How to build an art investment portfolio
The art of any investment begins with planning, research, analysis and an understanding of your personal objectives.
The strategies for investing in art and investing in property and other assets are more similar then you might think, as art also has solid blue-chip performers and more speculative emerging talents.
Balance the risk
Putting together a balanced portfolio is a key aspect of art investment. A mix of different artists and styles spreads risk and maximises potential gains.
Many of our clients have chosen to include a combination of the following types of art in their investment portfolios:
- Limited edition prints, such as etchings, in small edition numbers
- New media, such as photography and digital multimedia
- New schools, such as Australian Indigenous art
- One offs – unique pieces from recognised artists
Analyse the potential
The potential capital growth of an art asset is based upon sound analysis of key data. When selecting which art to include in your portfolio, you should also consider the following key indicators to growth.
Artist - Take into account the reputation of the artist. Well-known artists with a strong track record are less volatile and therefore provide more conservative growth. Lesser known emerging artists, whose pieces may cost less, usually carry more risk. Leading indicators of artist notoriety include awards, prizes and collections.
Medium - Focus on well constructed art works from top Australian iconic, emerging and Indigenous artists and look for the highest quality you can afford. The image itself also needs to be something that is consistently marketable.
Market - Monitor statistics and key indicators such as art awards, auction results and media articles for market trends and highlights. Visit as many different art galleries, events and exhibitions as possible to get a feel for the market.
Provenance - Make sure all artworks are accompanied by a Certificate of Authenticity and when acquiring works on paper, ensure they are signed personally by the artist and the provenance of all pieces is guaranteed. For Indigenous works, working photos are a valuable way to ensure provenance. The best advice is not to buy from sources you don’t know well.
Enjoy a return on investment
Art, like property, is a mid to long-term hold and just like property it can offer you a return on investment in addition to the potential capital growth.
Smith & Hall has developed a corporate rental program for its clients to allow the leasing of the artwork bought through the gallery to carefully selected organisations.
This allows clients to enjoy income from the asset, while it is potentially appreciating in value.
Depending on the artwork, the offer of between 4% and 8% per annum return for each work leased out makes it a very competitive income-generating asset.
Use your self managed super fund (SMSF)
In Australia, recent changes to SMSFs have opened a door to those wishing to invest in art through a super fund.
There are specific rules that apply to this kind of art purchase, including conditions that prohibit enjoying the art in your own home, but it can still be an attractive proposition for investment diversification.
The Smith & Hall corporate rental program allows their clients to derive income from their art assets, minimising ongoing storage costs and complying with SMSF regulations. If you are interested in buying art through your SMSF, you should seek independent advice from a tax or superannuation professional first.
For more information on art as an investment, call us on +61 2 8823 4300 or request a free copy of our guide to art as an investment.
