Advertise Here
Icon

Directory

IconActuaries
IconAdministration Outsourcing
IconAsset Managers
IconAssociations & Institutes
IconAuditors
IconBanking
IconBBBEE Consulting and Verification Agencies
IconBusiness Chambers
IconBusiness Process Management
IconBusiness Process Outsourcing
IconCompliance
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconCurrencies
IconDebit Order Collection Facilities
IconEducation and Training
IconFAIS
IconHuman Resources
IconInformation Technology and Software Partners
IconInvestment Consulting
IconInvestment Fund Managers
IconLegal
IconLISPs
IconListed Equities
IconOmbud
IconParticipation Bond Managers
IconPolicy Administration
IconPolicy Trading
IconProperty Unit Trusts (PUTS)
IconPublications
IconRegulatory Authorities
IconStock Exchange
IconSurveys and Research
IconTraining Courses & Workshops
IconUnit Trust Fund Managers
IconWellness Programs
Image
  Subscribe To »

Art as a store of value in times of crisis

Published

2020

Mon

27

Jul

During times of crisis, the appeal of collectible assets like art can intensify. Nervous of the present risks in investment markets, investors will look to include assets with a more consistent store of value in their portfolios. 

 

Historically, average valuations across the art market have tended to move upwards over the long term. In the short term, however, it all depends on demand. This is influenced by economic prosperity and the fortunes of those with the means to become significant owners.

 

“Each crisis is different and therefore the impact on art prices varies.  Works of the highest quality unsurprisingly always perform best but works of lesser quality or fashionable contemporary works that perhaps enjoyed a market in better times, will now struggle,” says Steve Kettle, Partner - Client Management, Stonehage Fleming Investment Management UK.

 

“The current crisis is accompanied by low interest rates which could assist the art market in the shorter term but the crisis comes after an extended period (two decades) of price rises for art and, COVID19 aside, the art market was looking for an excuse to reassess prices, especially for the contemporary market,” says Kettle.  

 

“As always, weak markets are unattractive to sellers of quality works and access to the very best works can, ironically, become more difficult at such times.  The owners also prize their store of value at such times.” 

 

As with all assets, risk management to preserve and grow the value of an art portfolio is vital. 

 

Economic, political and legislative changes can all have a significant impact on the value of and sale opportunities for an art collection. They can also affect the costs and logistics of moving works from one country to another, sometimes required at short notice. 

 

Maria de Peverelli, Executive Chairman, Stonehage Fleming Art Management explains: “Changes imposed by the Fifth Money Laundering Directive, for example, will impact and bring increased scrutiny on collectors’ activities.  Brexit could also have an impact on the art market.” 

 

“Collectors should also be aware of the inheritance or succession laws in different jurisdictions. They may restrict their freedom to bequeath their collection to a museum or establish their own foundation,” she says.

 

In a world of ever-increasing fraud, authenticity poses a risk to the value of an art collection. “Understanding what you’re actually buying, inheriting or receiving as a gift is just as crucial as knowing the parties in a transaction.”

 

The same is true when a work has been transferred several times between trusts, companies or other entities controlled within a high net worth family. Technically, each of these entities is a legal body in its own right, possibly with liabilities and obligations to other parties and beneficiaries. The basis of each transaction needs to be properly documented and authorised by the trustees or directors. 

 

“When it comes to transactions, the art market is largely self-regulated. Those rules that do exist vary from country to country, auction house to auction house, dealer to dealer and adviser to adviser. The lack of any recognised international standards for proving ownership, provenance, attribution, condition or even the parameters for technical analysis, all enhance the risk of acquiring a work which is not what it purports to be, or one with a tainted provenance,” de Peverelli says.

 

Does the documentation confirm what you are being told about an artwork’s export from the country of origin? Are there any gaps in its provenance? Do they indicate the possibility that it was looted during the Nazi period or similar? Equally, antiquities may have been excavated illicitly.

 

“Collectors should be mindful that their name and reputation could be tarnished by association,” de Peverelli warns. And this swings both ways. While a lack of information about previous ownership can taint an artwork, a renowned, documented provenance can dramatically increase its value. 

 

Unlike many other assets, art can have financial, cultural and emotional value. It is important therefore to consider the potential loss of all three when assessing risk. This is where the purpose of a collection comes into play.  

 

Purpose will mean different things to different people: what is an investment for one is a passion for another. If a collection’s main purpose is non-financial - philanthropic or in the interests of public education, for example - financial loss may not be the prime consideration. 

 

“By working through a strategic risk management framework, the wide range of potential risks can be more easily managed. Defining a purpose for the collection is a vital first step,” de Peverelli concludes.

 

 
Source: cdcom
 
« Back to previous page Print this page » |
 

Breaking News »

SANDWICH PANELS: A Burning Issue - Understanding the Risk

Sandwich Panel related fires have resulted in major property damage and business interruption losses over the years. What are Sandwich Panels? Sandwich Panels or Composite Panels are structures made ...
Read More »

  

Want to withdraw retirement funds on emigration? National Treasury and SARS say try again in 3 years' time

            by Joon Chong, Partner & Wesley Grimm, Associate at Webber Wentzel   The National ...
Read More »

  

THE NETHERLANDS - CORPORATE PAYMENT SURVEY 2020

This study is the very first Coface survey on corporate payment experience in the Netherlands. Originally, this survey had been conducted between February and early-March 2020 (the first quarter of 2020, Q1 2020), ...
Read More »

  

Will Europe remain a renewable energy powerhouse after the pandemic?

Global renewable energies: continued ascension despite the COVID-19 pandemic   Paris, September 8, 2020 – The COVID-19 health crisis has had a negative impact on short-term global renewable energy ...
Read More »

 

More News »

Image

Healthcare »

Image

Life »

Image

Retirement »

Image

Short-term »

Advertise Here
Image
Image
Advertise Here

From The Glossary »

Icon

Bond Funds:

Bond funds invest in gilts (bonds), fixed deposits and other interest-bearing securities. They may invest in short, intermediate and long-dated securities. The composition of the underlying investments is actively managed and will change over time to reflect the manager`s assessment of interest rate trends.
More Definitions »

 

Advertise

 

eZine

 

Contact IG

 

Media Pack

 

RSS Feeds

By using this website you agree to the Terms of Use.
Copyright © Insurance Gateway (Pty) Ltd 2004 - 2020. All Rights Reserved.