Alternative investment categories continue to be popular among high-net-worth investors who are already well-diversified in their traditional financial portfolios and are now seeking long term appreciation for tangible assets. As a result, interest in jewelry and fine art collection has grown steadily in recent years and savvy collectors have been able to realize greater returns on their initial investments while also enjoying the pride of acquisition and ownership of unique and important works.
“Owning art or jewelry as an investment certainly offers far more pleasure than a basket of stocks in a portfolio,” says Lisa M. Barnes, a professional art appraiser. “There’s a certain pride-of-ownership that comes from being able to handle exquisite and rare jewelry and taking the time to appreciate art that is your own.”
As investments in jewelry and art appreciate, the personal articles floaters that protect them must be continually reviewed
However, beyond the esthetic benefits, investing in jewelry and art requires careful consideration and there are a number of very important differences in comparison to more traditional investment vehicles. For example, jewelry, art and other tangibles are subject to different types of market trends and as a result, can fall out of favor and be challenging to sell. This illiquidity, as well as issues in determining fair market value, pose serious complications for investors according to Christine Daniels, Senior Personal Insurance Broker & Underwriter, Burns & Wilcox. As a result, a great deal of specialized knowledge is essential. “Just like constructing a financial portfolio, it’s important that investors educate themselves in terms of what is happening in the rare art and jewelry market.” Despite these reasons, worldwide interest in jewelry and art has continuously increased and as a result, private collections have grown in both size and value.
According to the European Fine Art Foundation (TEFAF) in Maastricht, Netherlands, the global art and antiques market is nearing the extraordinary heights seen just prior to the start of the international financial crisis. Powered principally by buyers in America and by rising prices for major post-war and contemporary artists, including Francis Bacon, Roy Lichtenstein and Andy Warhol, the organization recently reported that global sales of art and antiques increased 8% from the year previous to a total of $65.9 billion, just short of its all-time record in 2007.
Just as the value of art is influenced by market demands, jewelry is subject to fluctuation in gold and gemstone markets. Quality pieces are usually worth considerably more than the sum of their component materials. However, if a piece incorporates a significant stone — for example, a sizeable diamond — the value of the stone rises dramatically and becomes the key determinant of value.
Like art, jewelry is heavily influenced by global design trends. Once overlooked, fancy-colored diamonds are steadily growing in popularity and the category has experienced tremendous growth in recent years. According to Forbes, the popularity and price of these pink, yellow and blue diamonds have been on the rise globally, driven primarily by Asian investors. In fact, a rare red 2.09 carat diamond recently sold for $2,440,000 at Christie’s auction in Hong Kong this past November. The auction also saw the sale of a 3.39 carat oval-shaped, Fancy Vivid Blue diamond, surrounded by pink diamonds, sell for a $1,716,744 price per carat.
“The popularity of the fancy-colored diamond category has turned the tables on its white diamond cousins which have taken a backseat both in terms of category growth and appreciation,” says Robert Mark Bunda, BUNDA Jewelry Appraisers, an expert in Jewelry Appraisal. According to the Fancy Color Research Foundation (FCRF), a non-profit colored diamond index, fancy-colored diamonds experienced an average total appreciation of 154.7% from 2006 to 2014. In the same time period, the colorless, white diamond increased by a more modest 62.4%.
Whether a collector is focused on fine art or jewelry, proper insurance is essential and is one of the best investments any collector can make. According to Daniels, a regular homeowners insurance policy is simply not sufficient and serious investors and collectors should work with their broker to identify a specialty provider with floaters knowledge and expertise in their specific type of collection. “In most cases, a personal articles floater will be required, which schedules for extremely high-value items to be covered by a substantially larger level of monetary protection,” says Daniels. When a personal articles floater is purchased, it will require a detailed list or schedule of the property covered and each item must have an appraised value. High-deductible options may be available and insurance can be determined at an agreed value, current market value or a combination of both.
For brokers and their clients, ensuring that personal articles floater keep pace with the fluctuating value of the assets and investments they protect is essential. After all, a piece of jewelry or an artwork initially assessed at $25,000 more than a decade ago, could have appreciated significantly and may now be valued in excess of $50,000. As a result, personal articles policies should be carefully reviewed regularly to ensure that items are protected at their contemporary value.