InwestCo CEO Aaron Dabbaghzadeh Highlights Surge in Fine Art Investments by Middle Eastern Investors
The Middle East has undergone a significant cultural revival in recent years, becoming a major player in the fine art market. According to Forbes Middle East, the first quarter of 2023 saw a “wave of temporary art exhibitions, talent, and investors convening in the region.”
InwestCo, a family office with a strong presence in the United Arab Emirates, has observed a growing trend toward investments in alternative assets, especially fine art. This trend reflects the insights gained from advising numerous Middle Eastern investors, highlighting the importance of supporting clients in navigating the art investment space.
Embracing Diversification
With the region diversifying beyond oil and gas, many investors are exploring new avenues for portfolio diversification. This strategy spans various sectors such as real estate, technology, healthcare, renewable energy, and the art market. Diversification reduces reliance on a single sector, enhancing financial resilience and adaptability to market changes.
Trends in Fine Art Investment
One notable example of fine art investment in the Middle East is the 2017 acquisition of Leonardo da Vinci’s “Salvator Mundi” by Saudi Arabia’s Crown Prince Mohammed bin Salman. This purchase signifies a shift away from traditional assets, highlighting the growing significance of fine art in the region’s financial landscape.
The influence of the Middle East in the art market is evident in major auction houses. For instance, Sotheby’s Middle Eastern Art department set records for three Egyptian artists during the March 2022 20th Century Art/Middle East sale. These record-setting works included Seif Wanly’s “Untitled” oil panel, Abdel Badie Abdel Hay’s sculpture “Mobaghata,” and Hamed Abdalla’s self-taught oil painting “Ville Arab.”
Additionally, the establishment of major cultural institutions like the Louvre Abu Dhabi underscores the transformative power of art in fostering global connections and cross-cultural dialogue.
Implications for Family Offices
The trend of increasing fine art expenditures is expected to continue. Investing in fine art offers more than aesthetic pleasure; it provides financial opportunities and cultural enrichment. By investing in artworks, investors can support artists, endorse cultural achievements, and capture the essence of their time.
However, optimizing the value of such investments requires careful consideration. For family offices guiding investors through the fine art market, it is crucial to educate them on the risks and rewards, conduct thorough due diligence, and advocate for market transparency.
Challenges such as lengthy liquidation times necessitate careful planning for investors needing quick access to funds. Factors like subjective valuation, transaction costs, market volatility, and preservation expenses highlight the importance of meticulous research and strategic planning.
Educating clients on the factors affecting artwork value, such as scarcity, is also essential. Scarcity can arise from limited editions, unique works, low production output, infrequent market appearances, and the exclusivity of exhibitions. Economic prosperity can also drive demand, increasing competition and value. Additionally, artisanal craftsmanship and the use of rare materials can enhance an artwork’s intrinsic value.
A comprehensive strategy combining theoretical knowledge with practical experience is vital when advising clients on fine art investments. This can include workshops, curated gallery tours, real-life case studies, market trend updates, and guidance on legal and tax matters.
Ultimately, the vast opportunities for fine art investments in the Middle East represent a blend of tradition, innovation, and visionary financial decision-making. While art investments can offer both fulfillment and financial returns, a prudent approach is essential. As Aaron Dabbaghzadeh’s father wisely said, “Invest in assets that endure, and keep them right in front of your eyes.”
The information provided here is not investment, tax, or financial advice. Please consult with a licensed professional for advice tailored to your specific situation.