The art of investing: where creativity meets capital

Sam Cook, EMEA Head of Specialty Lending Solutions

Is art a good investment?

At J.P. Morgan Private Bank, we’re just as passionate about art as our clients are. In this piece, we explore how you can finance your art collection.

Earlier this month, J.P. Morgan Private Bank proudly served as the sponsor of Paris Photo for the 12^th consecutive year. The creativity displayed in the exhibition was truly remarkable, underscoring the uniqueness of works on display. Perusing these pieces, it’s easy to see why our clients are so invested.

How to incorporate an artistic passion into your portfolio

Part of my job is to help clients realise everything their wealth can achieve, integrating their hobbies and passions into a holistic wealth plan. Art is a beautiful example of how a unique asset can fit into a portfolio and support a client’s overall goals.

Handled well, an art collection can provide financial flexibility – servicing a collector’s larger wealth aims in the creation of a legacy plan. However, it is important to recognise that art is an unusual asset for many reasons. These include the owner’s emotional attachments, art’s inherently illiquid nature and its relative stability over the long term. Nevertheless, art is an asset – no matter the acquisition price.

How to finance your art collection

Recognising the rationale behind art financing is critical. A client might want to provide bridge financing to a sale, or merely release equity for other purposes.

Understanding why a collector owns art is crucial – as is a grasp of their future goals. For example, an individual that collects the emotional value of artwork is likely to have different priorities to an individual more concerned with investment returns. Determining this rationale is the first step in defining how art financing can be beneficial, and more importantly, align with pre-established  objectives.

We understand the importance of a flexible and bespoke approach to art financing. To identify an optimal approach, we strive to consider a collector’s full financial picture. This usually includes assets and liabilities, liquidity needs, short-term and long-term goals and their art ownership structure.

Our final recommendation depends on several variables:

The location of the artwork

A collector can retain the artwork in their possession, or hold it in a warehouse. They may also choose loan their asset(s) to a museum or gallery across jurisdictions, including Europe, the UK, the United States and Canada.

The type of art provided as collateral

Taking a client-centred approach – as opposed to an asset-centred approach – allows for a variety of art to be provided as collateral. “Acceptable” assets are not limited to works created by blue chip artists, or those obtained from contemporary markets.

Flexibility on financing terms

The structure of financing can be tailored to an individual’s needs, including short-term bridges and mid-term committed facilities.

How art can help you achieve your financial goals

Art transcends economic environments, providing cultural enrichment and a broadening of your asset classes. At J.P. Morgan, we’ve cultivated a breadth of knowledge from decades of client service, and at present, operate as one of the oldest and largest corporate art collectors in the world.

Irrespective of a collector’s reasoning for owning art, a thoughtful borrowing strategy is a smart way to build and maintain a collection, supporting the collector’s overall goals. It should be a component of any thoughtful wealth planning analysis.