Fall in global stock markets causes HNWIs to turn to art in a flight to safety
Wealth managers are reducing risk in their clients' portfolios and moving into safe haven assets, amid increasing concerns about the health of the global economy. Advisors have been selling equities and buying gold and specialist funds that seek to protect investors from sharp swings in the markets according to a recent report in the FT.
As signs point to continued to turmoil in the U.S. and Europe and gold climbs to record levels, sophisticated investors are increasingly turning to art and other investments of passion as a safe haven and store of value.
The demand for high quality works of art with strong provenance and in good condition make them particularly interesting as a long-term investment and wealth preserver. Such works are becoming increasingly scarce and original works of art are irreplaceable tangible assets which, by their very nature exhibit defensive characteristics during weak economic periods.
Many of the gains reaped by HNWIs in recent years have been a result strategic diversification of their holdings by moving into a broader range of asset classes; a sign that HNWIs have been willing to balance their portfolios by taking an informed, rational approach to their investments regardless of prevailing market conditions. Fine Art Wealth Management (FAWM) expects this trend to continue.
While clients will shy away from investment products of great complexity, FAWM predicts there will be continued interest in real assets like art. Investors are likely to emphasize diversification within their alternative investment portfolios, among various established and new types of alternative strategies like art and collectibles. Investments of passion are generally not considered a mainstream asset class by wealth managers as this market is rather opaque and highly illiquid. However, there is currently a trend toward art as a safe-haven and as a highly fruitful avenue for investment particularly in the current difficult economic climate.
There is ample precedent of the role of art, collectibles and other investments of passion as a refuge for investors during times of economic uncertainty. Bad news is good news for collectors and sellers, and so it has been for a very long time. Not only does capital flee the stock market, but economic uncertainty forces out into the market art and other passion investments that otherwise might never have changed hands.
