Thought Leadership
FAWM produces original research and Thought Leadership material on art wealth management and investment for wealth management professionals. Here you can order propreitary research and articles on a broad range of topics and industry trends. FAWM serves as an independent advisor to families of exceptional art wealth offering education on complex financial issues associated with art assets.
Copies of our Thought Leadership papers are available by paid subscription in the products catalogue. Abstracts of selected papers include:
ART WEALTH MANAGEMENT
- Tactical & Strategic Investment in Art - Abstract
Many of the gains realised by high net worth individuals in recent years have been a result of strategic diversification of their holdings by moving into a broad range of asset classes. Investors are expected to increasingly explore the role that real assets like art can play in their portfolios through opportunistic, tactical or strategic investment. While many investment professionals agree that real assets provide diversification benefits, there has been surprisingly little research into the appropriate allocation in an investment portfolio. Art used in the right way can enable investors to better tailor their investment strategies to address specific financial and investment concerns (for example: controlling volatility, boosting returns, or hedging against inflation). Full report available by subscription
- Art and Philanthropy - Abstract
Shifts in the global economy have led many HNWIs to view giving with a renewed, more entrepreneurial focus. A new breed of philanthropist and a new model of giving have emerged which combines business acumen, passion and technology in the fulfillment of philanthropic goals to support the Arts. Art philanthropy encompasses a broad range of strategies including to sustain leading cultural institutions, to encourage the creation of new work and re-interpretation of existing work, to strengthen the systems that support art making and to stimulate greater artistic risk taking. Sometimes referred to as "engaged grant making", this new philanthropy requires investment of both financial and human capital to improve the effectiveness of wealth giving. Simply put, it is applying the venture capital model to grant making, thus assisting art institutions to better achieve their mission. Full report available by paid subscription.
- Global Trends in Private Museums - Abstract
It is a fine gesture for collectors to share their wealth by enriching a museum's collection with works of art, or give them on loan to an exhibition in order to share their enjoyment with others. In recent years however a growing number of wealthy collectors are choosing to build their own museums rather than donate works to existing institutions. While there are a number of factors driving the growth of private museums globally, a lack of public exhibition space has played a major part. For many wealthy collectors, they simply want their works to be seen or or to share their passion with others. Though still relatively rare, private museums opened by wealth collectors are increasing in both number and size globally. Full report available by paid subscription.
- The Importance of Art Succession Planning - Abstract
To serve a family effectively over time, creating the right plan for an art collection requires taking into account the unique financial needs, interest in providing for heirs and other beneficiaries and charting a creative and sound financial course. Dealing professionally with art requires extensive knowledge and trust and estate practitioners must take into consideration the wishes of family members. For example, are they interested in keeping the collection intact? Do any of them want specific pieces in the collection for themselves, or do they prefer to receive the proceeds from the sale of the collection. The answers may have a major bearing on the ultimate shape that a sucession plan takes. Full report available by paid subscription.
- Integrating Art into a Family Office Platform - Abstract
There is a long association between the collection of beautiful objects by wealthy individuals and the discreet management of their wealth by professional advisers. Many private clients are art lovers, own collections or buy and sell in the art market. A growing number of family offices are recognizing that today's wealthy individuals' loyalty can be more safely secured by services that go beyond just providing more financial products. Private clients are demanding far broader choices which maximise lifestyle, investments of passion, philanthropy and ultimately lead to more fulfilling lives. Full report available by paid subscription.
- Art as a Safe-haven - Abstract
While the current financial crisis and economic uncertainty clearly have had an impact on High Net Worth Individuals' lifestyle spending, they continue to gravitate to art as a primary passion investment. Direct investment in high value 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 increasingly becoming scarce. Original works of art are irreplaceable tangible assets which, by their very nature exhibit defensive characteristics during weak economic periods. Full report available by paid subscription.
ART AS AN ALTERNATIVE INVESTMENT
- Will Art Become the New Gold? - Abstract
The price of gold continues to hit new highs boosted by concerns about the weakening US dollar. The expectations that US interest rates will remain low has put yet further pressure on the dollar, making an investment in gold more attractive. Investments in "real assets" can be advantageous in a depreciating real currency environment. Art like gold, is an irreplaceable, unleveraged real assset whicy many investors turn to as a safe haven in times of economic uncertainty. Since the turn of the millenium we have seen the AMR Art 100 Index perform in a similiar manner to gold. Historically, both art and gold have shown similiar characteristics and performance, especially over the last decade. Art like gold provides a historically proven vehicle for hedging against inflation. Full report available by paid subscription.
- Art as an Inflation Hedge: British Rail Case Study - Abstract
One of the key concerns for institutional investors with real liabilities is how well an asset can hedge against inflation. Research shows that In the long run, art reveals positive results during years of above trend inflation. One of the best examples of this was the British Rail Pension Fund which invested $100 million or 2.5% of its portfolio into art back in the mid 1970s. The Fund's collection achieved its primary objective of realizing a rate of return in excess of the rate of inflation which was unprecedentedly high. There are some important lessons to be learned given the market conditions which prevailed then and the economic conditions which exist today. The magnitude of the recent global stimulus plans has many investors on alert that these large liquidity injections could lead to a significant spike in inflation posing higher risk to institutional investment portfolios. Full report available by paid subscription.
- The Art of Funds - Abstract
As interest in art as an alternative asset class has grown in recent years so has the emergence of art investment funds. These funds seek to capitalise on the inherent inefficiencies of the art market and provide the potential to identify, create and execute transactions in works of art at highly attractive terms. An art investment fund's holdings are actively managed through the strategic purchase, ongoing curatorial managment, and sale of works of art. Depending on the objectives, an art investment fund may be broadly diversified in order to spread the risk across multiple sectors or concentrated in a single sector, such as Contemporary art. Full report available by paid subscription.
- Are Passion Investments the New Alternatives? - Abstract
Today we are seeing a growing number of passion investment funds cropping up including everything from art, wine and violins to collectibles such as iconic entertainment memorabilia. Investments of passion have generally not been considered a mainstream alternative asset class by wealth managers as this market is rather opaque and highly illiquid. However, there is ample precedent of the role that art, collectibles and other emotional assets play as a refuge for investors during times of economic uncertainty. While many investment professionals agree that real assets provide diversification benefits, there has been surprisingly little research into the appropriate allocation of real assets in an investment portfolio. Full report available by paid subscription.
- Combating Inflation Pressures with Art? - Abstract
As central banks continue their programmes of quantitative easing and monetary expansion in order to bolster economic growth, investors are searching for ways to protect their assets from value erosion. Unlike other tools available to manage the impact of inflation on portfolios, art can provide an effective hedge against inflation while also serving to enhance the overall risk return profile for a portfolio. One of the best examples of this was the British Rail Pension Fund which invested $100 million or 2.5% of its portfolio into art back in the mid 1970s. The Fund's collection achieved the primary objective o realising a rate of return in excess of the rate of inflation which was unprecedentedly high. Full report available by paid subscription.
- Index-linked Art Funds - Abstract
The recent alliance between Castlestone Management and Art Market Research takes the evolution of art funds to a new level by seeking to create the first index linked art fund. The aim of the new AMR Post-War Art 50 Index will be to attract the buy-in from retail and institutional investors who have been slow to enter the art fund market and reflects the growing demand by investors for products that are transparent. The Castlestone Collection Modern Art Fund plans to replicate the activity of the index acting as a "dispassionate expert" benefiting from the opportunities created by emotionally driven decision makers in the global art market. Full report available by paid subscription.