Art as an Investment Questions

On December 11th I posted on a J.P. Morgan report on investing in art (click HERE for the AW post, or HERE to go directly to the report).  The Financial Times now just post an article referencing the Morgan report/study.  The FT article also discusses investing in art with Mike Moses of the Mei Moses Art Indexes, as well as other experts.  If you recall, the J.P Morgan report did not think art was a good alternative investment strategy and that it did not parallel equities.

The FT article questions art as in investment, especially in the short term given the expense of acquisition, but hedges when it comes to long term investment strategies.  The debate on fine art as a legitimate investment continues.

The Financial Times reports

A December study conducted by Kyle Sommer, a vice-president with JPMorgan’s securities services group, reveals that art has had almost zero correlation with US equities and was negatively correlated with fixed-income and real estate investment trusts (Reits) in the past 25 years.

Also, the volatility of art was lower than US and international equities as well as commodities over the past quarter of a century, according to Mr Sommer’s research.
On a risk-adjusted basis, the performance of the Mei Moses World All Art Index matched that of the S&P 500 index over the past 25 years as well.

Art’s relative strengths as a long-term investment fail to mask its poor performance recently, however.

Last year, for example, the Mei Moses World All Art Index – which tracks art prices across genres, from Impressionist works to postwar and contemporary – fell by 3.28 per cent, while the S&P 500 jumped by 13.4 per cent and the FTSE 250 by 22.5 per cent in sterling terms. The best performance in the 12-month period was reported by the index tracking Old Masters and 19th-century paintings, which gained 6.4 per cent.

“It was interesting. There was a lot of hooplah in the press about the high prices being paid at various auctions,” says Michael Moses, creator of the Mei Moses Index, which analyses the prices of some 25,000 paintings and art works sold at auction.

“But across all of the categories, except for Old Masters paintings, prices were either down or flat.”

Indeed, many strategists remain bearish on art in the short term.

As Dan Briggs, chief investment officer with Fleming Family & Partners, sees it, it is difficult to view art as a “rational investment” in the same way as one does stocks and shares or property, which though illiquid, throws up a yield. “In a world of heightened transparency and auditing, I think art struggles,” he says. “The other issue is that it doesn’t yield anything.”

Source: The Financial Times