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Protecting your art investment could include commissioning a fake

From transit insurance to event security, art investments require special vigilance

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In recent years, fine art has etched out a defined space in the investment world, both as an asset class and as collateral. It can provide unique diversification, show a decent amount of appreciation over time (especially if the artist becomes a sensation) and if nothing else, it’s something attractive to hang in your home.

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For all of these reasons, more people are considering art as an investment option. In fact, the recent 2021 Art Basel and UBS Global Art Market Report, noted that 67 per cent of all individuals surveyed were purchasing art solely as an investment to grow wealth.

But unlike stocks, bonds and other financial vehicles that often make up a portfolio, art is largely a long-term investment and it is also a tangible object, which means it needs special considerations to keep it in tip-top shape and allow it the time and care to appreciate.

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So if fine art is part of your investment strategy, financial and art experts alike advise that people purchasing valuable paintings, sculptures or other artistic works should take necessary steps – from special insurance and storage to hiring security or commissioning a replica – to preserve and protect this investment.

The first level of protection starts in transit, explains Wendy Sinclair, area president for Vancouver at Gallagher, because it is almost a guarantee that your painting or sculpture will have to be transported to your location after its purchase – and this is where things can go wrong.

“I’ve seen numbers as high as 85 per cent of losses [occur] in transit … which makes sense because most of these items are breakable or easily damaged,” Sinclair explains.

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She recommends that fine art owners use what is called a condition report, which tracks the condition of the piece at each stage of the journey so that if there is an issue it is easier to figure out where and why it happened and, fundamentally, who is at fault.

“This report would describe the condition prior to packing, usually there are photos, and then its arrival when it’s unpacked,” she says.

Further protection, according to Sinclair, would include an insurance policy that covers the new piece and the transit exposure, as a standard homeowner policy may not be enough.

“If you’re relying on a standard home owner or condominium policy, there’s usually a fine-art supplement and no transit cover, so once your piece or pieces exceed the supplement value … you will need to purchase higher limits or even look to insure your collection with a carrier more experienced in insuring art,” she explains.

The world of art investment often attracts people who are both interested in the beauty and the money and there is often overlap between those two groups. Where one falls on that spectrum can dictate questions around storage, security and the need or desire for replicas.

Doug Woodham, managing partner of New York-based Art Fiduciary Advisors and author of the book, Art Collecting Today, has helped his clients evaluate, secure, store and commission replicas of their works in order to help maintain their value.

“I’ve had clients where when I’ve started working with them to help them understand what their collection is worth – these are people that might have started collecting about 40 years ago and maybe made a handful of really smart decisions and they’re as amazed as anybody else [about its worth] … and sometimes [they realize], ‘I can’t have this hanging in my dining room’.”

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In those cases, Woodham says he helps the owners set up storage for their collections and keep it under lock and key to ensure it stays secure. It is important to research fine art storage options to ensure the conditions are ideal. The same type of research regarding protection from the elements will also be necessary if you plan to hang pricey art in your home, including keeping it away from direct sunlight, creating the ideal environment for the piece, and, if necessary, going over cleaning strategies with staff.

From art guards to deliberate fakes

Then there are the art owners who want to admire their pieces, but are concerned about security. Woodham describes some of the lengths people will go to ensure their valuable art collections are admired, but only at arms-length.

“I had one client who had a wonderful Mark Rothko, a large, magnificent work,” he recalls. (For context, Rothko paintings sell for tens of millions of dollars.)

“Whenever he had a party at his house, because he loved having dinner parties, he and his wife … they hired a guard to stand next to the Rothko and make sure that nobody bumped into it.”

This might seem a bit extreme, but the value of these pieces and their ability to be damaged is worth the next-level safeguards for these clients, says Woodham. “They look at the practical aspects of living with extraordinarily valuable works of art, so they have to take some precautions.”

For the passion collector who also sees the need to protect the work of art as investment, there is the option of commissioning a replica so the aesthetic can be admired, but the valuable work can remain stored away for security reasons.

“In this case, [art owners] want to see it, they’re just not comfortable having it hang in their home,” explains Woodham, who goes on to talk about one client who loved to show off his replica of a famous painting hanging in his study to friends and family. “He would point out this wonderful painting and people would ‘Ooh’ and ‘Aah’, and then he would go, ‘I actually sold the original. This is a replica’,” laughs Woodham. “He loved the reactions.”

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