Salvator Mundi

Real estate is often described as illiquid, lumpy and bearing high transaction costs. However, these measures pale when compared with investment in fine art. Add to the considerations a typical lack of any significant income (often outflows for insurance and security), fallible provenance, and a lack of regulation, and one might wonder what would encourage an unnamed buyer to pay $450m for Da Vinci’s Salvator Mundi this week. Putting aside the outside chance that they just really like art, there are various reasons which may again chime with property investors. Firstly, this is about capital gains, and so you only need be convinced that someone will one day pay more than you (the current deal represents a 4x multiple). Given that the painting sold at auction, with an underbidder not far off the chase, this might provide some comfort. Secondly, from a financial perspective, art has a weak correlation with equities and so offers diversification benefits. It has also shown itself to be a good hedge against inflation. Thirdly, I’ve heard that Leonardo isn’t painting any more of these (<20 of his paintings exist) and so scarcity brings value. Finally, ego surely plays a part. The largest art investment ever will be a pretty good dinner table trophy.