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It is widely accepted that the key to creating wealth
is through building a diversified portfolio of investments with a long-term
horizon. The recent performance volatility in world markets, particularly in
the traditional asset class of equities has demonstrated the benefit of
including alternative investment strategies as part of a diversified approach,
especially those that have an established trend of showing capital appreciation
over a longer term.
Study has shown that art holds demand in the market
during an economic boom as well as a slowdown. Investing in art is one
alternative investment strategy, which has been gaining increasing acceptance
around the world. The increasing activity of art auction houses over the last
decade has provided an important secondary market which has resulted in
liquidity, promoting art not only as an object of pleasure but also as an
inevitable asset.
The Indian Art Market
Art is an inherent part of Indian culture. Its presence
plays an important role in Indian history and society. The following are the
trends in the current Indian art market scenario:
Contemporary art grows as economies globalize: it is happening here and now
Growth of GDP & and the economy as a whole
An immense increase in purchasing power of HNI’s & NRI’s
Art is regarded as a trend for safe haven emulated by HNI’s & NRI’s
NRI’s looking for identity
Indian affluent looking for a new status symbol
Availability of documentation and authenticity of works of art.
Awareness about artistic significance and pricing of paintings
Growth of services and expertise within the art world
Market infrastructure is falling into place
Growing secondary market has resulted in liquidity.
No secondary market for any other collectable category
‘Never sell culture’ resulting in limited supply
Increasingly being viewed as a component of portfolio analysis and investment
An increasing realisation regarding the limited supply situation for great
works of art; hence they
tend to command a high premium in price.
Investment in a new age market. Enter in early growth phase
Supply side has matured over 3 decades with established art history, artists
and galleries
Buy side is consolidating after a break out
Market is firmly in the sight of affluent Indian Diaspora
Early mover scenario is still on offer
Asset has a long term investment perspective
Established artists have sustainable value
Younger artists have higher risk/higher return
Best value as an investment in times of economic depression.
Art
Investment VS Other Investments
5
years
Percentage Return
With a simple buy and hold investment strategy, Indian Art has given a 2000%
return over the last 5 years. This figure has been calculated by taking an
average appreciation in value of paintings by 50 artists over the last five
years.
The best Equity Mutual Funds have given a return of 1100% over the same period
as compared with the Sensex which has appreciated by only 200% And property
which is considered a safe investment has given a return of 250% over the same
term.
Thus, compared to the other asset classes Art has out performed them
considerably giving the highest returns.
Benifits
Buy side will dominate market for many years driving prices and growth
Market width and depth increasing every day
Well managed early movers will reap the whirlwind
Above average returns only expected from ‘niche’ asset classes such as
paintings
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