Art as an investment – How do I invest correctly?
The most important in a nutshell
- Wealthy people & institutions have been using art in their portfolios for decades for wealth accumulation and preservation.
- You should by no means invest all your money in art. However, in terms of diversification, investing in artwork can be useful for expanding your wealth portfolio.
- The art market enjoys rapidly increasing popularity, not only in times of crisis.
- Caution: Not every investment in art makes good sense.
- You don’t necessarily have to be a collector or have a passion for the subject and you can still invest.
Highlights of our recommendation at a glance
- exempt from inheritance tax (if cultural assets are involved)
- no loss in value over the last 20 years
- average returns of approx. 8 % over the last 20 years
- gains exempt from tax when sold after one year holding period (trading goods)
- no correlation with other markets (shares, real estate, raw materials, …)
- despite these highlights we recommend to invest only 20 to 30 % of your assets (diversification)
- with a work of art several ways of liquidation / sale are possible (flexibility)
- high repurchase rate from existing customers (shows a high quality of the product)
- ethically clean and highly regarded investment in all cultural circles
- risk diversification through a portfolio design with several works by different artists
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For whom can an investment in art make sense? (Use Cases)
People of advanced age who no longer have the opportunity to invest in stocks, ETFs or funds in the medium or even long term due to the shorter investment term and are looking for a strong alternative may find what they are looking for here. If the stock markets collapse, there is often not enough time to ride out the loss. In the art market, there are no or much smaller fluctuations in value, making losses almost impossible. Example: A man is 67 and receives his lump-sum payout from his life insurance policy (we advise against choosing the annuity for various reasons). He does not need this money immediately and will not need it for at least 5 to 10 years. He has the option to leave it in the account during this period and let it shrink from inflation, invest it in ETFs or similar with the risk of losses or invest it in art to realize value security, inflation compensation and even profit gains beyond that.
Wealthy people who have funds at their disposal which they would like to use to add another asset to their portfolio in the sense of diversification. Example: A woman is 50, she is successful in her job, owns well-diversified assets of ETFs and shares. In addition, she owns real estate and a classic car. An art investment would broaden her asset allocation and reduce risk. It also gives her useful tax benefits when she sells. At a minimum, her heirs will receive the artwork free of inheritance tax.
People who prefer security and physical property to risk and partial ownership for their money, especially in the current times of crises and conflicts. Example: A person who is absolutely risk-averse and (despite our very intensive advice in this regard) does not want to invest in the economy (shares, funds, ETFs) under any circumstances, we offer, together with our partner, a variant which, in addition to the aspect of security, nevertheless generates a return that can be over 8% annually.
People who are thinking about their estate. How they can best transfer their assets (i.e. without deductions by the tax office, for example) to the next generations. Example: A widow is 90 and has already given away parts of her assets to her only son over the past decades. Now there is still a property worth €400,000 and funds in accounts amounting to €300,000 left. The son has an inheritance tax allowance of €400,000. Thus, he would get the property “just like that”. Unfortunately, however, inheritance tax would have to be paid on the remaining assets. However, if the widow were now to invest at least part of the cash assets in art as a cultural asset, this part of her assets would be transferred to the next generation without any tax deductions, even if she were to die one day after signing the purchase agreement or paying the purchase price.
Entrepreneurs who do not want to have unused company assets “eaten away” by inflation and reduced by custody fees in company accounts, but who still want to invest the assets safely with the minimum goal of inflation compensation. In addition, this form of investment brings with it special characteristics for companies, which we would be happy to work out in a personal discussion. Example: The Würth company owns a considerable collection of works of art (approx. 18,000 pieces). The collection provides prestige and brings in additional company profits. However, Reinhold Würth, who took over the company from his father in 1954, describes the main benefit as a stopgap for bad times.
