Below are the links to two interesting articles on the risks and potential returns associated with investing in art, the "passion investment." Although neither piece says anything new as such, I nevertheless decided to post the links because their scrutiny of the actual numbers and statistics involved in art investments seemed enlightening. After all, numbers don't lie... though of course, they don't paint the whole picture either.
Both articles also illustrate how the key is timing and doing the research necessary to mitigate as far as possible the unpredictability of collector demand. For example, despite being a "very appealing image from Monet's early period," according to Nicholas Maclean (dealer and former co-head of Christie's Impressionist and Modern Art department), the sale at auction of Monet's La Plage à Trouville in 2000 resulted in a loss of £2.9m due to the market having "moved towards later works, in particular the series paintings." Irrespective of the quantity or quality of the research undertaken, however, there is always a certain art to foreseeing future trends in demand for works and/or artists not least because the global art market lacks a comprehensive price register of each and every transaction purported to be "investment grade." The introduction of this much-needed price register would increase market transparency and subsequently reduce (but by no means eliminate) the risks involved in acquiring art for investment purposes. Collectors would be able to draw more accurate conclusions and cast more reliable forecasts by studying such publicly available information. But even then substantial risk would remain because investors are not just guided by potential returns when they acquire art- they are also guided by the intangible and often unforeseeable force that is their own, personal taste in art. The truth of the matter is that, unlike gold bars or stock certificates, you can hang art on your walls and so even those who buy art as a way of hedging the volatile stock or real estate markets are still likely to buy what they love. As they should.
Showing posts with label price register. Show all posts
Showing posts with label price register. Show all posts
Sunday, September 19, 2010
Wednesday, September 15, 2010
Is the Russian initiative to regulate art securitization and art funds merely a ploy to make them seem investment grade?
That was the suggestion made by Artworld Salon as it commented on Russia's newly-implemented art funds regulation introduced last month as part of a modernization program designed to make Russia an international financial center rivaling New York, London and Hong Kong. The allegation that the regulation is merely form over substance is not unfounded given "the relative lack of oversight of the opaque and enthusiastically “managed” system that is the Art Market." Indeed, regulating art securitization and art funds appears to be at odds with a distinctly investor-unfriendly market characterized by "private dealing, auction pumping, the ability to cellar works that aren't selling and [the] lack of any form of reliable pricing register." Surely transparency must precede oversight. The bases for the suspicions gain even greater strength when one learns that the implementation of the regulation was in sync with the creation of two closed end art funds by Leader, "a powerful local asset management firm controlled by Putin loyalists." It's more likely than not then that the regulation is above all a marketing tool.
The author also takes this opportunity to discuss one of the most significant problems afflicting the global art market and its component individual markets: the difficulties associated with pricing acquisitions and disposals of art due to the lack of publicly available information on transaction prices. I have previously discussed the need for increased disclosure in the context of droit de suite and how its introduction in New York would be a highly undesirable way to achieve greater market transparency. In my view, the proposal of "a price register for each and every work of art that someone tries to promote as “investment grade,” with NO exceptions and NO omissions" is far more compelling than Edward Winkleman's case in favor of droit de suite, which suffers from the serious risk of shrinking the New York market ultimately to the detriment of all artists.
NOTE: "with an exception of perhaps only India, no country of any significant domestic investment market has a well defined regulatory framework for art funds," reported Skate's. "We are not aware of any regulatory framework anywhere in the world defining how art assets can be put into mutual funds and such funds can be offered to [the] general public [and/or] qualified investors."
The author also takes this opportunity to discuss one of the most significant problems afflicting the global art market and its component individual markets: the difficulties associated with pricing acquisitions and disposals of art due to the lack of publicly available information on transaction prices. I have previously discussed the need for increased disclosure in the context of droit de suite and how its introduction in New York would be a highly undesirable way to achieve greater market transparency. In my view, the proposal of "a price register for each and every work of art that someone tries to promote as “investment grade,” with NO exceptions and NO omissions" is far more compelling than Edward Winkleman's case in favor of droit de suite, which suffers from the serious risk of shrinking the New York market ultimately to the detriment of all artists.
NOTE: "with an exception of perhaps only India, no country of any significant domestic investment market has a well defined regulatory framework for art funds," reported Skate's. "We are not aware of any regulatory framework anywhere in the world defining how art assets can be put into mutual funds and such funds can be offered to [the] general public [and/or] qualified investors."
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