November 14, 2016
These markets reflect the economy’s health, offer investments that can be enjoyed for years to come.
Shrinking interest rates and diminished returns have made the fine art and car collector markets increasingly popular investment alternatives for high-net-worth individuals.
But these acquisitions are more than just a decorative addition to your portfolio — they’re also indicators of economic health and can impact your investment strategy as a whole.
“There is a direct correlation between the art and car collector markets and overall economic growth,” says Jeff Kravetz, CFA, Regional Investment Director for The Private Client Reserve of U.S. Bank in Scottsdale, Arizona. “When investors do well, they spend more on their collections, but if there are risks in the capital markets, they tend to pull back.”
Because these are long-term investments, Kravetz advises buyers to consult with their financial advisors to assess value and determine what role the collectibles can play in estate planning.
“Many collectors look at these pieces as legacy assets that could be in their families for generations to come,” Kravetz says.
Assessing the Marketplace
While the big art masters and rare models of automobiles might be few and far between, they do play an important role in the investment landscape.
Last year, Pablo Picasso’s “Les femmes d’Alger (Version ‘O’)” sold for $179 million, making it one of the most expensive pieces of art ever auctioned. That same year, a 1961 Ferrari 250 GT SWB California Spider sold for $18.5 million. While these numbers are extreme, they exemplify the wealth changing hands in the world of fine art and collectible cars.
“Each sale creates a lot of media buzz, which leads to more people getting into the market,” Kravetz says.