“Crypto-winners” who have been able to reap good returns from blockchain technology over the past decade are willing to secure some of their assets from inflation, depreciation and crises. We offer here the possibility of converting cryptocurrencies directly into tangible assets in the form of art, without having to go through the intermediate step into a fiat currency. The whole thing happens anonymously and access-protected. Example: a woman invested in Bitcoin in 2016 and sold it at an opportune time in 2021. She made a profit of one million euros and wants to secure 30% of her assets through our special art investment.
Do you feel addressed?
Why invest in art?
- The performance beats the MSCI World in average annual performance by just under 3%.
- These gains are tax-free under §23EStG as long as you hold the work for at least 1 year before selling it.
- The heirs do not pay inheritance tax on these works of art, as they have the status of cultural assets (§13 ErbStG).Here is an example: A single man owns and lives in a house worth 2 million euros. He has 2 children who have already moved out. The property is too big for him, he sells it and builds a smaller house worth 800,000 euros. In the event of his death, the inheritance of the house to the children would fully exhaust the respective inheritance tax allowances of 400,000 euros per child. The remaining assets to be inherited would be subject to inheritance tax. The man buys art from part of the remaining 1.2 million euros, which has the status of cultural property. This type of art is not subject to inheritance tax and consequently does not reduce the value of the estate. In this way, the man is able to transfer his assets to the next generation with almost no deductions. In this context, it is important to note that there is political talk of significantly reducing the exemption amounts for inheritance tax. This would mean that a much larger group of people would be affected by this problem.
- Art Basel is the world’s largest art fair. More money flows into it than into the world’s largest arms fair. In addition, at the arms fair, people only order and do not buy. At Art Basel, people buy and pay directly.
- An art investment does not correlate with other markets such as the capital or real estate market. Consequently, one does not have to expect fluctuations in profit when the stock market collapses. So it makes good sense to have an asset from the art market as an investment in your investment collection that has no correlation.
- Art freezes the past, stores important moments and beautiful impressions. People live out their creativity. All this provides a high degree of identification. The 3 most pictured motifs in the world are Mickey Mouse, the Mona Lisa and Che Guevara. In all cases, they are art. Mickey is a drawing, Mona is a painting and Che is a photograph. Photography in particular occupies a great place in our lives: On cell phones, basically only the performance of the cameras improves from model to model. Countless photos are shared daily on social networks like Instagram, Facebook, etc. People identify themselves with it. It is suitable as an investment and a financial investment.
- An art investment is independent of currencies and regions. The currency of a commodity may change, but the value may not. For example, should a war take place in Europe, one must be able to sell one’s tangible assets to America in U.S. dollars, for example. Or to Asia in yen.
- An investment in a work of art can be Sharia-compliant (halal) if certain things are observed. For example, the purchase of post-war photography. This opens up a fantastic variant of asset diversification for Islamic investors.
- There is probably not a single bank in the world that does not hedge at least part of its assets through the tangible asset of art. Deutsche Bank owns art by more than 5,000 artists from 40 countries. Ing Bank has a collection of 10,000 works of art. Art can be an asset for any asset portfolio, not just for large investors.
- For example, if you invest in a portfolio of several photographs, you have the flexibility to sell just one work. On the other hand, if you invest in real estate, it is very difficult to sell only a part of it. So, in contrast to real estate, you have a mobile flexible alternative whose maintenance and management costs are much lower.
Still no art in your portfolio?
What should you consider when investing in art?
The art market is broad. There are countless possibilities to invest. Whether you invest in paintings, sculptures, photographs, or other varieties is up to you. Our recommendation focuses specifically on a particular niche – the “best-performing category”:
Post-War & Contemporary Art Photography (contemporary photography of the postwar period).
Reasons for this are:
- It has been officially recognized as an art form since the 1960s.
- The development of the prices of the artworks is well documented.
- The number of paintings is known and their origin is clear.
- Important: It is a matter of editions. This makes it possible to establish a binding price. It can be called up at any time and, in general, maximum transparency is ensured. Because there are certificates of authenticity, so that everyone knows who made it and where. There are edition numbers that prove that the photo is one of ten identical copies of a limited edition, for example. And there is an identification number, which basically operates like the vehicle registration of a car.
