ART: PASSION OR INVESTMENT 

Passion investments have undergone a renaissance since 2020. These investments are often more hobbies than serious attempts to grow wealth, but art stands apart from other luxury assets in a class of its own.

BY BLAKE J. NOAH
13.01.2023

Of course, art is more than an asset—and many collectors don’t like viewing it that way. They feel that art is to be enjoyed and collected for its own sake rather than in the pursuit of financial gain. 

As dedicated art enthusiasts ourselves, we believe it can be both.

The data bear this out. A recent Citi report shows that, from January 2020 through June 2021, the Masterworks.io All Art Index delivered a 28.2% return—comparable to broad, publicly-traded risk asset classes. Between 1985 and 2018, the contemporary art market returned an average of 7.5%, a competitive return compared to global high-yield bonds at 8.1%. 

But art will always be more than an investment option. A piece of artwork that you love looking at holds inherent value, regardless of its long-term performance as an asset. It is a conversation starter, a showpiece, and a legacy you can pass on to future generations.

The long-term performance of the art market is proof that you can actively enjoy growing your wealth while surrounding yourself with beauty in the process.

The case For art as an investment

From whiskey and wine to luxury watches and classic cars, investment-grade collectables are one way to diversify your investment portfolio while expanding your collection. However, all of these luxury goods share a common downside—by using them, you depreciate their value. 

Not so with art, which can be actively enjoyed while hanging safely on your wall, appreciating in value.

As worry about recession pushes investors toward more diverse assets, art has emerged as one of the leading ways for investors to channel their passion into profit. Deloitte’s 2021 Art & Finance report shows that 85% of wealth managers recommend including art in a balanced portfolio. The UBS and Art Basel collaborative report Arts Economics 2021 showed that 61% of high-net-worth collectors had over 10% of their wealth invested in art, and that number shot up to 30+% for millennial collectors.

Beyond its aesthetic and cultural appeal, artwork has other benefits that set it apart as an attractive investment. Its returns have a low correlation with stocks and bonds, so art is relatively insulated from market turmoil. Historically, art outperforms the stock market during periods of recession. It retains value during periods of high inflation in a way that currency does not. It is also a unique object you can see and enjoy in a way that most other asset types simply don’t allow. 

Of course, investing in art does carry significant risk. Art is an illiquid asset and requires robust vetting to ensure that works are genuine and carry proof of provenance. Expert advice is key for any investor looking to diversify into the art market—but the dividends are too numerous to capture them all on a balance sheet.

More than an asset class

Art will always be so much more to the beholder than its monetary value reflects. It moves us to laughter or tears, evoking memories and dreams that capture our imaginations. As George Bernard Shaw once wrote, “You use a glass mirror to see your face. You use works of art to see your soul.”

The emotional benefits of owning art may even outweigh any economic returns. Art enriches more than our wallets; it enriches our lives. Collecting is a process that engages and challenges the collector, providing hours of enjoyment and even a unique insight into the human experience. Art and story are inextricably linked; the artist's story melds with the story of the painting’s history and finally your own story as the buyer. An art collection is an extension of yourself, a legacy you can pass on to younger generations.

Art, in other words, is a reflection of ourselves in a way that traditional investments can never be.

Final thoughts

While there is sometimes debate between ardent art collectors and art investors, we see plenty of middle ground. Art represents both passion and growth. From the excitement and intrigue of buying directly from the artist on the primary market to the proven track record of an artwork bought at an auction house or gallery, art encourages a unique fusion of passion and profit.