Art and Collectibles as an Asset Class

Art, classic cars, wine, watches and other "passion" assets have long held a place in the portfolios of wealthy families. They are held for pleasure, status and diversification, but as an asset class they obey their own rather rigid logic, which is important to understand before the first purchase.

Art as an Asset Class

Art prices are weakly correlated with the stock market, and during periods of inflation tangible objects often serve to preserve value. The price for this is the absence of cash flow, low liquidity and subjectivity of valuation: the value of a work is confirmed only at the moment of sale and depends heavily on fashion, name and market conditions. The market itself is small and cyclical: according to Art Basel and UBS, in 2024 global art sales fell 12% to $57.5 billion—the second consecutive year of decline, although the number of transactions increased. The decline hit the upper segment: the number of works over $10 million fell by almost 40%, while lower-priced lots gained in turnover. This is a typical picture of a market where value is held by a narrow layer of top names.

Features and Costs

• Low liquidity: selling a worthy piece takes months, and the auction cycle takes even longer.
• High transaction costs: buyer's premium at leading auctions reaches 26–27% at the lower price tier (Christie's, Sotheby's), and to this are added seller's commission, insurance and logistics.
• No income: the object does not generate dividends and itself requires storage and insurance costs.
• Risk of authenticity and condition: restoration, damage and doubts about attribution directly impact price.

Classic Cars, Wine and Watches

The logic of art extends to other passion assets tracked by the Knight Frank Luxury Investment Index: classic cars, wine, whisky, watches, jewelry and even handbags. They are united by a combination of limited supply, cultural prestige and tangibility; they differ in liquidity and price drivers. Watches from leading brands gained about 5% in 2025, and over a decade grew by more than 125%, relying on scarcity of specific references. Wine according to the Liv-ex Fine Wine 100 index declined in 2025 and lost about a quarter of its value from the 2022 peak, but over the long horizon delivered around 37% over ten years. Classic cars rely on a narrow circle of collectible models and require expensive maintenance.

Provenance and Authenticity

Provenance—the documented history of ownership of an object—determines both its price and legal clarity. A complete chain from the workshop to the current owner increases value and protects against claims; gaps in it, on the contrary, mean the risk of restitution or that the item will turn out to be a forgery or an illegally exported object. Therefore, expertise and verification of origin are a mandatory part of the transaction.

Freeports: Storage and Tax Deferral

A significant portion of investment art is stored in freeports. The oldest and largest is the Geneva Freeport, where, according to estimates, art worth approximately $100 billion and around 1.2 million objects are concentrated. As long as the item is formally "in transit," customs duties and VAT are deferred; similar hubs operate in Singapore, Luxembourg and Delaware. The convenience of storage and tax deferral coexist here with opacity of ownership.

Regulation and Reputation

Freeports have long been in the sights of regulators. Back in 2010, FATF named them a risk zone for money laundering, and in 2018 a European Parliament study pointed to their similarity to offshore zones and called for stricter supervision up to closure in the EU. Switzerland since 2016 has tightened anti-money laundering rules and requires keeping an inventory for items imported after 2009. The main practical outcome was the AML regime: since 2020, the Fifth EU Anti-Money Laundering Directive has extended banking-type obligations to art dealers, auction houses and freeport storage operators.

AML and Ownership Structures

Since 2020, the art market has been integrated into the general AML framework. The Fifth EU Directive (5AMLD) made art dealers, galleries, auction houses and storage operators obliged entities: for transactions from €10,000 they conduct customer due diligence and establish the beneficial owner. In the UK, art market participants register with HMRC, which has been imposing fines for violations since 2022. The EU is transitioning to a unified AMLR regulation and a supervisory body AMLA with an application deadline of 2027. The US so far covers only antique dealers under AML (under the AML Act 2020); conventional art does not fall under the federal regime, and the US Treasury's 2024 assessment considered its risk moderate. Expansion is being discussed in the form of the Art Market Integrity Act bill (requires status verification).

At the same time, how collections are held is also changing. Expensive collections are often registered to a company, foundation (Liechtenstein or Panama) or trust—for the sake of continuity, limitation of liability and confidentiality. The previous anonymity of such a wrapper is shrinking: beneficial owner registers and counterparty due diligence reveal who stands behind the structure. Therefore, the wrapper is selected for a specific task—transfer to heirs, collateral for credit or consolidation of family assets in a family office—and its economic substance must be real.

Succession and Insurance

A collection requires a separate place in succession planning. It needs to be valued, described and the question of situs resolved—the physical location on which applicable law and tax depend: an item stored in the US risks falling under local estate tax regardless of the owner's residence. Low liquidity hits heirs, who sometimes have to urgently sell part of the collection to pay tax, often in a falling market. A catalog, insurance coverage and clear instructions for each item remove a significant part of future disputes.

This material is for informational and analytical purposes only and does not replace individual investment, legal or tax advice.

Sources

• Art Basel and UBS
• Knight Frank Luxury Investment Index