However, over the past decade or so, rising demand for “investments of passion” has sent their value soaring, drawing in investors, speculators, but also collectors who realise maybe they can cash in on their hobby.
 
It is probably no coincidence that “trophy” assets – those that are easiest to show off – have done the best. Last year, classic cars generated growth of 17 per cent, while art returned 4 per cent, according to the Knight Frank Luxury Investment Index. This compares with a 5 per cent drop in the value of the FTSE 100 equities index and a rise of just 1 per cent for the top end of the London residential market. In February 2015, 'When Will You Marry?', a painting by Paul Gauguin of two Tahitian girls, became the most expensive work of art ever bought when a Swiss collector sold it to Qatar for almost $300 million. With these kinds of sums being exchanged, the temptation to sell is strong – for those who want to.
 
There are two types of buyers in the art market – those with a real passion or desire to acquire deep knowledge of what they are buying, and then the investors/speculators, Steve Kettle, chairman of the art management division of multi-family office Stonehage Fleming, tells WealthBriefing.
 
“True collectors will never leave the market but their presence is being diluted by those with deep pockets,” he says. Those who are buying art purely from an investment perspective, meanwhile, may well be disappointed because prices have massively overshot, he adds.
 
“Certainly in the contemporary art market, the bubble has already started to burst. It’s just a matter of time before these investors, or more correctly speculators, leave the market altogether and move on to another so-called alternative investment asset that would fetch them better returns.”
 
Even with the eye-popping prices paid at the very top, figures for the market overall support this theory. According to a survey coinciding with the TEFAF art fair last month in Maastricht, Netherlands, sales generated by the global art market fell 7 per cent year-on-year in 2015 to $63.8 billion. The number of transactions also dipped by 2 per cent. Zooming in on the auction market, which is dominated by Sotheby’s and Christie’s, growth stalled last year. New York-listed Sotheby’s reported net income of $43.7 million, down 63 per cent from the previous year. Christie’s, a private company that does not report net income/profits, made 2015 sales of £4.8 billion , down 5 per cent from 2014.
 
For true collectors, the level of the market is irrelevant, Kettle explains; money for them never moves from the lifetsyle asset bucket to the investment one. That is not to say, however, that these people do not take advantage of the opportunities that have come with the “financialisation” of this market, for example through the use of art as collateral.
 
In medieval and Renaissance Europe, artwork was backed by patrons – usually kings, popes and wealthy people – before being made to order. That practice was called patronage. Today, there is the business of art finance. Firms in this space, such as Falcon Fine Art and Athena Art Finance, allow collectors to raise finance against their art assets, thereby generating liquidity and releasing equity, without having to sell. In the US alone, the art-related lending market has grown by 15 to 20 per cent annually over the last five years and is now worth between $15 billion and $19 billion, according to a recent report by Deloitte and ArtTactic. Private banks are on top with an estimated loan book size of between $13 billion and $15 billion.
 
With so much capital at the ready, collectors can sit back and enjoy the liquidity hanging on their walls. But what about the supposedly overheating market? Are there safeguards in place to a borrower getting carried away?
 
Randall Willette, founder and managing director of Fine Art Wealth Management, explains that art lenders can currently be identified as recourse or non-recourse lenders depending on their assessment of the borrower’s credit worthiness.
 
A recourse loan is secured by the art assets but also guaranteed by the borrower, which implies the borrower’s full credit is essentially backing the loan. A non-recourse loan on the other hand, is secured solely by the art underlying it. Few banks will accept these terms as they will normally assess the financial health of the client along with the quality and marketability of the art, he tells WealthBriefing.
 
“New specialist art lenders have entered US and European markets to tap into the increasing demand for financing by sophisticated collectors. These lenders are often referred to as asset-based lenders and offer ‘non-recourse’ lending, meaning they will have no right to claim on any of the client’s other assets. Because this is a higher risk loan, it will typically incur a higher interest rate, as the art acts as the only source of collateral for the loan,” said Willette.
 
With so many parties looking to profit from strong demand for art and other high-value collectibles, fuelled partly by a burgeoning middle class in Asia, collectors will want to make sure their children are not easy targets. The dilemma lies in when you spend years – decades even – cultivating a collection only to have its value discarded by your easy-to-woo children.
 
This, it seems, is a problem specific to today's millenial generation . Much to the disappointment of art collectors, Kettle says, their children more often than not do not share their passion or taste, leaving the matriarch or patriarch having to establish a costly private foundation, donate works to a museum, or dispose of the asset.
 
“Many millenials view artwork more as a financial commodity, which is a great shame. There are also those that, driven by a social agenda, are pulled into a glamorous and very manipulative market, one where there is little clarity on who is a friend and who is not,” Kettle said.
 
Addressing strategies for getting the younger generation excited about the family art collection, Willette said in a recent white paper: give them a voice and be receptive to change. “Two of the biggest mistakes when trying to involve children in the family collection are forcing involvement; and ignoring children’s own interests across a broad spectrum of art including regional and niche opportunities,” the paper, entitled Engaging the Next Generation in the Family Art Collection, said. It also highlights technology, one of the key generational differences, as a useful engagement tool - namely how a digital strategy for a family collection can provide clarity and focus as to what kind of legacy the family should strive for.