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By Laura Peressini, Private Client Advisor
After a healthy recovery from the lows experienced during the Global Financial Crisis, investment markets are once again facing headwinds including falling oil and commodity prices, geopolitical risks and monetary policy challenges.
Investors looking for new ways to diversify in this uncertain environment should consider investments that can perform differently from stock or bond market movements.
Alternative investments are so named for the simple reason that they perform differently to traditional investments. We believe that high quality alternative investments can significantly enhance portfolio diversification, lower volatility and potentially enhance long-term returns. Traditional alternative investment products include Managed Futures, Hedge Fund-of-Funds, Multi-Strategy and Global Macro. Collectables including art, coins, stamps, wine and classic cars are other types of alternative assets that have a place in larger well diversified portfolios.
Collecting art is a recognised investment strategy and fine art is a genuine alternative asset class with a proven track record. Art is a tangible safe-haven as part of a well-diversified portfolio and has potential for excellent growth and can also generate additional income through art rental. When bought wisely art continues to demonstrate its capacity as a strong long term alternative and store of wealth where its value can increase significantly over time. Investment lies in the quality. Sotheby’s annual auction in Australia last year was the fourth highest on record. Recent sales have been impressive grossing $11,259,136 with just over three quarters of the lots (78.4%) sold and at 124% in value. It was the highest individual sale by the company since May 2007.
Today's art investor is presented with numerous options for entering the art market at any level. Grant Thornton Australia’s Private Wealth team can assist in structuring your portfolio to include art as part of your alternative asset exposure. Once purchased, it can be displayed in your home or place of business, stored in a secure facility or, to generate an alternative income stream or can be leased to private individuals or corporations. Typically this can generate between 5-8% ROI depending on the work as income.
If your Self-Managed Super Fund (SMSF) purchases art, there are strict guidelines in place by the ATO, as a member or trustee, you cannot display or store the art in your private residence. Although it can be stored, but not displayed, in your business premises. Art can only be leased to an unrelated party if there is a formal lease agreement in place. If you hold artwork, antiques, coins, or other collectables within your self-managed super fund, then you need to be aware of new rules that originally came into effect from July 2011, and will reach their full effect in 2016.
Grant Thornton Australia has a relationship with the largest non-government corporate rental programme in Australia. Corporate and individual clients benefit from renting exceptional fine art at a fraction of the cost of purchasing the work outright. They offer competitive rental rates, flexible packages and varying lease terms. Their return on investment for the collector or investor is both realistic and consistently achievable.
They hold an extensive portfolio of contemporary artwork from a wide range of media and genres. Museum quality Indigenous works form a significant part of the collection. Renting art is a highly cost effective and flexible alternative for businesses to access Australia's leading artists without tying up valuable capital. Furthermore, rental payments are typically tax deductible.