- One becomes the physical owner of the art through a purchase contract and can freely dispose of the images. We do not recommend investing as a partial owner in a kind of “fractional ownership”, because in this case you are not the sole owner and therefore you are dependent on the decisions of other co-owners.
- The photographs are insured for their replacement price.
- Each piece is safely stored in a bonded warehouse. As a result, they are also exempt from sales tax when purchased.
- The buyers of such art are professionally looked after by our cooperation partner, an art advisor, and supported in every respect. Be it the purchase, the sale or administrative matters that arise in the meantime.
- This Art-Advisor also lends the artworks to galleries, museums and exhibitions in order to make the works accessible to the public. In this context, the owners do not incur additional costs, but the chance of increasing the value of the paintings increases.
- Such a portfolio has a minimum value of €20,000. The main reason for this is the spread over several works by more than one artist, in order to diversify even within this asset niche and reduce low risk even further.
- The Art-Advisor only works with established artists who are on the international artist roster, have already exhibited internationally and enjoy a certain level of recognition. 65 internationally active artists can be selected. Emerging artists may have a higher potential to achieve a stronger return, in turn, an initial “hype” from the artist can also quickly sink again. So then does his work and its prices.
- The works of art are always alienable. One has various possibilities here. One can offer the pictures over galleries or put over physical or digital auction houses to the sales. Of course, you can also sell the photos personally or use the increasingly popular digital sales channels. Digital already accounted for 30% of total market sales in 2021. For those who don’t want to bother much, the Art-Advisor offers the option to buy back the images after a 5-year holding period. This shows the absolute conviction of the company in their product and service.
- Of course you can also have the originals delivered to your home if you wish. However, this investment then increases greatly in risk, as the works are constantly exposed to light, are no longer visible to potential buyers and are more difficult to insure. In addition, VAT would then be added to the purchase.
Interested in more information?
Who do we work with?
- With a globally active art trading house from Switzerland, that
- has an international reputation in the field of photography since 1999.
- In Europe, they are in their field of “post-war an contemporary art” by far in 1st place, very experienced and should therefore be the first address when interested in buying.
- The company works with 65 internationally renowned photographers. From some of them they have the exclusive rights for Europe.
- These have proven themselves on the art market, are listed in the international artist directory, their works are available in the form of strictly limited editions in the form of editions.
- The artists’ works have already decorated various exhibitions in museums and galleries.
- They are present worldwide and are traded internationally. Thus, a measurable price development is traceable and transparent.
- In many cases the artists have been awarded for their works, nominated for art prizes and have been published.
- Our cooperation partner has a worldwide network of gallery owners, curators, auction houses and insurance partners.
- The company also offers services as an exclusive art advisor for asset managers, private banks, family offices and art funds. For investors, this type of investment is not new in 2023. However, our Swiss business partner also offers this best opportunity to the average consumer.
- Our Art-Advisor is also one of the largest lenders of photographs to galleries, exhibitions and museums. This makes their managed works available to the world and promises greater opportunities for appreciation.
- They also offer this service and access of this exclusive investment, which for a very long time was reserved for a very wealthy group of people, to the average consumer. In their way they are therefore unique in the market and offer everyone a modern, safe and also lucrative alternative to buy art, which is rather rare compared to conventional forms of investment.
- The portfolios provided by our partner to their clients have achieved an average performance of 11.51% p.a. since 2000. In 2021, the performance was 12.18%. The preliminary return for all art portfolios averaged 12.2% in 2022. The minimum was 0 and the maximum was 34.7%. Important: These strong numbers are not the responsibility of our partner, the market simply gives them. An intention to make a profit is also not the primary goal, but rather to secure a portion of its assets in order to compensate for inflation.
Interested to learn more?
One artist as an example: Vivian Maier
- Perhaps she is the inventor of the “selfie”.
- In 2009, her name still yielded 0 results in a Google search.
