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Art market: can Frieze purchases insulate against economic chill?

Investors cope with recessions, inflation and high-cost debt. Havens are few and far between. Even gold is down 9 per cent year to date. Could the art market be worth a look?

Punters in the enormous snaking queue that formed for the London Frieze art fair certainly seem to think so — although the split between collectors and socialites has yet to be established.

By rights, art should be shielded from the worst of the economic headwinds: collectors tend to be wealthy and to fund their purchases from income or savings. Indeed, recent auctions seem to bear this out. Combined sales from the top three houses were up more than 20 per cent in the first half of the year, according to an upcoming survey by Clare McAndrew of Art Economics. And the ArtBnK index, which tracks the price fetched by active artists, has risen more than 50 per cent, compared with a decline of almost a quarter for the S&P 500.

Fine art is outperforming gold, Treasuries and wine in 2022

All these indicators have their limits. Auctions are less than half of the art market. Indices that track them only count successes: no allowance is made for the lots that get pulled or remain unsold. And, of course, every artwork is different. The price that it fetches may say more about its size, colour or quality than it does about the state of the market. That said, the mood music is still remarkably positive.

The blue chips of the art world — the Picassos, Monets and Basquiats — are widely assumed to be the safest bet. Buying them may be a once-in-a-lifetime opportunity. And going mainstream is a natural way for investors to try to limit the risk of these expensive and illiquid asset purchases.

But where does that leave the rather more modest collector, the one without hundreds of millions of pounds to spare?

Enter fractional ownership models: these give investors the chance to own a bit of a Basquiat, and sell it on without the underlying artwork changing hands. Useful for those wishing to diversify their assets — but less so for those who want a painting.

Another option might be to buy art one likes, and look elsewhere for investment opportunities. For all the buzz over collectable asset classes, it is easy to forget that over the past decade the S&P outperformed them by miles — even after its recent decline.

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