Fueled by the rapid expansion of global wealth, the market for fine art and collectibles continues to climb – along with prices. The recent explosion of interest in the art and collections market creates new threats and complex challenges. This paper provides an overview of the changing state of the global collections market, describes the emerging risks, and offers advice on what the savvy collector can do to manage and reduce these increased risks.
The global collections market continues to grow despite the current economic challenges. The record-breaking sales reported by Christie’s and Sotheby’s in 2008 represent a new breed of super-rich collectors from emerging economies such as China, the Middle East and Russia. These new patrons of the arts are often less experienced buyers who are willing to pay inflated prices. This buying behavior has impacted the valuation of art and increased the risks associated with collecting.
Along with less experienced buyers comes greater potential for fraud, theft, and counterfeit sales. The Federal Bureau of Investigations estimates the black market for art to be around $6 billion per year. Recent art thefts at well-known institutions illustrate the desire to possess works of art that are not available through legitimate avenues. Wine collections can be misrepresented by re-labeling or re-filling bottles. This paper offers suggestions on how to reduce the risks associated with authenticity and title fraud.
The inclusion of art, wine, or other valuable articles in one’s investment portfolio is a newer trend fueled by expanding global wealth. This article will examine the risks associated with purchasing art for investment purposes. It will also provide advice on how to assess value, evaluate insurance options, develop an estate planning strategy, and protect a collection from physical damage.
Building a valued collection can be an exciting and rewarding experience, if one understands and takes the appropriate steps to manage the risks. Whether it is the result of a lifelong passion or simply a means to diversify an investment portfolio, a collection needs to be protected with the same focus given to other highly valued assets and investments. Proper diligence, expert advice and close attention to market changes are critical success factors in building and protecting a valued collection.
The rapid expansion of wealth can count among its many unintended consequences an explosion of interest in the art and collectibles market. In his 2006 book Mind Set, John Naisbitt writes that contemporary art has become the chic world’s most coveted commodity.1 The rise in global wealth has increased the demand for art and collectibles. The July, 2008 market report posted on www.artprice.com noted that despite record oil prices, a crisis in the credit market and the real estate bubble bursting, the market for art has exhibited a resilience that defies a wobbly world economy.
As the demand for fine art and collectibles continues to climb – along with prices – so have the risks. We will review the changing state of the global collections market, examine the emerging risks, and offer recommendations on what the savvy collector can do to manage and reduce these increased exposures.
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