- Then in 2022 there were already more than 4 million hits.
- Her works have already graced 140 exhibitions in 27 countries and 68 cities.
- More than 1.5 million visitors were captivated by her works.
- Vivian Maier has about 10 exhibitions a year. These are fully booked until the end of 2024. So her works are not available for further exhibitions until then. Galleries can apply for an exhibition starting in 2025. Unbelievable.
- By comparison: Andy Warhol’s works grace six exhibitions a year. Gerhard Richter has eight.
- Individual paintings by Vivian Maier have doubled in value Vivian Maier has about 10 exhibitions a year. These are fully booked until the end of 2024. So her works are not available for further exhibitions until then. Galleries can apply for an exhibition starting in 2025. Unbelievable. in the last six years. This corresponds to an annual increase in value of 16.6%.
Her documentary “Finding Vivian Maier” was nominated for an Academy Award in 2015 (Available on Amazon Video). Here’s a short form on her story:
Someone bought a box full of negatives at an auction and realized they could turn the history of photography on its head. He made it his life’s mission to make Vivian Maier’s life’s work public, because her legacy was not published and appreciated until after her death (April 21, 2009 in Chicago). In total there are about 150,000 negatives and it will take another 15 to 20 years until her complete work is processed.
The documentation gives exciting information and a valuable picture about the world of photographic art.
Our cooperation partner has exclusive rights to her works for the European market.
Meet more photographers?
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Criteria for analysis of artworks and artists
When selecting artworks and artists for client portfolios, precise examination and research must take place in advance. Basically, art can be purchased on the primary market (from artists, galleries) or on the secondary market (from collectors or auctions). Ideally, a wide variety of review bodies and experts should be consulted prior to such an acquisition, such as
- gallery owners
- art critics and professors
- curators and
- insurance companies.
Through the assistance of such experts and further research of one’s own, one obtains information about various qualitative and quantitative criteria that are essential for an overall consideration of a work of art or artist.
Quantitative criteria include:
- past and present gallery and auction prices
- Placements in sales-related rankings
- annual turnover on the auction market
- number of exhibitions and other art events in the past and future
- global distribution of works in galleries
- number of placements and nominations for prizes and awards
- the success and number of various publications (measured, for example, by the degree to which editions sell out)
Qualitative criteria include:
- the medium used by the artist (photography, painting, etc.)
- education and age of the artist
- evaluation by critics
- importance and evaluation in the art-historical context
- future exhibitions and publications
Numbers – Data – Facts
- The “Artprice100 Index” can be used as an indicator of the performance of art. This index recorded a performance of 405 percent from 2000 to 2021. That is an annual increase of 19.2 percent. In the same period, the price of the S&P 500 rose by just under 160 percent (7.6 percent p.a.). However, this comparison is not 100 percent suitable for comparison and should only serve as a rough guide and show the power of asset art. Additionally, these values do not only refer to the “best-performing category” of photographic art.
- The Post-War & Contemporary Art Index returned an average of 10.95 percent in value per year over the period from 2000 to 2021. Our partner’s portfolios exceeded this figure and stand at 11.51 percent per year. A strong performance.
Sources: boerse.de / Deloitte Art & Finance Report / Frank Knight Wealth Report / AXA
- In 2021, the international art market generated $65 billion in sales. Despite the pandemic, or perhaps because of it, 13.3 billion of that came from online sales. This is a record high. Just 2 years earlier, it was only half. Deloitte estimated that by 2020, $1.5 trillion will be invested in art and artwork. The trend is expected to increase to 1.8 trillion US dollars by 2025. This development ensures that the average consumer will be able to sell his works of art himself even more easily and flexibly in the future and will no longer have to rely so heavily on a gallery or auction houses.
- 85% of asset managers recommend investing in art.
- Western art is in high demand in the growing Asian market.
- More and more people are buying art. Sales at auction increased from €103 million to €6.7 billion between 2000 and 2022. This represents a growth of 6,405% (291.13% per year).
