Gulf Business Invest

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?

- DANIEL FLEMING HEAD OF WEALTH ADVISORY JPMORGAN PRIVATE BANK, MENA

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”

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