Listen to Our Latest 20-Minute Webinar

We invite you to listen to the below webinar where Philip Hoffman, CEO, and Anita Heriot, President of the Americas, further discuss the economic advantages of diversifying into art or collectibles and where to take caution when considering an investment.  

How to Utilize Your Collections as a Hedge Against Inflation

Our CEO & Founder Philip Hoffman speaks with President Anita Heriot in a 20-minute virtual forum. Watch to learn about the latest on inflation and how to leverage collections to maneuver through the current economic climate.

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ART & INFLATION IN 2022

In recent months, as inflation rates have surged and stock markets have slumped on both sides of the Atlantic, collecting art has increasingly become recognized as a solid investment strategy. Whilst not all artworks and collectibles are created equally, and therefore do not offer the same possible financial protection, the art market has historically shown resilience during market downturns and is largely uncorrelated to other major asset classes. The right art investment has proven to be an excellent store of wealth over all time periods, exceeding inflation.

CASE STUDY

The best – and only – case study of art investment as a hedge against inflation is that of the British Railway Pension Fund, which specifically and successfully bought art in the 1970s against a backdrop of inflation rates as high as 17%. The fund invested 3% of its holdings at the time (£40m) into 2,400 objects across a vast range of categories and achieved an annual compound interest of 13.1%, while the average stock market investment returned 10%.

ART IN THE POST-PANDEMIC MARKET

Apart from hedging against inflation, we see the benefit of art being uncorrelated to other asset classes in the speedy recovery of the market during moments of economic decline. In 2021 – as the world entered a post pandemic recession – auction sales totaled around $12.6B at the three major auction houses (Sotheby’s, Christie’s and Phillips) up 2.3% from 2018. Furthermore, collectors returned to the market with a renewed appetite for buying and 167 artworks achieved $10m+ each, twice as many as the previous year. The market so far in 2022 continues to go from strength to strength with the ArtPrice Contemporary Art Index reporting a 16.2% year to date increase compared to the S&P, which is down 14% over the same period.

TOP 5 TAKEAWAYS

AUDIT YOUR COLLECTION

It is crucial to understand the current fair market value of your collection before making any financial moves. Once you have this information, you can then develop a strategy.

BE PREPARED TO HOLD FOR 3 TO 5 YEARS

Art acquisitions typically should not be liquidated for several years. With annual revaluation, one can develop an intelligent sales strategy that corresponds to the market.

STICK WITH BLUE-CHIP

Now is not the time to risk investing in Young Contemporary artists with little track record. Stick to blue-chip artists with an established secondary market that has steadily increased in value. There may be some fantastic buying opportunities in the near future, with masterworks coming to market to bring their owners liquidity, with less competition from other buyers.

DIVERSIFY

Look to other opportunities in the collectibles market such as jewelry and watches of the highest quality possible.

DO YOUR HOMEWORK

Be sure to turn to a trusted advisor and research your options before committing to any important financial decisions.