Source: UBS Art Market Report 2022
- The minimum investment to buy a portfolio is €20,000. The amount is mainly due to internal diversification. For the above amount, you get about three photographs. These are from different artists. This is to ensure that the risk of an already very unlikely loss is reduced even further. When buying a single work of art, too little consideration is given to the deeper sense of investment and diversification.
- for 76% of all collectors and 96% of the art market experts surveyed, art is an integral part of professional asset diversification.
Source: Deloitte, Art & Finance Report 2021
The numbers speak for themselves.
How much will it cost me to invest in art?
- When buying art, the price of a portfolio of photographs is at least €20,000.
- Our customers pay the current market value for each piece.
- Our partner buys the respective artist’s pictures in bulk at a lower price. Thus, the art can be offered to the customer at the market price.
- Annually, the cost of insurance, storage and transportation to/from exhibitions is charged separately at the rate of 1.5% of the current asset value.
- If you do not sell the photographs yourself, but have our partner help you to do so, or if you wish to take advantage of the buy-back option after 5 years of holding, our partner retains 20% of the sale proceeds.
To become an expert in all areas of life costs a lot of time, effort, nerves, money and is basically impossible. Contact us without any obligation, simply use our expertise and that of our partners and participate best in our knowledge without much effort – not only in the field of art and investment.
We give you the information you need to make a wise decision for you and your money. In the course of this, we answer all your questions about investing and share our knowledge with you.
informative – free of charge – without obligation
How does this investment in art work?
- View the offer
- Sign the purchase contract
- Pay the invoice
- The art portfolio is delivered to the Swiss bonded warehouse by customs licensed art logisticians
- the portfolio becomes your property
- you will receive the consignment note
- you will receive professional support
- you will receive an annual value report with detailed information on the development of your portfolio
Is this now the best investment available?
No! If you had bought a “Hermès Kelly 28 Sellier Night Blue leather Bag” in 1994 for 5,340 DM and kept it unused and shrink-wrapped, it would have been worth 47,268 € in 2012. 6 years later – in 2018 it already cost €93,750. This corresponds to a total performance of 3,505.7%, i.e. an annual return of 140.228%. 😉
- Can I simply turn the pictures back into cash?
- Yes. There are many ways to liquidate. Probably the simplest is when we support you together with our Swiss partner.
- Why is art so interesting as a tangible asset?
- It does not correlate with financial markets such as commodities, stocks and real estate.
Capital gains and inheritance are tax-free. Investing can make sense.
- How do I monitor the performance of my portfolio?
- You receive an annual portfolio report. This shows the performance very clearly.
- Is my investment insured/protected?
- The artworks you are investing in are always insured at the current replacement price.
They are stored outside the banking system. Even in the event of a crisis, you always have access to your portfolio in the Swiss bonded warehouse.
- Who confirms to me that the pictures are genuine?
- The insurance company acts as a credible institution.
In addition, you will receive a certificate of authenticity.
- Am I actually the owner of the paintings?
- Yes, through the purchase contract and the certificate of deposit you are the sole owner of the works. However, you can also purchase the portfolio together with another person.
- Where is my art stored?
- In a high security bonded warehouse in Switzerland. Visitors are welcome.
- Why in Switzerland?
- Among other things, you save the 19% value added tax.
Our partner, a recognized Art-Advisor, is located there.
- What costs will I incur?
- 1.5% of the current portfolio value will be charged to you annually for storage and insurance fees.
- From how much capital can I invest?
- The art portfolios can be purchased from a minimum purchase price and cost of goods of 20,000€.
- Can I hang the photos in my home?
- In principle, it is possible to have the pictures at home.
However, it is not a good idea.
Because it should be noted that this means you have to pay 19 percent VAT. In addition, the insurance of the images will be more expensive. There are other reasons that speak against home delivery, too.
Personal, we consider it the best option to leave each piece in the duty-free warehouse and use that kind of art only for investing.