Art should be considered as an investment for institutional portfolios from both a return standpoint and as a way to achieve social goals, such as diversity and inclusion, that are often part of an ESG framework. Historically, wealthy families and individuals have been the biggest buyers of art, for its aesthetic, cultural and social value. More recently, art has started to morph into a financial asset in its own right.
Opportunity: Although small by financial market standards, the art market has significant turnover that would allow small- and midsize institutional investors to diversify portfolios. Over the past decade, art has averaged about $60 billion in annual turnover, similar to the level of money raised by venture capital funds.
Investing in change: Works by postwar male artists sell for $100 million-plus, far outstripping original purchase prices. However, equivalent pricing has eluded female and minority artists — even as the art world has recognized their talent. Through investments in diverse artists, institutional investors could help rectify that imbalance while earning returns.