Art as an Asset Class: Tom Hainlin, Ascent Private Capital Management
It’s difficult to look at art as an asset class and then compare it to other assets. At least that is the view of Tom Hainlin, national investment strategist at Ascent Private Capital Management. Hainlin follows the trends of the art world from an investment perspective. Offering advice to his clients based on the valuations in the current market.
“We encourage buyers to look at art as an investment of passion with an impact for social joy rather than a return on capital. Most owners don’t think of art like you would other assets, they don’t see it as a passive thing, it is much more about a personal passion and interest,” Hainlin says.
Rather than asking what art will make them money, Hainlin says: “Our clients want to know ‘How much of my portfolio can I invest in this’?” According to Hainlin, families are showing a much greater interest in art, but not purely for investment purposes. “We have found our families are buying art as an investment of passion and not for a return enhancement.”
He adds that clients are often driven by the “desire for tangibility and the social aspects of owning art, which allow them an investment that can offer heritage.” Due to the nature of art and collectibles most often being material objects, owners can physically pass these on when planning their estate. “Families are seeing collectables and art as a more tangible asset that is less abstract, it’s a lot more fun,” he says.
When advising clients on art as an investment, Hainlin is seeing a trend in the US of clients looking for other ways to use their art collections. “I have seen an increase in families who have art collections and don’t want to lose them, but want the liquidity to free up collateral to do other things.” This is one of the things driving the need for art financing.
“We see quite a big generational difference, one generation are buying art thinking this is great I want to pass it down to my children but then the children are saying I would prefer to monetise it and invest it in my other interests.”
“Not many families that we work with are buying art purely for speculative purposes. Clients have more interest and desire for the art rather than a financial concern, we generally advise them how they can invest in it, but this can change depending on the family.”
According to Hainlin a lot of demand for art in the US is driven by wealth creation and the tech industry. The increase in Silicon Valley wealth is helping to drive the market. “We are also seeing the finance industry taking steps towards considering art as an asset”
“There is an increase of interest in people looking at art, with the internet bringing art to more people. Globalisation has helped the art market, by making art available all over the world.”
But Hainlin says that despite China’s economic success, we are seeing Chinese consumption decline. There is a shift away from investing in the art market which seems to be the direct result of the anti-corruption campaign in China causing a decline in conspicuous consumption of luxury goods.
Hainlin also says that the Russian market is seeing a dip due to the collapse of the market. As the result of the dramatic fall of stock prices and the rouble being devalued due to the fall in oil prices and sanctions for political issues with Ukraine. “A decline in buyers in these places is seeing the market engine forward in the US, driven by wealth creation and tech industries. The portions of the market tied to wealth creation in places seeing a financial decline will not have a positive effect.”