This summer has been a productive and unpredictable one in many ways. I’ve spent most of it in my studio, lost in the process of creating a new body of work. I’ve also spent more time exploring the world of investments, stocks, shares and the science of trading. The areas I’m keen to follow include alternative investments and the so called ‘ SWAG’ assets that are silver, wine, art and gold.
It’s very clear why ‘ SWAG’ assets are growing in popularity. The increase in household, financial and government borrowing over the 2000-2010 period created a false illusion of prosperity. Our trusted banks became convinced of their own ability to control the business cycle and our governments allowed institutions and households to act recklessly. The problem was caused by the creation and availability of too many things, coupled with a false belief we needed everything available in the big consumer market. There was always too much supply plus an artificial demand created by excess borrowing to satisfy excess supply.
Many of the gains reaped by investors in the last decade or so have been a result of strategic diversification of their holdings and exploring a broad range of asset classes. A new use for art has emerged, where it is undoubtedly as a solid investment. Purchasing art has always been something the more sophisticated and well informed investor has exploited (This is evident with record breaking sales at Sotheby’s and Christie’s auctions) but it is becoming more prevalent amongst those with less knowledge of the sector or without large portfolios.
SWAGs outperformed other equities during times of economic downturn because they provide the profitable principle of “scarcity economics” and the value of art is partly related to its uniqueness. Moreover, in an unsteady market, people will be drawn to stabile assets that may be bought and stored indefinitely. Most importantly, as their returns are not related to the patterns of the stock market, they add a sensible diversity to any portfolio.
Investors are looking to protect themselves from losses by increasing the ratio of non-correlated instruments in their portfolios and art wealth management companies are readily available to assist art buyers with their overall wealth management strategy, helping to develop bespoke art portfolios that demonstrate high potential for value creation.
Looking at the global economy and the art market is very interesting. Art Sales Reached £40 Billion In 2012 Outperforming the Equities Market. As global wealth grows exponentially beyond the US, UK and mainland Europe, the art market has become more globally influenced than ever before. Fuelled by triple-digit growth in recent years, China has overtaken the U.S. as the world’s largest market for art and antiques, representing 30% of the global market in 2011.
The 2012 RBC/Cap Gemini World Wealth Report states Asia-Pacific surpassed North America in high net worth individual population to become the largest HNWI region for the first time. With newly acquired wealth, demand for luxury goods increases. As emerging markets become wealthier, the art market is likely to continue to be comprised of a much more diverse set of art buyers. This is generally good news for the art market. There’s a lot to discover about the art world, the amount of money in the industry and the potential to have a slice of the pie.