The almost lost Portfolio.com is back with a good article on a Kansas City contemporary art investment fund. Portfolio was closed for financial reasons, and the quickly reconstituted, which is good, because like Forbes, the Financial Times and some other investment and business publications, they typically run some interesting articles for investors on art markets and collectors and are of good use for appraisers.
Portfolio reports on the Kansas City Collectors Fund which invests in contemporary art. Results are strong, especially for a market segment that has been hit hard since October 2008. The Collectors fund is showing an impressive 10% increase in value over the past 12 months ending in June. The prior year the the increased by 20%, more in line with the market at that point in time.
The interesting item here is the fund results and capitalization are based upon appraisals of the art held in the fund. We have to keep in mind, the investment gains are not realized, not based upon an index or daily buy and sell orders such as stocks or bonds.. Ultimately, the values of the art, and therefore the art investment fund are only as good as the appraisers conclusions. With the contemporary art market declining greatly over the past 8-10 months, and with continued volatility, the results, are to say the least surprising and of course are possible, but on the other hand, also possibly inflated. I would like to see the market analysis, comps used and justification of value as determined by the appraisers.
The fund currently has about 125 investors, owns 130 pieces of art that are placed in the investors homes on a rotating basis. Pretty unique.
Portfolio states The appraisals suggest a performance that significantly outpaces the Mei Moses Fine Art Index, which tracks the financial returns of the art market. “Is it possible? Yes,” said co-founder Michael Moses. “Is it difficult in this environment? Yes.” According to the index, returns on all art fell 4.5 percent last year and 31 percent in the first half of 2009. “It may be that the appraisers who viewed the work feel that its qualitative factors outweigh the decline in the quantitative measure,” he said.
The fund has only been in existence for two years, so it remains to be seen whether it can continue to perform in the long term.
Currently valued at $17 million, it holds pieces such as a massive, vibrantly painted aluminum structure by Frank Stella, The Mat Maker, and serene pastel drawing, Four Cakes, by Wayne Thiebaud. The approximately 125 investing entities, typically couples, don’t have to rely on brochures to view the fund’s more than 130-work collection—the pieces are stored in their homes on a rotating basis, another part of the fund’s diversification strategy.
The article continues But not everyone thinks art should share space on an investment palette.
Stephanie Guerin, a certified financial planner with The Planned Approach Inc., in Prairie Village, Kansas, encourages investing in assets not tied to the market. But she considers art a personal-consumption item, not an investment.
“There is potential there to make a killing financially, but it’s very, very speculative,” she said.
Still, members say the economics make sense, particularly because it’s a 10-year fund, and the investment is just as much about the experience.
To read the full article at Portfolio.com, click HERE.
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