What was meant to be a quick sale of a rare antique turned into a sobering reminder of the hidden risks of so-called alternative assets.
Grande tête mince, a bronze sculpture by Alberto Giacometti, failed to meet expectations at a recent Sotheby’s auction. Industry insiders and art experts estimated that the sculpture was worth $70 million, however the auction failed after the highest bid maxed out at $64.25 million, according to the New York Times.
This high-profile flop highlights some of the risks of storing wealth in collectibles. On average, ultrawealthy families across the world have allocated roughly 13.4% of their assets to artwork and collectibles, according to Deloitte. However, the market is notoriously opaque and illiquid, which means many of these collectible items might not be worth as much as their owners believe.
Investors looking for an asset that isn’t exposed to the same market dynamics as stocks and bonds have better options than art. Here are three alternative assets that could be more attractive than ancient sculptures or oil on canvas.
Gold has been around longer than any piece of ancient art and its collectors include central banks and sovereign nations. The market for this precious metal is also much more transparent and robust.
Gold’s reputation as an uncorrelated, safe haven has been cemented in recent months. As President Donald Trump’s ongoing trade war whips up volatility in stocks, bonds and cryptocurrencies, the price of gold has surged roughly 25% over the past six months.
Adding some exposure to this hard asset could be a good idea if you’re worried about economic growth, inflation or interest rate volatility over the medium to long term.
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Tangible land and property has strikingly different dynamics than either stocks or bonds. According to an analysis by J.P. Morgan , direct real estate as an asset class tends to have low or even negative correlation with the S&P 500.
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