Another article about how to invest in art. In itself it - nothing special. I translated it, because it seemed to me that the information about mutual funds investing in works of art, can someone interested.
The Art - the market, available to all
Financial Gazette (Journal des Finances), 26.07.2008
Despite the financial crisis, the latest auction from Christie's and Sotheby's show the dynamism of the art market. However, judging by some indicators, recession looms easy. In the works of art can be invested to diversify their investments, but subject to certain rules.
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Nine million pounds! This is - the profit realized actor Hugh Grant in the sale of a portrait of Warhol, Liz Taylor brush acquired them for £ 2 million ... Can envy instinct British actor.
This gain is well illustrated by the current fascination with some artistic currents. Thus, the quotation from the contemporary artists of 1993 soared by 160%- you want to compare this result with 135%CAC-40 (French stock market index of blue chips) and 200%Dow Jones for the same period.
However, art lovers should not sink into sweet dreams with a dizzying rise in prices for some artists, as well as B of Most of the art market research shows that the profit from investing in this market yield profits from buying shares.
Investing in art subject rather a desire to diversify their long-term investment than the desire to obtain quick profits, even if such profits were possible in the 1990's.
There are various ways to participate in the art market
According to Karl Schweitzer, head of Art Banking at UBS (Union of Swiss Banks), "there is no standard percentage of capital that can be invested in works of art. Everything depends on income ... But you should not invest in art is too much of its liquidity, if they may soon be needed. And it is clear why: the work of art does not generate regular income. When a record being entered works of famous artists, novice investor might think that this market is not available to him - and indeed, Bacon triptych left in May 2008 for $ 86 million.
But we should not refuse to participate in this market. There are different ways to invest in it. To purchase a work of art is a famous artist or part of it, the investor can enter a fund that invests in the art market. The most reputable fund has «Fine Art Fund», managed by former CFO of Christie's, Philip Hoffman (Philipp Hoffmann). To enter it, you need to make 250,000 euros. This fund allows its shareholders to keep their own homes is one of the products purchased by the fund.
There is also a Russia fund, run by Vladimir Voronchenko, there is a Chinese fund managed by former staff member of Sotheby's, a specialist in Oriental art by Julian Thompson (Julian Thompson); Is Art Trading Fund, initiated by Chris Carlson (Chris Carlson). The latter fund is maintained as a hedge fund, income from investments may be obtained through 3 - 12 months.
Karl Schweitzer, a rather critical view of all these funds: "None of the existing or existing funds, with the exception of standing in a very special situation of British Rail Pension Fund, did not bring profits to investors."
In addition, organized "teams of Contemporary Art", allowing teamed and buy a piece of art together. These groups of customers, which usually recommends an expert or a well-known member of the art market are a practical way to participate in this market, but today they are still not very well known and difficult to find. And in Belgium, and France there is the emergence of such groups. Helen Demmerle, an adviser to investment in art at UBS, explains: "These groups are investing in lesser-known artists. They are largely based on his taste.
Finally, contrary to established opinion, the price of works of art does not constitute an insurmountable obstacle. Indeed, 78%of transactions in the field of contemporary art in France were subject to the product, price not exceeding 5000 euro, trading at half of the items purchased is less than 1000 euros.
In addition, when buying works of art can be advantageous conditions. So, galleries usually provide customers the ability installments for several months at no additional cost. Project of the French Culture Minister Christine Albanel provides encouraging banks to lend up to 7000 euros with a zero per cent for all investments in the arts.
«Art - this is how the Chinese language, it is possible to learn»
Money - not all, participate in the art market also requires a "good eye", that is, artistic culture and a certain curiosity. "Art - this is how the Chinese language, he can learn." This knowledge acquired by visiting museums and galleries, studying catalogs of auction houses and specialized literature, regular viewing of specialized sites.
Some private banks are providing assistance - for example, Crédit Suisse reduces its clients with independent experts who are chosen depending on the client's interests. In France, from 30 to 40%of transactions occur at the auction. Fans of public bidding is well-known nuances of behavior in these places. You need to visit an exhibition of items that will be the next day for sale, and to consider carefully chosen piece, and always as fast as they can be more subtle, and not to arouse the public interest in the subject. Bidding can rise very quickly, but if the reserve price is not reached, the object remains in the auction house, and after 15 days you can buy one auctioneer, agreeing with him about the price.
The advantage of buying in the galleries - no additional fees. Delphine de Kozan, collector, explains: "Price, called the Gallery in advance will provide a discount, which can reach 20 %».
Эти 10 пользователя(ей) сказали Спасибо LCR за это полезное сообщение:
LCR, thank you very much! Useful article for beginners.
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Karl Schweitzer quite critical of all of these funds: "None of the existing or existing funds, with the exception of standing in a very special situation of British Rail Pension Fund, did not bring profits to investors».
I wonder why?
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In addition, organized "teams of Contemporary Art", allowing cooperated and buy a piece of art together. These groups of customers, which usually recommends an expert or a well-known member of the art market are a practical way to participate in this market, but today they are still not very well known and difficult to find. And in Belgium, and France there is the emergence of such groups. Helen Demmerle, an adviser to investment in art at UBS, explains: "These groups are investing in lesser-known artists. They are largely based on his taste ».
