Wealth Management

Farrer & Co reveal how art is once again becoming a popular form of alternative finance and security for lenders and borrowers.

Private collectors, the art trade, museum directors, trusts and foundations, and members of leading heritage bodies and visitor attractions look to us for advice on their challenging issues. These include negotiating the acquisition of major pieces or collections, title disputes, the reproduction and exploitation of art and literary works, the tax-efficient transfer of artefacts, recovering stolen artworks and managing the associated media, asset, tax and estate planning for successors, authenticity and provenance issues.

 

 

 

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Deloitte Luxembourg and ArtTactic is delighted to present the 2nd edition of the Art & Finance Report 2013. A joint effort, in which Deloitte and ArtTactic analyzed the industry’s development over the last 14 months.

This year’s report confirms  that the global art market is on the rise and the increasing attention being paid to the concept of art as an asset class, are fostering the development of a new type of professional services in the art and finance industry.

 

>>DOWNLOAD report here 

 

The highlights of the report include:

  • Increase in confidence among wealth managers in the development of the  Art & Finance industry 
  • Economic uncertainty is increasing client demand for alternative investments: portfolio diversification is more important than investment returns for wealth managers collectors and art professionals surveyed 
  • The role of art in wealth management is changing from client entertainment to art wealth management services.The increasing value of art is creating a need for banking services to protect, enhance or monetise this value 
  • The global art investment fund market increased by 69% to US$ 1.62 billion in 2012 driven by Chinese demand for art investments, but it remains a nascent market
  • A new Freeport in Luxembourg scheduled to open in 2014 is likely to be a major attraction for the wealth management and art investment fund industry. and is likely to become a major draw for bringing art and collectible assets to Luxembourg
  • The Art & Finance industry is set to benefit from greater transparency and more liquidity: new online transaction platforms add liquidity to the lower end of the art market, and will broaden the scope and depth of art market data available, which in turn will improve the valuation of art
  • Online education is set to play an increasingly important role in building confidence in the art market.

 

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The growth of the art market and its infrastructure in the last 10 years is fuelling an increasing interest in art as an asset class, which means we now can start talking about the early stages of an Art and Finance industry.

The lack of institutional interest in art as an alternative investment, and the reluctance of private banks and wealth managers to get involved in something as esoteric as art, have often been used as arguments as to why this market will not evolve beyond its current form. However, this report suggests that this could change in the next two to three years, as private wealth managers surveyed by Deloitte Luxembourg and ArtTactic, are showing an increasing interest in offering wealth management services related to art and collectibles.

The positive performance and growth of the global art market in the last 10 years have coincided with a dramatic increase in the global High Net Worth Individual (HNWI) population, which was estimated to be 7.2 million in 2000 and has increased by 51% to 10.9 million in 2010. With art investment accounting for 22% of HNWIs’ investments of passion, it is likely that the art market will continue to grow in line with the global population growth of HNWI. But how is the private wealth management industry responding to this change? What are the challenges and how could they be addressed? These are some of the important questions we have attempted to highlight in this report.

Methodology and limitations
Deloitte Luxembourg and ArtTactic conducted the research for this report between July and October 2011. We surveyed 19 large private banks predominantly in Luxembourg, employing more than 900 private wealth managers. Our aim was to establish the perception, motivation, as well as the current and future involvement with art as an asset class. At the same time, we conducted a similar survey among 140 international art professionals (galleries, auction houses and art advisors) and 48 top international collectors to establish whether the issues and concerns in the art market were of a similar nature as those experienced in the wealth management community. We have also been in contact with 34 art investment funds during this research process.

Testing a new approach
Deloitte Luxembourg and ArtTactic recognise that the findings are only indicative. They may be influenced by the fact that the focus was largely on private banks and wealth managers in Luxembourg. However, due to the global nature of these banks, we still believe that the findings reflect a broader perception within the global wealth management sector.

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