art lending; Sergey Skaterschikov, Founder Skate’s Art Market Research of Next Edition Partners on the future of the online art industry; Guillaume Cerutti, Président Directeur Général of Sotheby’s France on the current state of the art market; Christopher Stuart Sinclair, Director at Deloitte Tax & Consulting in Luxembourg on the Alternative Investment Fund Managers Directive; Prof. Rachel Pownall from Maastricht and Tilburg University on art market indices and the art market symposium and Fabian Bocart, Founder of Tutela Capital on market and liquidity risk measurement tools.
Deloitte Luxembourg and ArtTactic recognise that the findings are indicative and recognise the limitations of these findings; however, we believe that the results reflect a broad representation of the perceptions and attitudes that exist in the global wealth management and art community.
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