Art Funds

Tech site Fast Company has an interesting article on Arthena and art funds. It is more than a cursory article and certainly goes into some depth on how the fund works and identifies works which may be undervalued or are expected to gain in value.

For the full article, follow the source link.

Fast Company reports

Arthena mines a dataset of millions of historical sale prices and dozens of other attributes to locate art likely to gain in value at a rate of about 20% per year. It then lets investors contribute to funds that buy and sell that art that is then safely ensconced in an art storage facility—and potentially made available to museums for loan and, if all goes well, ultimately sold to return a healthy profit to investors.

While investors don’t get the intangible benefits of directly owning art, like being able to show a beloved collection off at a cocktail party or lend pieces to a favorite museum, they also don’t have to deal with the hassle of storing and preserving individual pieces, and insuring them in case they’re stolen or damaged by a clumsy houseguest.

Arthena raised $20 million in investments for a new fund investing in a mix of art from the modern and postwar eras and the present day while participating in startup incubator Y Combinator’s recent winter round, and is attracting interest from people who haven’t previously collected or invested in art, says D’Angelo.

“Most of the people investing are completely new entrants to the market,” she says.

The company also offers a variety of funds emphasizing different eras of recent art history, but for investors the choice is as at least much about taste for risk as it is artistic taste. Funds focusing on established masters of the Modern era—illustrated on Arthena’s website by Picasso’s Girl before a Mirror from the 1930s—are advertised as a stable store of wealth; and funds buying familiar artists from the postwar period are dubbed “blue chip artists” for those with a “moderate risk tolerance.” For more aggressive investors, Arthena offers funds investing in “rising emerging” artists of recent years, perhaps the art equivalent of investing in a rising tech stock.

For now, the ability to put money in an Arthena fund is limited to SEC accredited investors—generally individuals with annual incomes of $200,000 (or $300,000 for a couple), or $1 million in assets, who are considered to have the resources and sophistication to invest in less-regulated securities.

If Arthena’s approach can continue to attract new funds to the art market—and D’Angelo says she’d like to one day see the company’s funds open to a less restricted set of investors—that can ultimately mean more money to support working artists and the galleries that exhibit their works.

“Adding volume is something the art world has talked about for decades,” D’Angelo says.

Still, Arthena’s approach may not be for an investor looking for a purely data-driven investment, because there’s still a level of subjectivity inherent that is not usually part of the equation for quantitative investments in purely financial markets—like input from experts on trends, buzz, and their gut instincts.

Arthena has been able to run analyses like computing which artists’ works best correlate with each other in terms of sale price, something that’s more complicated than just seeing which participated in the same movements or worked in the same era, she says. And since art investments are ultimately in individual works, not artists—investors and collectors can only buy individual pieces, not 50 shares of Pablo Picasso or five ounces of Georgia O’Keeffe—the company also tracks how aesthetic factors, like the size and color of individual works, can influence prices.

“Things like certain colors from certain artists do better than others,” says D’Angelo.

The company has made clear that it won’t robotically rely on data and algorithms to make investment decisions and that “traditional appraisal” is also a part of its methods. Human analysts study art that’s up for auction and can adjust machine-generated price and growth estimates based on their findings and “knowledge of the art world,” as well as non-numeric data like formal reports of artworks’ condition, the company says.

Source: Fast Company