Art in the Royal Portfolio

While investable art is surely expensive, many famous collectors have been able to generate massive returns by betting on emerging artists and holding on to their works for long term windows that run into a few decades. Time and again, we have brought forward reasons to back the claim about how and why art is an investment. In this article, let's seal the deal by analysing how art plays a dominant role in the financial portfolio of one of the most famous royal families in the world.?

It is no surprise that the Royal Family of England is immensely wealthy. Over the last decade, their finances have also been put under heavy scrutiny by the public. While their regular income, mostly through ‘Duchies’ and the Sovereign Grant, is nowhere close to the billionaires of the 21st century, it is their personal assets that truly make heads turn. Passed down through generations, the late Queen’s collection included more than 7,000 paintings, 30,000 works in watercolours and 5,00,000 prints. Notably, this collection is also known to hold at least 6 Rembrandts, hundreds of drawings by Leonardo Da Vinci and nearly 24 drawings by Michelangelo. The collection is in fact so vast, that a painting by the master of light Caravaggio titled ‘The Calling of the Saints Peter and Andrew’ was discovered in a storage room in 2006, known to be missing for 400 years.?

Although there is no way of knowing for sure, as per one estimate, the Royal art portfolio is valued at approximately US$10 billion. The overall brand that is the Royal Family, is valued at 3x that collection. After real estate, it is the portfolio of artefacts and objects that makes the Royal portfolio what it is. If works of art constitute a third of the value of one of the richest families’ net worth, then art is undeniably a dominant asset. ?

Two key takeaways here are that the family has created and held on to their collection across generations and that the collection is spread across artists, genres, mediums, materials and subject matters, thus making it a long-term and diversified art portfolio. And that is truly what investing in art is all about. It is about collecting works by emerging artists while hedging one’s bets by having a substantial investment in established artists and the willingness to keep a long-term horizon.?

The Royal Family of England is only one in a whole host of royal and well-known business families and celebrities that have held and subsequently created a significant portion of their wealth through investing in art. Moreover, many big names such as Brad Pitt and Angelina Jolie, Leonardo DiCaprio, Tiger Woods, Kanye, the Rothschild family and the Royal Family of Jaipur are known to be avid collectors and patrons. In the nineteenth century, the Rothschild banking family allegedly acquired art in order to diversify its portfolio. The family invested their wealth by thirds: equities, real estate, and the remainder in jewelry, art, and cash. In the early twentieth century, the forerunner of an art investment fund was established by French financier and art lover Andre Level, who pooled together money from 12 other investors to found the Peau de LOurs (Skin of the Bear) scheme. The funds were used to buy more than 100 works of art from artists such as Picasso and Matisse, who were still in the early stages of their careers. In 1914, the entire collection was liquidated. The sales prices for the works were, on average, quadruple the original acquisition prices (Fitzgerald 1995.)?

This does not equate to art being a passion of the rich, but rather a pointer towards how the rich manage and generate wealth by diversifying their investments by also including unconventional assets. And the leader on the scoreboard of alternate assets is art.

By Siddhant Puri | Financial Knowledge Analyst | Indian Art Investor