Investing in art

For collectors and investors alike, it’s an important question: where does art sit alongside more traditional asset classes, and what role can it realistically play in a portfolio?

"Collecting art is a wonderful journey… it’s a journey of education; it’s a journey of enlightenment."

Lakshman Anantakrishnan, Chief Investment Officer at ANZ Private, is clear that art occupies a very different space. It sits firmly in the “alternatives” category, similar to wine, classic cars and lifestyle properties.

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“Most other asset classes derive value from what they produce,” he says. “Art derives value from what it means. That’s a fundamentally different investment proposition, and it requires a fundamentally different analytical framework.”

Unlike shares or property, art generates no income stream. Its value is driven by scarcity, cultural relevance, and demand from a relatively small group of global collectors. It also doesn’t reprice daily, which can give the impression of stability, but in reality, it reflects infrequent transactions rather than reduced risk.

That dynamic is amplified in Australia’s relatively small art market, where specialist firms like Menzies Art Brands play a central role in sourcing and connecting collectors with significant works. Cameron Menzies, Chairman and Head of Private Sales at Menzies Art Brands, describes a tightly held ecosystem.

“The entire secondary market in an average year in this country is about $150 million in turnover,” he says. “So, it could be one picture overseas consolidated into the entire market.”

Within that small pool, competition for the top works is intense, with a handful of auction houses vying for a limited number of high-quality “trophy” pieces. Menzies brings these works to market through curated auctions held three times a year, supported by private sales, working closely with collectors throughout the process.

Despite the scale of the market, art continues to attract buyers, not always for purely financial reasons. As Menzies explains, motivations range from status and aesthetics to something more personal.

“Fundamentally we’re dealing with collectors… art really is like the screenplay to their lives,” he says. “You’re engaging with these objects every day… collecting art is a wonderful journey… it’s a journey of education; it’s a journey of enlightenment.”

This emotional dimension is precisely what sets art apart as an investment.

“In many ways, art is the most honest asset class. It openly admits that humans don’t invest purely rationally,” Anantakrishnan says. “Every other asset class pretends otherwise, but the behavioural forces are just as present. They’re simply better disguised.”

From a portfolio perspective, art can offer diversification, but with important caveats.

“Art is not the portfolio hedge people imagine it to be,” Anantakrishnan says. “It’s a slow-moving, aesthetically enriched exposure to global elite wealth.”

Because its value is tied to the purchasing power and preferences of high-net-worth collectors, art tends to move independently of equities in normal conditions. However, during significant economic downturns, it can still decline as wealth contracts.

How works come to market also highlights the unique nature of the asset class. Asta Cameron, Head of Art at Menzies, says sales are often triggered by life events.

“Usually it is one of the four D’s: either a death in the family, a couple getting divorced, someone downsizing, or perhaps debt,” she says.

Once consigned, works are researched, catalogued and introduced to a targeted network of buyers, reflecting a highly relationship-driven process. Timing can also be crucial in achieving strong results.

“Artists always are going up and down, so you’ve got to really jump on those trends if you can,” she says.

Even with expertise, liquidity remains a key consideration. Art is typically a long-term holding, with successful resale dependent on timing, demand and the right buyer.

“We’re not operating a stock exchange here… it’s a very, very nuanced market,” Menzies says. “That golden rule seems to be buy it because you love it, not because you think you can trade it.”

Alicia Muling, is Senior Journalist at ANZ