United Kingdom

Millionaires buy more art than ever

Distrust of markets fuels growth in passion investments

LONDON. Millionaires are putting more money in art than ever before, according to a new report by Capgemini SA and Merrill Lynch & Co. The number of millionaires in the world grew by 17% last year and, with financial markets still in flux, art has emerged as the most popular category of “passion investment” according to Capgemini’s Ileana van der Linde who managed the research. “There has been a real shift in psyche,” said Van der Linde. “There is major distrust of financial markets and regulatory bodies, and people are looking to put their cash into tangible assets.The World Wealth Report 2010 surveyed 1,200 wealth managers who represent 150,00 clients across 71 countries, and found that the world’s wealthy dedicate around a third of their overall holdings to passion investments. Over a quarter of those surveyed, 29.8%, said art was the top choice of passion investment for financial gain, said Van der Linde.

Emerging markets have traditionally turned to art and other collectibles including gold and gems, said Van der Linde, citing the example of newly rich Chinese buying up historic items from their culture for investment and as a potential inflation hedge. What’s new, though, is that the trend is now gaining ground in more mature markets: 37.4% of European, and 31.1% of North American millionaires now view art as the most fruitful passion investment, according to the report. “This is a significant turning point in the perception of art as an asset class in western societies,” said Michael Plummer of Artvest Partners.

So, what’s the likely effect on the art market? Of those surveyed, 90% were high net worth individuals who have investible assets worth between $1 to $5m, excluding their primary residence, according to Van Der Linde who said that “their investment would be felt at the lower price points?they’re not the people spending $20m on one work.” But, art is the number one passion investment for the ultra-rich?those with wealth of $30 or more, who represent 1% of those surveyed. And, that 1% “holds 35% of the overall wealth,” Van der Linde said.

However, the majority of those surveyed, 56%, said that the “opaque, unregulated and illiquid nature of the art market discouraged them from participating more fully”, and 63% said they would be more likely to invest if they had better access to expert advice.

A version of this article appeared in our July/August print edition

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Comments

21 Aug 10
16:54 CET

DOTTIE DIAMANT, SANTA FE, NM

As private art dealers in the Southwest, we have seen this trend before for and agree that having a tangible, one-of-a-kind, beautiful artwork is much more satisfying than a stock portfolio or a mutual fund. That said, buying art solely for investment comes with all the inherent risks of any other investment and these items certainly do not all rise in value over time. However, we've discovered that our most passionate clients (whether millionaires or not) find it incredibly rewarding to surround themselves with unique and precious objects and reap many kinds of returns some of which may be financial. Dottie Diamant, Principal www.fineartsofthesouthwest.com

6 Jul 10
21:37 CET

JING DAILY, NEW YORK

It's great to see art collecting on the rise. It's all about diversification in art -- what goes for all investing also goes for visual arts. A great point is the Chinese Collector growing to rival the Western, as they rise to be prominent collectors of wine, jewelry, as well as Contemporary Art. We've been closely watching auction results in the Chinese Art Market, and we'll be watching for the implications of these changes on the art market itself. http://www.jingdaily.com/en/culture/arttactics-analysis-of-christies-spring-auctions-in-hong-kong-highlights/

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