The Art of Tax Planning in Designing an Investment Portfolio

15 February 2017

Art has become an increasingly popular asset class when it comes to designing an investment portfolio, but remains a fairly unchartered territory for many South African investors.

In 2015, the top three most expensive art works sold for $179.4 million (Picasso), $170.4 million (Modigliani), $141.3 million (Giacometti). Over the past decade, the art industry has seen a growth rate of 212% and is quickly becoming an asset class to be reckoned with.

According to Tim Mertens, Chairman of Sovereign Trust SA, “With the search for higher returns on investments, and the need to diversify investment portfolios in times of market uncertainty, investors are considering alternative investment avenues, of which art is a class of growing interest. In addition, this is an investment that one can enjoy as it appreciates in value and attracts limited taxes.”

“Of course, collecting art is not for everyone, but those who are in the know or have an appreciation for art in whatever form could do worse than many of the other alternative investment classes out there such as private equity or hedge funds. Art is tangible and has more in common with the likes of property investment,” adds Mertens.

Portability of art means that it can be moved between borders which has made it an attractive store of wealth for the wealthy, especially those living in less stable economies or countries around the world. Mertens advises though that in South Africa one would have to contend with South African Reserve Bank approval in order to transport art cross border, but in countries where this is not an issue, there are obvious advantages.

Sovereign Trust recently announced their sponsorship of the Cape Town Art Fair to be held in Cape Town in February 2017. Mertens asserts that one of the objectives of the Cape Town Art Fair is to drive the reputation and sales of contemporary African art. “Art is big business all over the world – but less so here and we hope the Fair will offer South Africans an opportunity to participate in the art market.”

What makes art fairs so attractive is that they provide collectors with a single point of access to a wide range of galleries that have the credentials and experience to profile artists with investment potential. This type of event will help make the purchasing decision a little easier for potential buyers.

The Cape Town Art Fair will be held from 17 to 19 February 2017 at the Cape Town International Convention Centre.

For more information please contact:

Peter Mokoko
ByDesign Communications
pmokoko@bdcomms.co.za

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