There are many reasons why private banks advise clients about fine art, both as collecting as an activity in itself, and for investment reasons. We talk to UBS about its recent report with Art Basel, and what lessons it has learned.

Art buyers and collectors are optimistic about the state of this global market. Recent activity appears to back this up, UBS said of its recent report, produced in conjunction with Art Basel. And the study also showed – as remarked upon here – a return to in-person auctions and exhibitions after the disruptions caused by the pandemic. 

“Collectors remained committed to the market and reengaged with live events, while exhibitions, auctions and fairs returned to fuller schedules,” Paul Donovan, chief economist at UBS Global Wealth Management, told this publication. “Looking ahead to 2023, both collectors and dealers are optimistic on the market’s potential.”

Donovan gave the example of how 77 per cent of high net worth collectors surveyed by Art Economics and UBS were positive about the outlook for the global art market, and a majority (55 per cent) plans to buy art in 2023. 

“In certain markets, such as the important US market, their share is as high as 65 per cent. Also 45 per cent of the surveyed dealers expected an improvement in sales, including 10 per cent predicting a significant improvement. We are seeing this strong continued interest in buying art from our clients, who share our passion for collecting,” he said.

Besides UBS, other banks, such as Deutsche Bank and Citigroup, advise their HNW clients who are interested in the art world. This is an area that has created a cluster of specialist advisors. In the US, for example, Ronald Varney Fine Art Advisors, which has been awarded by this news service, works with wealthy individuals and families on their collections. In the UK, an example (see an interview here) includes Hottinger Art, part of European firm Hottinger Group. 

There’s plenty of room to play in. The global art market exceeded pre-pandemic levels in 2022, logging 3 per cent year-on-year growth in global art sales reaching an estimated $67.8 billion, according to the UBS/Art Basel report. The sharpest bounce-back in the art market happened in the US, with the UK in second place, overtaking China (a country that only started to come out of tough anti-pandemic measures last year).

The UBS and Art Basel events are important barometers of the global art market and can indicate how confident HNW individuals think they are about their money and their desire to spend some of it. 

“The year 2022 saw the art market hold onto its post-pandemic rebound and strengthen further despite severe economic uncertainty,” Donovan replied.  

He was asked what types of art stand out for popularity and what sort of prices are being achieved. 

“Works by living artists have gained an increasing share in recent years and have often been among the highest-priced lots at auction. As for trends, although we observed a continued interest in digital art over the last two years, the majority of sales by value in the dealer sector in 2022 came from the more traditional mediums of paintings, sculptures, and works on paper, making up 82 per cent of the sales combined,” he said. 

“I also thought it’s interesting that the report found that having a very low share of representation of female artists was correlated with lower year-on-year sales growth performance for galleries, while those with a share of over 80 per cent had higher than average growth of 21 per cent. While there may be many factors that drive performance, the findings indicate again that having a higher share of women has not been a negative factor for sales in 2022, but having very few could be,” Donovan continued. 

A reference to the digital world raised the question of how far the pivot to the virtual world that happened when Covid-19 struck was permanent, and how much of it was a passing phase. 

“During the pandemic, the art world experienced a significant pivot to the virtual world, with more sales and events moving online. However, in 2022, as live events and physical spaces began to re-emerge, there was a reduction in online spending, but it was still higher than pre-pandemic levels,” Donovan said. “Auction houses and dealers reported a reduction in the share of sales accounted for by e-commerce, with online-only sales falling by 17 per cent from the 2021 peak of $13.3 billion.”

“Nonetheless, e-commerce sales remained 85 per cent higher than in 2019, indicating that the shift to online is here to stay as a complement to live events and the experiential nature of the art market. Overall, the move of the art world online offered welcome improvements in price transparency and access to information. Digital developments continue to open the market and help lowering barriers to entry, enabling new collectors to enter the market – essential to its long-term health,” he said. 

Donovan noted that blockchain innovations also offer new tools to support artists, collectors, and dealers in a quickly advancing legal and regulatory landscape.

This news service asked Donovan about inflation and art collecting.

“Art has emotional value and sometimes financial value for our clients. Our view is that collecting is a passion pursuit which pays emotional dividends. We advise that there is a careful institution of management structures to ensure collections remain protected, correctly valued and insured and that preparations have been made for succession planning,” Donovan said. “All in all, when mitigating risk in art transactions, managing an art collection professionally and collecting according to a personal strategy, out of experience, this passion asset has proven as a satisfying endeavor even – or especially – across the most significant crisis periods. Quality is key. To this extent, it is worth noting that in 2022, despite economic challenges such as high inflation, rising interest rates, and lower growth expectations, the global art market demonstrated its resilience, with global sales up by 3 per cent.”

The art world gives UBS an insight into what makes its clients “tick,” and that’s invaluable, he said.  

“We share our passion for collecting with a large community of clients whose needs are at the heart of UBS's services and we’re committed to contributing to the conversation about where the art market is today and where it’s going. UBS Art Advisory provides exclusive impartial expertise on the art market, collecting and art legacy planning. Some of the world's wealthiest families and individuals allocate a significant portion of their wealth to their passions. Many are collectors. By offering expertise and thought leadership, we can support them in exploring their personal collecting aspirations and to secure their own cultural legacy for future generations,” he added.