More on Art as an Investment and Art Funds

As I mentioned an an earlier post, Forbes is running a series of article/posts on investing in art.  It is comparing and contrasting financial investments to the combined financial and passion investment in art.

The latest Forbes post is on art funds and attempting to track art values like other financial assets.  The article remains skeptical, but it does show the growth in interest from the financial community about art as an investment.

Forbes reports

While you can sell your Apple or Microsoft share at any hour of any day, how will a fund manager ensure that it has enough buyers and sellers to create any sort of liquidity for fractional shares in very rarified assets? And if it can’t ensure that, how will an investor offload his or her 4,000th share of a Francis Bacon painting, for example, without convincing up to 3,999 other people to do the same? If the whole painting, fine wine or whatever it is will be sold at some point, how is it determined whether a buyer can be found at the right price at that particular time?

This is not the first effort to take art works public. In January 2010, French company A&F Markets set up the Art Exchange, billed as the first stock exchange dedicated to art, where buyers can buy shares for €10 apiece in a number of different contemporary art works. According to the Art Exchange website, it offers buyers and sellers daily liquidity. Orders are executed daily if they match with opposing orders, within a price limit fixed by the client. If there isn’t an opposing order or if orders would cause the share price to fall more than 12%, execution is delayed until the following day.

Yet there’s no mention of whether a sale has ever been made by a previous buyer, much less every day, or if shares in an art work have ever appreciated since they were first offered. In fact, the biggest risers and fallers touted on the Art Exchange website are for shares in two new works the exchange offered for sale in May–Cement Truck, a sculpture by Belgian artist Wim Delvoye, and an oil on canvas Under the Volcano, A Brush with Fire by British artist Mark Quinn. The price of shares in those works have moved a massive 0.00%, which doesn’t sound too promising.

Source: Forbes