Art as an Investment

The Art Newspaper reviews a new book which looks at art as an investment vs other traditional and passion investment opportunities, such as art vs stocks, art vs wine, art vs gold, The new book is by Art Newspaper editor Melanie Gerlis and is called Art as an Investment? A Survey of Comparative Assets.  It will be available in the US in late February.  Click HERE for the link to Amazon.

The Art Newspaper reports

If you are an institutional investor trying to work out whether or not to put money into art (or if you are the private bank manager trying to explain whether or not this is a good idea), there needs to be some way of pooling the available data to quantify the asset’s performance. So, and despite all the essentially unmappable characteristics of art, market specialists have spent much time and effort creating indices that could (in theory) be compared with other markets.

The main problem is that even these academically and mathematically conceived indices of art sales are built on data that is so limited and variable that they are like a tower built on very shaky foundations.

In the continuing pursuit of liquidity in art, somewhat inevitably the idea has emerged of breaking up a painting into equal parts and selling each essentially de-risked part to investors while watching the value of the work go up or down, reflected by the supply and demand for each “share”. The aim is that these shares trade on an “exchange” for art that would provide daily prices of all constituent works and could eventually be a benchmark index for the value of all art—easy, right?

So far, such attempts have yet to succeed (or at least there is no measurable proof that they have succeeded). The biggest (logical) problem with such schemes is that they could only really work if a work of art could be seen, primarily, as an investment. A business needs to be profitable to exist, to employ its staff, to buy its machinery, to market itself, to grow; it therefore makes sense that people should want to invest in its possible growth through shares. A painting can exist perfectly easily without generating any profit at all. In fact, the primary reason for which the average work of art is bought (an emotional response to its visual qualities) is completely negated by trading the work on an exchange. The biggest (illogical) problem with such schemes is that the art market is rather elitist about applying financial metrics to works. Not because of concerns that would-be investors could be disappointed; simply because—like a designer clothes shop that doesn’t display its prices—money somehow diminishes the greatness of art. 

Source: The Art Newspaper