BNY Wealth recently surveyed investment decision-makers from 290 family offices. These private institutions manage the wealth of families that possess at least $250 million in investable assets. Nearly half of the respondents manage assets worth over $1 billion.

It is worth noting that among the family offices interviewed, nearly two-thirds hold assets that are not related to their broader investment portfolios, a proportion that is almost twice that of last year. More family offices reported investing in luxury assets, ranging from watches, exquisite jewelry, artworks, and spirits to sports teams and music copyrights.

The report suggests that the growing popularity of luxury assets may reflect their potential as a hedge against inflation. Inflation, as well as potential central bank mistakes, are identified as the primary risks that family offices will face over the next five years.

BNY Wealth, the head of the international market and family offices, stated: "For certain luxury assets, such as sports and media rights, we are increasingly seeing them in ultra-high net worth [UHNW] portfolios. They can provide inflation protection through pricing flexibility and regular cash flows."

However, the category with the highest year-on-year growth was not those assets that generate cash flow, but rather physical assets such as watches, exquisite jewelry, artworks, and spirits.

In this sense, buying a Patek Philippe may not be much different from buying gold: both are tangible tools for value storage, designed to protect against market fluctuations, geopolitical tensions, and rising inflation.

Recent performance data is mixed, but overall it indicates stability. The tracking of 10 categories of collectibles, represented by Knight Frank Luxury Investment Index, saw only a 0.4% decline in 2025, whereas most asset classes experienced declines in both 2023 and 2024. Last year, the sales of artworks at major auction houses increased by 11%, with the most notable sale being Gustav Klimt's work Bildnis Elisabeth Lederer sold by Christie's in November for $236.4 million. Watch prices rose by 5.1%, mainly driven by two major brands in the secondary market: Patek Philippe saw a 12.1% increase, and Rolex by 4.6%. In contrast, fine wines declined by 2.5% in 2025 due to U.S. tariffs suppressing demand, causing prices to fall nearly 25% from their highs in 2022.

Can luxury assets really hedge against inflation?

Long-term studies on luxury assets as an investment also yield mixed conclusions. In a 2021 study, researchers Campbell Harvey and Man Group from Duke University examined eight periods of high inflation in the United States from after World War II to the eve of the financial crisis in 2008. During these inflationary periods, the annual return on artworks was about 7% higher than inflation, wine was 5% higher, and stamps were 9% higher.

However, a study published in 2025 by Applied Economics found that although artworks can hedge against inflation in the long term in France, this is not the case in the United States and the United Kingdom. In 2022, a study conducted in collaboration between Credit Suisse and Deloitte Private Banking discovered that not all luxury goods are equally resistant to inflation: Chanel handbags, traditional Chinese art, and watches perform well during periods of high inflation, whereas fine wines, modern and contemporary art, as well as art from the United States and Latin America, "often perform poorly in high-inflation environments."

Whether luxury assets can be considered good investments or not, they are indeed booming. Sotheby's reported that sales in the first half of 2026 reached a record $4.4 billion, an increase of 58% year-on-year; CNBC reported that affluent consumers are increasingly purchasing jewelry, especially colored gemstones, as a form of investment.

Families that invest their money in luxury assets are still making heavy bets on artificial intelligence. For the third consecutive year, BNY has found that AI is regarded as the most attractive investment theme for the next five years, with 68% of respondents mentioning this point.

Taste as a differentiating factor

Marc Andreessen stated last year that venture capital might be one of the few professions that will not be replaced by AI, as the decision on where to invest relies on “intangible” skills, making it more akin to art than science.

Co-founders Y Combinator and Paul Graham posted on X in February this year, stating: "In the AI era, taste will become even more important. When anyone can do anything, the real differentiator lies in what you choose to do." For ultra-high-net-worth individuals, the true differentiator may lie in what you choose to buy.

Research on luxury investment also supports this point. A study by Credit Suisse indicates that what maintains value is not “luxury” itself, but rather specific tastes. No sector reflects this more than the art market.

Art and the Economy of Super Riches

In a paper published in The American Economic Review in 2009, economist Benjamin Mandel argued that art cannot be valued in the same way as stocks or other investments, as its value to the owner comes not only from aesthetic pleasure but also from the signal of wealth it conveys – what economists and sociologists Thorstein Veblen refer to as “conspicuous consumption.” Moreover, this second type of return tends to increase as prices rise.

The research by Mandel also influenced a column article in The New York Times Magazine in 2012, which discussed how the art market thrives on inequality and argued that high-end art is more a special economy for super-rich individuals rather than a part of the broader global economy. In 2011, a study by William Goetzmann, Luc Renneboog, and Christophe Spaenjers published in The American Economic Review reached a similar conclusion. The authors found a long-term relationship between top incomes and art prices and argued that the prices of high-end art are driven less by the purchasing power of ordinary people and more by how much money the wealthiest individuals are willing to spend.

This dynamic is similar to what economists refer to as a “K-shaped” economy: the wealthy earn more and spend more, while low-income families fall behind. Research by the Federal Reserve Bank of New York found that as of March 2026, households with an annual income of over $125,000 had seen a cumulative actual expenditure increase of about 7.6%, whereas households with an annual income of less than $40,000 had only a slight increase of just over 1%. However, some economists, including researchers from the Federal Reserve Bank of Minneapolis, believe that these data do not tell such a clear story.

In such an economic environment, the value of luxury assets such as art, watches, and exquisite jewelry depends less on financial returns and more on their ability to indicate that their owners can afford things that others cannot.

As Andy Warhol wrote in his book published in 1975, "I like to hang money on the wall. For example, if you plan to buy a painting that costs $200,000, I think you should take that amount of money, tie it up, and hang it on the wall. Then when people come to visit you, the first thing they see is the money on the wall."