By Claire Moraa
- 40% of Americans are actively engaged in art and collectibles
- Family offices have jumped from managing $3.3T to $5.5T in five years
Family offices already caught the attention of high-net worth individuals and now they’re taking it up a notch higher to diversify their investment portfolios. Away from the traditional assets and stocks, more people are warming up to arts and collectibles as alternative investments. With 40% of Americans already actively hoarding their collectibles, it is a booming industry that cannot afford to be ignored.
Why This Matters: Incorporating art and collectibles into a family office’s investment portfolio can contribute to diversification, potentially reducing overall portfolio risk. However, the value of art and collectibles can be subject to significant fluctuations due to changes in demand, tastes, and market trends. Unlike traditional investment assets such as stocks or bonds, art and collectibles typically do not generate income. They also require proper storage and maintenance, which can incur ongoing costs. Factors such as climate control, security, insurance, and conservation efforts contribute to the total cost of holding these assets.
And even though the art and collectibles market has a promising future; $294 billion to $422 billion in 2030, it’s still a highly volatile market. So how can family offices ensure that they are applying the same discipline, rigor, and risk management to art and collectibles as they do to traditional investments? First, comprehensive policies and guidelines specifically tailored to the acquisition, ownership, and management of art and collectibles within the family office’s investment portfolio must be established. Continuous education and research to keep abreast with current trends in the industry can be helpful in understanding trends and best practices.
What’s Next: It’s no secret that art and collectibles can yield benefits when incorporated in an investment portfolio. And while there are inherent risks associated to this type of investment, the potential benefits of this asset class are far too significant to be shelved. With the same level of discipline and risk management applied to traditional investments, this too could evolve and redefine how wealth is preserved, grown, and expressed across generations.
CBX Vibe: ‘ART‘ Tyla
