"Passion assets" such as fine art and other collectibles were put under the microscope at last week's investment summit held in New York and organized by the publisher of FWR.

Collectibles took center stage as a portfolio allocation at Family Wealth Report’s Family Office Investment Summit in New York last week. (See here for another story from the event.)

A panel on “passion assets” stressed that the adjective was chosen for a reason: the collector’s enthusiasm – and lack of expertise – can outweigh the value of the collectible.

“The appeal is primarily experiential,” said Colleen Boyle, managing director, business development and philanthropic strategy. “But art and other collectibles is very much a ‘buyer beware’ market. It’s very unregulated and fraught with fraud.” 

To be sure, industry experts on the Summit panel made clear that there’s money to be made in luxury collectibles such as art, sports memorabilia, vintage cars, coins, jewelry and watches.

“The market for collectibles has gotten bigger and the rewards can be financial as well as personal,” said Thomas Ruggie, CEO of Destiny Family Office and a renowned sports memorabilia collector. 

Wealthy individuals with a net worth of more than $50 million report a 25 per cent allocation to art, according to a 2024 survey by Art Basel and UBS. Just over one-third of family office are allocating capital to collectibles as part of their investment strategy, according to the Goldman Sachs Family Office Investment Insights Report.

Record prices
The sale of a jersey worn by New York Yankee slugger Babe Ruth in 1932 (see the picture below of prices) made headlines earlier this year when it sold for $24.1 million after a six-hour bidding war. The jersey, worn by Ruth when he when he hit his legendary “called shot” home run in that year’s World Series, sold for $940,000 when it was last  put up at an auction in 2005.

Similarly, the first appearance of Superman in a 10 cent 1938 Action Comics book sold for $6 million this year and an acoustic guitar that John Lennon of the Beatles played when recording Help! in 1965 sold for $2.9 million after not being seen or played in 50 years.

Examples of prices paid

And despite reports of a softening in the art market, Pablo Picasso’s portrait of one of his lovers sold for $139 million last year, well above pre-auction estimates, while the last portrait Gustav Klimt ever painted also exceeded the auction house estimate by 27 per cent, selling for $108 million.

Authentication “super important”
Industry experts stressed the need for collectors to educate themselves as much as possible, proceed with caution and obtain third-party verification for items they possess or want to buy.

“When you buy art, there is always risk involved,” said Nanne Dekking, CEO of Artory, speaking at the “Art and Technology: Redefining Authenticity in a Digital Age” panel. “You need to know who the artist is and what is the authentication. That’s super important.”

The ability of the digital technology blockchain to accurately and safely record and store information was touted as an excellent authentication tool for artworks by Dekking and fellow panelists Courtney Booth Christensen, senior director, trusts and estates for Winston Art Group and Lisa Gelles, executive director at Howard Insurance.

“Buying art is a matter of trust, and blockchain provides transparency, authentication and validation,” Dekking said.

Valuation
Professional valuation is also critical, according to industry experts.

Art collectors should have professional appraisals, said Boyle. Sports memorabilia collectors can check the price of comparable items sold at auctions to determine value, said Ruggie. In addition, a new technology called photo resolution matching that can now authenticate sports items, was used to prove that the Babe Ruth jersey really was worn by the baseball star almost 100 years ago.

Authentication and valuation are also key for estate and tax planning, said attorney Matthew Erskine.

“You need to have a title to the artwork for the IRS,” Erskine said. “And the tax bracket for a sale is different for collectors, investors and artists.” He also advised collectors who donate art to charities to make sure they receive a ‘thank you note,’ acknowledging the gift, or else the IRS won’t recognize it as a charitable donation.

Collectors considering selling a work of art through an auction house should be prepared to bargain, Erskine advised. “You can always negotiate with an auction house,” he said.

(See other articles about the summit here and here.)