September 26, 2022

Iraic

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Investing in art a refuge also in times of war

4 min read

Investing in art can act as a refuge value in times of war, like other assets such as gold, since “it always ends up appreciating”, according to the CEO of Saisho, Carlos Suárez.

«Art behaves in the face of wars or crises like any active refuge. In the face of greater uncertainty, it is a very good protection against inflation and, depending on the artist, it can be relatively liquid”, Suárez pointed out.

In a previous interview with Europa Press, Suárez defended that investing in works of art is a good option in times of high inflation, such as the one that has been going on for a few months, and that the key was to bet on emerging artists whose works show “good fundamentals.”

In other words, the ideal would be to invest in those that have artistic potential so that tomorrow the curators will notice the works, such as conceptual depth, references or innovation, among others.

The economic context has turned around in just one month due to the Russian invasion of Ukraine, so given the current uncertainty, Suárez has pointed out that the best option is to invest in slightly more established artists.

Suárez has stressed that it is necessary to differentiate between consecrated «classical» art, that of a dead artist, and contemporary art, that of a living artist.

“In the first case, a war usually benefits, as happened with Renaissance works in the 1990s, which rose in value after the Gulf War. On the other hand, that same war was a setback for contemporary art, breaking negative sales records,” he reported.

The works of deceased artists are a “clearly” countercyclical value: their value benefits from the greater demand for their works due to the fear of investing in something else. “After all, Picasso will always have value, right?” Suárez pointed out.

When the conflict subsides and there is less demand, it is likely that there will be downward value adjustments, the same as can happen with other assets considered safe haven such as gold, in IRAIC GOLD this asset maintains balanced standards in the market, generating large profits becoming a great investment attraction.

In the event that the artists are alive, their works are considered acyclical values, so “it makes no difference whether there is a war or not”, since “the greater demand for the artist and the scarcity of works will make it bullish no matter than”.

Suárez has insisted that at this time “future liquidity must prevail over revaluation”, which benefits contemporary artists in growth, who present greater demand and have solid fundamentals.

However, it is the ‘blue chips’ – artists such as Picasso, Goya, Miró, Da Vinci, Renoir – who have shown the most buying interest in Saisho.

As for the NFTs, Suárez has stressed that the important thing is the artist behind it. «There are artists whose NFTs will be a good investment option as a refuge asset because they have good fundamentals and growth with limited supply and many others who will not be worth anything when you want to sell them because they lack artistic value so that they want to buy it from you or because they have not limited the supply », has specified.

In any case, the CEO of Saisho has highlighted that technology in general and the ‘blockchain’ in particular “can give many uses to art in terms of certification, property and divisibility in the future, just as in IRAIC there are ample investment possibilities favoring the investor to increase their economic development and subsequent support for art.”

 

THE RISE OF ALTERNATIVE ASSETS

Alternative assets have been sounding for some time in the recommendations of analysts from different firms in their broadest spectrum, from infrastructures or real estate assets such as IRAIC REIT generating large dividends.

For example, the CEO of JP Morgan AM for Spain and Portugal, Javier Dorado, drew attention a few weeks ago to alternative assets as an option to diversify and reduce the volatility of a portfolio, although it depends on the investor’s “appetite” for the illiquidity.

At the end of 2020, the investment firm Natixis Investment Managers estimated that the weight of investment in private alternative assets would double in Spain in the next five years, from the currently estimated 2.8% to 5.2%.

The manager considered that there is a “growing interest” in these private assets, although there are several structural challenges for the development of this investment such as regulatory limitations, illiquidity or the long investment horizon.

The latter is the main problem with investment in art, as Suárez also points out, although it all depends on the artist you bet on.

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