Art as an Asset Class
Art as an Alternative Investment Asset
By Raya Mamarbachi, Marc Day and Giampiero Favato (Henley Management College)
The paper constitutes a discussion of the trend around the rise of art as an alternative investment. With financial markets in turmoil, art as an alternative asset class is being incorporated into portfolios in the interest of diversification. Art's low correlation with the equities market and desirable risk and reward ratio, as price appreciation defies all logic, makes it an attractive investment. The volatility, irrationality and illiquidity of the art market make it hard to compare to more conventional investments. The paper will look at how investors are treating art as an asset class and how art compares to more traditional assets such as equities and bonds.
Five Theories On Why the Art Market Can't Crash - And why it will anyway (2006)
New York Metro
Walk around Chelsea these days and you can practically hear money buzzing in the air. Powerhouse galleries such as Matthew Marks and PaceWildenstein have extended their empires with extra showrooms. Younger guns like Leo Koenig and Casey Kaplan are graduating into grander spaces. And almost every weekend, some former gallery director is going into business for himself. It's not just Chelsea. The whole contemporary-art market has shifted into overdrive. Playing to today's competitive collectors, the Armory Show's opening gala earlier this month offered three-tiered access: $1,000 to enter the art fair at five o'clock, $500 a half-hour later, and $250 for seven. But by five, the booths of the hot dealers had already been besieged by dozens of collectors and art consultants, invited in at noon by their clients; many works by sought-after artists were either sold out or held on reserve (some on “double reserve”)...
Picasso Lures Hedge-Fund-Type Investors to Art Market (2006)
Bloomberg.com
In September 2004, Philip Hoffman did something unusual: He bought a painting he actually likes. It was a work by Ed Ruscha, a pop art icon whose paintings hang in the National Gallery in Washington. Hoffman says he loathes some of the art he buys. In fact, he says he barely glances at paintings that have cost millions of dollars to acquire.
Hoffman, 44, is a new breed of investor in the $5 trillion art market. From a townhouse near Hyde Park in London, he manages an investment fund that buys and sells paintings rather than stocks or bonds. Since 2004, a dozen or so similar funds have tried to lure investors as the price of art has soared. So far, Hoffman's is the only one that's raised enough money to start investing.
Hedge-Fund Managers Cohen, Sender, Loeb Are Top Art Collectors (2006)
Bloomberg.com
U.S. hedge-fund managers Steven Cohen, Adam Sender and Daniel Loeb are among the world's most active art collectors, according to a list compiled by the magazine ARTnews.
Art Market Watch - Augist 10, 2006
Artnet.com
Hedge fund maestro Adam D. Sender is selling some of his contemporary art — works by Richard Prince, Andreas Gursky and Mike Kelley, among others — at Phillips, de Pury & Co. this fall, according to Carol Vogel in the New York Times. Todd Levin, Sender's curator, said that the collector is selling only a small portion of his holdings of some 800 works acquired over the last eight years.
Beware the perils of dabbling in contemporary art (2006)
MoneyWeek, 2005
Early in May each year, the art world descends on New York for two weeks of auctions. These are the most important dates in the art calendar and what happens at them generally sets the tone for the rest of the year. Deborah Brewster in the FT asks what was the message this year? In a nutshell, the art market in general appears to be slowing, but the “flaky” contemporary-art sector is not. Instead, it's the hottest ticket in town.
The rise of the Art Investment Fund (2006)
The New Yorker, 2005
In 1904, André Level, a French financier, persuaded twelve other investors to contribute two hundred and twelve francs apiece to a new investment fund called La Peau de l'Ours (“the skin of the bear”), which was targeted at an unusual market: modern art. Over the next ten years, the fund bought more than a hundred paintings and drawings, including major works by Picasso and Matisse, before selling off its entire collection in a giant auction, at the Hôtel Drouot, in Paris, on March 2, 1914. The sale was more lucrative than even Level could have hoped: some paintings went for ten times the original price. When it was over, the partners found that they had quadrupled their initial investments.
Top Billionaire Art Collectors (2005)
Forbes.com
The worlds of art and money have always been intertwined; each basking in the other's reflected luster. Today's billionaires are no different from the grand dukes and popes of the Renaissance or the merchants of 17th century Amsterdam. They buy art to appreciate it, to learn from it and to profit from it.
ART: The New Asset Class? (2004)
safehaven.com
Just when you thought that no pair could be more mismatched than the Virgin Mary and a grilled cheese sandwich, the cultural world brings us the marriage of finance and... fine art. Try and picture it: Wall Street and wall... paintings? Business statistics and... brush strokes? Stock portfolios and... palettes? Economic earnings and... easels?
Inside the London Art Market (2204)
Joe La Place at Artnet
London has become the most dynamic city in today's art market. Although New York has dominated overall turnover since WWII, when it comes to market performance, London is putting the Big Apple to shame.
Art for the Venture's Sake (2003)
Panache Magazine Online
Until very recently, a major impediment to investing in art has been the lack of a reliable benchmark to gauge market performance. Although art indices have been around for years, their performance has been crudely calculated. The return was arrived at by simply tallying up yearly sales, and then dividing the sum by the total number of sales. The major drawback is that this method fails to take into account an artwork's repeated sales – hence revaluation – over time.
The Collateral Value of Fine Art (2007)
By Rex Thompson and Clare Andrew, forthcoming in Journal of Banking and Finance.
The names Renoir, Manet, Monet, and Degas conjure up images of some of the world's favorite and most widely recognized works of French Impressionist art. But as an investment, the market for these works is often viewed as intractable and risky. Is it possible to use the tools of finance to understand the investment quality of fine art? Professor Rex Thompson of SMU Cox and Clare McAndrew of Trinity College, Dublin, attempt to quantify the investment risk of fine art and determine its collateral value in a forthcoming Journal of Banking and Finance paper.
The Art of Portfolio Diversification (2004)
Rachel Campbell, Maastricht University
Diversification benefits have decreased over recent years and there is a fight to find alternative investment vehicles to boost returns whilst minimising risk. Recently available data has enabled the construction of an annual art index dating back to 18752 and the potential for investors to invest in Art as an additional asset class. Art indices tend to have high volatility whilst not gaining significantly greater gains than the stock market. At first glance it would appear that Art is a highly risky investment strategy. In this paper we take a closer look at the benefits from investing in Art. The extremely low (and even negative) correlation with other asset classes results in a highly beneficial investment vehicle for an investors' portfolio.
Last updated 232 days ago by MoneyScience
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