ART AS AN ASSET
WELL-MANAGED ART COLLECTIONS MAY GIVE YOU FINANCIAL FLEXIBILITY. BUT, IN THESE UNCERTAIN TIMES, WHAT IS THE BEST STRATEGY TO USE AND GROW THIS ONE-OF-A-KIND ASSET?
Art, and the passion for it, can help sustain us, especially during difficult times. Pandemic-related lockdowns gave art enthusiasts more time with some of their favourite pieces and to attend innovative global auctions held online, as the art market accelerated its adoption of the megatrend digitisation.
In the UAE, Dubai’s art market is picking up. The region has a vast potential, as the country is now investing more than ever into art. Art spaces like the Foundry x Emaar in Dubai Downtown are opening and giving new collectors the chance to discover and buy artworks. In addition, Christie’s has an annual auction at Alserkal Avenue in Al Quoz, which is an arts and culture district for Dubai with a line-up of galleries, facilities and platforms. It is a brilliant example of ingenuity and creativity of the region.
HOW TO OWN AN ART?
Owning each piece directly can be a great way to start. However, as a private art collection develops, owners often establish an intervening legal entity to hold title to their artwork. Doing so can give a consolidated view of the collection, allow centralised art collection management, and mean that only one country’s laws may apply to the lot. It can also help keep the collection together for future generations.
THE DIGITISATION OF ART
All the above has worked very well for traditional art collections, but what about nontangible art? The latest trend in art is creating and selling non fungible tokens (NFTs). NFTs, which are digital assets, can represent art, music, images, writings and videos. They are bought and sold online using blockchain technology, just like cryptocurrencies.
NFTs’ native crypto marketplaces aim explicitly to circumvent and disrupt institutional gatekeepers, yet many major art institutions are increasingly offering NFTs. In addition, auction houses and galleries are capitalising on and co-opting NFTs with the featured artists’ cooperation. Based on this trend, we’ll likely see more established commercial and non-profit art institutions embrace NFTs.
Having said that, so far, the NFTs art market has been highly volatile and it does not have the same market history and track record as traditional artworks. Nevertheless, anyone interested in acquiring NFTs should consider three succession planning questions: If something happened to the owner, who would know about their NFT collection? How can the intended beneficiaries access these assets?
Finally, how can the owner legally transfer ownership to the beneficiaries?
HOW DOES ART FIT INTO PERSONAL FINANCES?
Art is a unique asset for many reasons, including the owner’s emotional attachment to it. However, it is also an asset if you are acquiring art for significant prices.
Some of our clients see art investment as a way to diversify their portfolios. But we strongly recommend that you carefully evaluate holdings in the context of lifetime financial goals and estate planning.
AS A PRIVATE ART COLLECTION DEVELOPS, OWNERS OFTEN ESTABLISH AN INTERVENING LEGAL ENTITY TO HOLD TITLE TO THEIR ARTWORK”