In the current situation of uncertainty, the investment focus for Ultra High Net Worth Investor is shifting towards alternative investments such as arts & collectibles. This asset class has shown a low correlation with traditional asset class besides the emotional and social value.
Hence it is an ideal hedging tool against inflation and the diversification strategy of an Ultra HNI portfolio.
Total investment in art and other collectibles (i.e. wine, classics, cars, jewelry, gems, and watches) is largely driven by Asian markets growing at a CAGR of 14-23% from 2017 – to 2021.
Despite the significant size of the art and collectibles market and its rapid growth in the coming year, this market remains an uncontested space given a lack of comprehensive services in the sector across Asia.
Art and collectibles are a trillion-dollar market with significant opportunities.
Technology is a key driver of innovation and change in art
Technology has enabled new art investment and ownership models to emerge which could attract new audiences and potential investors to the art market. The recent development around tokenization and the growing Decentralized Finance market would highly support the art industry.
Technology is not only addressing many frictions of the art market but also issues related to transparency, valuation, and authenticity. The advent of big data and artificial intelligence will likely catalyze the innovation of analytical tools which can assist art valuation, and risk monitoring and provide deeper insights and research into various aspects of art & collectibles.
Younger collectors are particularly tuned to recent developments in art investment products and services with a strong interest in NFTs (Non-Fungible Token).
Over the past few years, young collectors have shown interest to buy the latest cutting-edge creations and have ditched bidding on traditional paintings and sculptures in favor of purchasing digital prints, accessible via blockchain databases with special encryption called NFTs.
Skeptics might wonder if this is a speculative bubble destined to burst. However, this conversation overlooks the utility and practicality of owning digital artwork, which takes less space, collects less dust, and requires no physical maintenance.
Is art a sustainable investment avenue for investors?
While the pandemic has had wide-ranging consequences. The severe impact of COVID 19 rests on the priorities of wealth creation for Ultra HNI investors.
Investors were reluctant to invest in a traditional asset class such as stock and real estate instead the increased search for meaning and purpose alongside a desire to contribute more to the world around has been a focus for investors. The pandemic emphasized the need to shift their dependency on altruistic giving and a supportive model towards a purpose-led and impact-oriented investment strategy.
Investors look at art as a value-preserving asset. The relatively new area is likely to gain traction, Investors have shifted their focus towards sustainable investment.
Art and culture have stayed on the fringes of what most sustainable finance investors would consider viable causes to support, the tide is now turning. Governments around the world are increasingly realizing the economic and social value of culture and the creative sector in our society.
Regulation to improve trust in the art market.
The topic of regulation has left the market into two split – those who believe the market is best left to self-regulation versus those who think government intervention is required.
To grow the art market beyond its boundaries, it is critical to attract new audiences and develop trust and transparency.
The art market has been sluggish to evolve and adapt to new business it is still believed that the art market needs to modernize its business practice.
However, there seems to be light at the end of the tunnel. New regulations around ownership, transparency and anti-money laundering are already affecting the market and will force existing businesses to evolve business practices.
There has never been a better time to invest in art, and the interest in art as a viable asset is all set to grow in the future.
While it is natural that the art trend will come and go, immersing yourself in the art world and keeping an eye on what artists and the community at large are talking about is key to spotting profitable developments within the market.
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Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.