How to Invest in Art, A Legal Perspective

Investing in art and knowing how to invest in art is no longer just for the few. Art has become a popular portfolio option, offering a range of benefits for investors. Fractionalized art investing allows even small investors to participate in the blue-chip art market. Benefits such as appreciated value and portfolio diversification drive savvy investors to explore this world. Additionally, art is generally non-correlated to macroeconomic swings and geopolitical uncertainty and can hedge against inflation.

Before diving into the art market, investors should be informed about the legal considerations in buying, selling, and collateralizing art. Having a seasoned art advisor can help you navigate these issues.

Let’s take a closer look at why art investing has taken off, how to invest in art, and the legal considerations to consider.

Diversifying Your Portfolio

Art is an asset class with a low correlation to other traditional investment options, such as stocks and bonds. When the prices of stocks and bonds are negatively affected by economic or political factors, the price of art may remain stable or increase. Investing in artwork can provide a buffer against losses in other areas of an investment portfolio.

Legal Considerations

Investing in artwork also comes with legal considerations. These may include provenance, authenticity, copyright, and collateralizing your art.

Provenance refers to the history of ownership of a particular artwork. Investors need to be confident that the artwork they buy has a clear and documented origin to avoid future disputes.

Authenticity is another significant issue. There have been numerous cases of counterfeit artworks being sold for large sums of money. To avoid this, investors should only buy from reputable dealers or auction houses and should obtain expert advice before purchasing.

Copyright concerns can arise when an artist’s work is reproduced or copied without their permission. Investors also need to ensure they have the licenses or permissions to use the artwork for commercial purposes if this is their intention. Copyright (and trademark) concerns are particularly applicable in the digital and NFT art space.

Lastly, collateralized art refers to utilizing art as collateral for loans, allowing clients to pursue opportunities, including raising cash for new investments, refinancing other debt, supplementing income, creating cash flow, and purchasing more art. Many private banks now provide loans collateralized by a borrower’s art collection.

Other issues to consider are auction houses, cultural heritage protections, export and import restrictions, digital and NFT art, insurance, viewing, shipping, storage, and taxes.

Always Ask an Expert

Investing in artwork offers an immense opportunity that is both lucrative and highly enjoyable. As an art investor and attorney, I’ve learned first-hand how to recognize a good deal, an exceptional one, and one that I should avoid. If you’ve considered purchasing or selling significant art, then let’s chat— We have the necessary tools and legal knowledge to help you grow and manage your art portfolio, teach you how to invest in art, while also developing your passion for creative and unique works.

Categorised in: News

This post was written by Daniel Novela