Exploring Alternative Investment Allocations with FA Solutions
Overstone CEO Harco van den Oever spoke at an online panel discussion hosted by FA Solutions as part of the FA Talks webinar series, alongside Alistair Galloway from Pantheon Ventures, and Dr. Boaz Barack from BONART Financial Performance who shared their insights for private equity and structured products, respectively. Here’s our thoughts on art as an alternative investment.
Alternative assets have been less volatile than capital markets, with some weakening expected in coming months. For art, we are likely to see that prices will remain strong as there will be a reduced supply despite many seeking opportunities to buy distressed art. Online sales have so far performed well in lieu of physical sales since the lockdown.
There is strong correlation between passion assets and the wealth of High Net Worth Individuals, who have 5- 10% of their asset base in art. When HNW wealth increases, there is positive impact on passion markets, where art is the least impacted and classic cars the most. The investment horizon is about 5 years – longer for Old Masters and shorter for Contemporary works.
The webinar polls found that participants thought art and other collectibles were the most difficult to value. In the market we see increasing clarity in art with the transparency of pricing and accessibility of data, and good confidence level in art. Just under 30% of the attendees also have and would consider increasing the greatest investment allocation in art and other collectibles, on par with unlisted companies.
General advice for those looking at art as part of a portfolio is to look at art as you would any asset. Get a clear picture of :
Price and the current market value of the asset- not its purchase price or insurance value, normally obtained through auction houses.
Liquidity – the depth of market for the work, looking at historical data
Volatility – its beta, how the work would perform against an index
With increasing regulation and price transparency, art is ripe to become a stable asset leading to diversification and more leverage opportunities.
Catch the rest of the webinar here.
If you are interested in assessing the liquidity and volatility of a collection, read more about Overstone Scores. Drop us an email at info@overstoneassociates.com if we have a solution that could help your business needs.