This Alternative Investment Has Provided 22.3% Gains During Years of High Inflation

Institutional investors have benefited for decades from the high potential returns and low correlation to the stock market that alternative investments can provide. Alternative assets also provide greater diversification than traditional investments can offer, which is especially important during periods of high inflation and economic crisis.

The multimillion-dollar capital contributions traditionally required to participate in these investments have left most individuals out of the loop until recent regulatory changes made it possible for retail investors to participate in many of the same opportunities as hedge funds and private equity firms.

Investing in Art: One of the most exclusive types of these alternative investments is blue-chip art. Not only does investment-grade artwork come with price tags in the millions, it’s also difficult to gain access to and even more difficult to know which pieces to purchase.

Fortunately, alternative investment platforms have solved some of these problems for the average investor. It’s now possible to purchase shares of valuable paintings from artists like Andy Warhol and Jean-Michel Basquiat with minimum investments starting around $1,000 instead of $1,000,000.

See also: Best Art Investments

Contemporary Art Historical Performance: There’s no central marketplace where all artwork is bought and sold, so art investors rely on third-party research and art indexes to understand the overall performance of this asset class.

According to research conducted by Masterworks, contemporary art has provided 14% annualized returns between 1995 and 2020. The company’s research also shows that this type of artwork has provided some of the greatest returns in years of high inflation, with an average annualized return of 23.2% during years with inflation of 3% or higher.

Certain data also shows that art has performed well during periods when other asset classes have performed poorly, making it a great addition to a diversified portfolio.

In December 2020, Citigroup Inc. C published a report comparing the performance of contemporary art versus other asset classes during the COVID-19 pandemic. The report’s findings showed that contemporary art outperformed all other asset classes that were looked at, including developed market and emerging market equities, fixed income funds, commodities, private equity and even real estate.

Interested in exploring alternative investments? Check out Benzinga’s Alternative Investments Hub for guides, news, resources and reviews on the top alternative investment platforms.

Photo by Steve Johnson on Unsplash