Art is not only beautiful to observe and live with, but it is also one of the most underappreciated asset classes that one can invest into. It has proven to be tremendously advantageous to those who can afford it, in a way that is not represented only by an index or historical performance graph.

Scarcity

Most works are one-of-ones, which is to say that no more could ever be produced, and scarcity tends to drive value across all asset classes. For blue-chip pieces, the uniqueness of each work can drive demand sky-high, which in turn sends prices sky-high. Even art that is editioned, such as screen prints or cast sculptures tend to be produced in limited quantities, and there is generally accurate transparency around those quantities.

Low Correlation to Markets

Today, in the midst of tumultuous market conditions, blue-chip art has shown tremendous resilience, having been one of the best performing asset classes so far this year. According to a study conducted by MoneyMade, art has the lowest correlation to the equities market of any alternative asset class, making it a great tool for diversification and downside-protection.

Tax Advantages

There are also tax-advantaged transaction opportunities with art, much like there is in real estate. Additionally, the advent of freeports, or airport-based art storage facilities that allow for the avoidance of sales tax, has been advantageous for collectors, though their use can come at a significant expense.

Established Market

Unlike many other, newer markets for hard assets, art is a truly global market with a very wide array of interested parties and potential buyers. Participants include collectors, museums, foundations, secondary market galleries, auction houses, investment funds, and some non-industry businesses, thus making a greater potential pool of buyers and sellers.

Aesthetic Benefits

Beyond sheer numbers, there is also a “pleasure dividend” - aka lifestyle or aesthetic value derived from this asset class, which in turn, creates what might appear to be irrational exuberance around certain pieces. Simply put, art is one of the great pleasures of life, and great art can be transcendent.

Conclusion

It is easy to just look at the performance of high-end art this year and previous years to see how beneficial investing in blue-chip art can be. But it is also important to examine the reasons that drive interest in the market to understand how it can sustain itself.

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