Here's how to diversify your portfolio in an artful way

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Heres how to diversify your portfolio in an artful way

Published: Wed 29 Mar 2017, 7:15 PM

Last updated: Wed 29 Mar 2017, 9:20 PM

When an art advisor looks at the prospect of acquiring a work of art, research is key, and advisors are equipped with the knowledge and network to make an informed decision. This is highly prevalent when we look at art acquisitions with the objective of long-term capital growth. Here are some insights into the 2017 art market.
Observation one: Art is such an effective means of portfolio diversification
Art is a real asset that enjoys a negative correlation with traditional assets. Since art is a store of value and wealth preservation, it can act as a hedge against instabilities in the Middle Eastern economic climate. Art also offers buyers in the region a long-term protection against inflation, being a tangible asset that can be moved geographically and sold in any currency.
Observation two: The Art Market in the Mena is growing
The Middle Eastern art market has been on an incline over the past seven to 10 years. It has become an incredibly interesting space, specifically with the UAE's remarkable growth and international recognition of the region's artworks and artists. On the other hand, every emerging market experiences growing pains, and its perseverance comes from a strong infrastructure and healthy economy.
As experts in the industry, our focus is to maintain a steady incremental growth.
One of the best examples is in recent years the UAE has become a representative hub for the region's art; initiatives like the Sharjah Biennale, Art Dubai and the ongoing museums project in Abu Dhabi are a testament to this.
Observation three: Reaffirmation of market confidence after the US elections
The United States presidential elections in November 2016 did not put a dent in the art market. This is evident in the strong results achieved at auction (in New York) for the sale of modern and impressionist and post-war and contemporary art (PWC). Christie's PWC auction set five artists records, and five lots exceeded $10 million, namely the Willem de Kooning, which brought in $66 million. Although the total sale of almost $277 million lagged behind last year's $331.8 million, the results were still impressive. Two nights later, anxieties over a weakening market were alleviated, when Sotheby's brought in over $276.5 million.
In conclusion, the week following the presidential election, Christie's, Sotheby's and Philips collectively brought in almost $665 million during their contemporary evening sales, while the two Impressionist and modern evening sales at Christie's and Sotheby's reached almost $405 million. A total result for the week just shy of $1.05 billion.
The writer is joint venture partner and head of Middle Eastern markets at The Fine Art Group. Views expressed are his own and do not reflect the newspaper's policy.

By Salma Shaheem

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