5.8.13

Abu Dhabi & Art

Some people think that after Dubai´s exaggerations, holding the largest Guggenheim museum and a new Louvre in Saadiyat island (Abu Dhabi) is again a way of showing off the oil wealth. We don´t think so. Suppose for one minute that we are the ones in charge of investing the huge amount of cash flow that comes from Abu Dhabi´s wells. What should we do? The world is changing fast and owning US treasuries is not safe any more after a possible dollar debacle. Probably, we would buy some physical assets like gold, companies, real estate..., but more diversification would be needed.

One of the best options according to famous financial analyst and writer Jim Rickards could be to add a good percentage of our portfolio in fine arts. Historically, it has been really profitable, and, even now, the art houses with good management keep on making good money. This type of investment has steadily beaten inflation. Investing in art has 3 main hurdles: we need expertise, a safe place to deposit the pieces, and to make sure we follow the trend in terms of valuation.

Abu Dhabi´s genius plan deals with the 3 at the same time plus it gets prestige and tourism. They can hire the best experts to buy what almost nobody can, they create a beautiful "deposit box" that the rest of the world can admire, and, being so big, they will become a major partner in most of the World´s important art transactions which somehow could open a path for higher valuations.

It is not showing off, it is the perfect investment. Should retail investors copy it?