Art Advisory Services

Art Investments

For several years, the media has been abuzz about the extraordinary growth of the art market, its recent downturn resulting from the global economic crisis, and its resurgence in 2012, specifically. From the mid-1990s to September 2008, the combination of high demand and limited product, gallery and auction records, and the cachet of being recognized as collectors enlarged the market significantly and escalated prices more rapidly than any time in recent history. While the recent downturn resulted in longer sales cycles, brand name works of art earned record prices at auction and the largest galleries expanded to capture new markets.

Some people approach art as a speculative investment. Despite several attempts to launch art investment funds, virtually all have failed as investment vehicles. As investors, they frequently engage in a “pack” mentality, favoring and, often, creating fads and fashions. There are good and serious questions about the outcomes and returns of these strategies. Artists can fall into disfavor, particularly when a speculator sells a significant portion of his collection.

The majority of collectors ask, as a final question in the purchasing process, “Is it likely that this art asset will appreciate?” For them, they act on passion and preference, and finally on cost and economic appreciation. It is not uncommon to hear a collector talk about his “art debt.”

In our view, value can be placed on a work of art in several different ways:

As with financial markets, the art market fluctuates. It escalated for nearly two decades. Prices may rise or fall, although the prices of established artists tend to remain stable or rise. An art work’s monetary appreciation can sometimes be rapid; conversely, it is susceptible to downturns in the economy, a negative re-evaluation of an artist’s career, and other factors. Nonetheless, the best art investment strategy is to collect significant artists’ works and retain them for the medium-to-longer term (a minimum of 5 to 10 years.)

An art collection can be an extension of a diversified investment strategy or part of the legacy that one wishes to create for one’s family or for a social or cultural institution, such as a museum, university, or library.

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