Reported by Annabelle Spranklen

So why has art become such a worthwhile investment? Last year we saw technology stocks dwindling, ailing blue-chip stocks and crypto plummeting. The art market, however, was alive and kicking. 

Annual returns received from UHNWs art investments in 2022 were at 29 per cent and the top item purchased by UHNIs in 2022 was an Andy Warhol painting named Shot Sage Blue Marilyn, for $195 million (£171 million) in a Christie’s auction.

‘The proprietary Knight Frank Luxury Investment Index (KFLII), which tracks the value of ten investments of passion, has increased by a healthy 16 per cent during 2022, comfortably outpacing global inflation rate whilst outperforming the majority of mainstream investment classes, including equities and gold,’ said the report.

‘The very upper end of the art market appeared to flourish during the credit crunch’,  Sarah Barker, Partner at Wither’s Worldwide Business Division, tells Tatler.  ‘Valuable artworks were said to be an alternative asset class where money might be safely invested when it was not safe elsewhere. Since 2008, the top end of the art market has generally appeared to thrive,’ Barker added. 

Camilla Wallace, Head of Private Client Group at Wedlake Bell and Rudy Capildeo, Art and Luxury Law Specialist at Wedlake Bell told Tatler, ‘We would never advise our clients to invest in art. The art market is unregulated and while there have been positive steps towards creating a more robust marketplace by introducing anti-money laundering laws across Europe in 2020, there is an uneven playing field as other large art markets such as New York and Hong Kong are yet to enact such legislation,’ they add. 

Wallace says she always advises clients to buy what they enjoy and ‘not to be fooled by the attention grabbing headlines which tend to focus on the top of the market where quality and rarity always achieve premium prices. Below that level the market can be very volatile and difficult to predict.’

Of course, as the report suggests, not all UHNWs are being dissuaded from throwing their money at this market, even if the advisers are raising an eyebrow.

If clients want to buy valuable artwork, seeking expert help is essential. ‘I help them to mitigate, and best protect themselves from, the potential risks associated with such a purchase’, says Barker who lists inauthenticity, misattribution, condition issues, export history, and financial crime as the main risks, while ensuring clients interests are ‘best protected in the sale agreement or consignment terms.’

While buying art might seem a nice way for UHNWs to make an extra buck, the experts agree this is a market full of danger. ‘The high value and portable nature of artworks, and customary methods of doing business in the art market, do lend towards an environment in which criminals and opportunists may believe they can make a quick return’ says Barker, who goes on to say that the UK art market is currently rated by the Treasury as ‘High Risk’ for money laundering.

Read full report: https://www.tatler.com/article/uhnw-art-investment