It is doubtful, of course, that this is a viable idea. For the existence of such groups requires three conditions:
shall organize the beginning: a man or a small initiative group of people well versed in the art - ideally, non-experts or people who could attract competent experts to assess the authenticity and the investment attractiveness of specific products;
so that people belonging to the group knew each other well and completely trust each other - well, at least, completely trust the organizer of the group;
so that people belonging to the group had available funds that they can invest on a long enough period of time.
Well, still lots of problems, ranging from legal and ending social (the inevitable conflicts between group members regarding the effectiveness of spending, etc.).
Этот пользователь сказал Спасибо Admin за это полезное сообщение:
British Rail Pension Fund - pokazal v srednem 4%v god. Raznye sectora uskusstva pokazyvali raznyi rost.
V Au i NZ dovol'no uspeshno rabotaiut 'art syndicates'. 10 - 20 chelovek vnosiat opredelionnye summy deneg i pokupaiut na eti sredstva v techenii kakogo-to vremeni.
Interesnaia model '. I rabotal konsul'tantom v neskol'kih sindikatah.
V Au auktsiony rabotaiut v osnovnom so 170-200 hudoznikov. Bol'she poloviny is nih dead. V NZ eschio men'she. Blue chips gruppa ne tak velika, kak v ex USSR, poetomu prosche investirovat '.
Osnovnaia problema - likvidnost '.
Nebol'shaia stateika ob etom po angliiski, ia napisal ee let sem 'nazad, v nei est' koe-kakie tsifry po BRPF:
FINE ART AS AN OBJECT OF INVESTMENT AND SPECULATION
According to the 1997 Princeton University WordNet 1.6 dictionary definition the terms investment and speculation are as follows:
Investment is:
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`The act or practice of buying land, goods, shares, etc., In expectation of selling at a higher price, or of selling with the expectation of repurchasing at a lower price; a trading on anticipated fluctuations in price, as distinguished from trading in which the profit expected is the difference between the retail and wholesale prices, or the difference of price in different markets.
An item of value purchased for income or capital appreciation. '
Speculation is:
`An investment that is very risky but could yield great profits; engagement in risky business transactions on the chance of quick or considerable profit. '
According to these definitions speculation is just one form of investment, but with greater risk. To further separate these two terms, consider speculation as a direct, quick resell for profit, when the buyer is not concerned with yield, stability, long-term prognosis. Investment on the other hand is a long-term moneymaking instrument, backed by theory, reasonably safe and without very high yields, but with capital gain.
"The statement that 'Art is a good investment' usually means,` Some works of art have been a very profitable speculation "(Chanin, 1990, p.79). This quotation reflects the meaning of the above definitions quite succinctly.
According to Hughes, "... the idea of using art as a form of investment was unknown in the eighteenth century and barely even mooted, except among a few picture-dealers, in the nineteenth" (Hughes, 1990, p.392) . This statement shows the relative freshness of the idea of investing in art, and its link with the appearance of the contemporary art market. Artificially created trust, as mentioned above, brought public opinion to this level of belief. To the extent that in 1970 Eagle advised, "Invest in art for the future. It is virtually inflation-proof, and the overall value of certain pieces has increased 2,400 per cent since 1951 - compared to the fourfold increase of stock market prices" ( Eagle, 1970, back leaf). To an extent there are
20 elements of truth in this statement, some works of art had this level of growth and even greater. Alternatively this never, and does not, happen on a regular basis to every artist and in the 1980s world wide recession, prices for art fell dramatically in a short space of time.
Some attempts to invest in art on a big scale have been made, not always satisfactorily initially. There is the example of the British Rail Pension Fund, who decided in 1974 to invest long-term in works of art acquired specifically for profit. Although meeting with some criticism for the decision to diversify its investment portfolio, investing around 40 million pounds sterling, British Rail retained Sotheby's as their Fund advisor. In the 1980s the Fund sold about 1,000 items for a total of US $ 24 million, returning around 11%pa. But in April 1989 the Fund sold 25 Impressionist and Modern works at a sell-out Sotheby's auction and realized $ US65.58 million, representing a 20%pa return. Maurice Stonefrost, chief executive of the Fund, stated that: "Impressionist and Modern pictures have been the single best investment I have had on my book." (Chanin, 1990 p.83). Although these Impressionist and Modern works eventually made money for the Pension Fund, they were but one fragment of their whole portfolio. Watson makes this clear, stating, "... with net income for shares reinvested in the stock market, only a handful of art sectors do better than conventional investments' (Watson, 1992, p.426).
The opinion of many art dealers is that the main difference between investment in art and the investment in securities (shares) is that in the event of a market collapse, that: "Shares ... once defunct, are gone forever. All you have left is the certificate to look at ... - a small consolation compared with a picture hanging on your wall. " (McLean, 1995, p.4) However there are some fundamental differences in trading on a share market and art market.
Main differences between the share market and the art market:
• The art market is divided into "a series of several small fragmented markets influenced by unquantifiable factors such as fashion, degrees of restoration and aesthetic choice." (Chanin, 1990, p.77). There are substantial differences between the markets for paintings and prints, contemporary art and Old Masters paintings. In every case price is related to each particular subject.
• Hard to standardize - works of art are unique and practically unquantifiable.
• Consequently from the impossibility of standardization, there are no reliable sources of reference supporting investment in art.
21 • Art ownership carries some costs (such as restoration, framing, insurance, freight etc), which are not related to shares.
• Art has geographical boundaries (people tend to buy the art of their own country, and often undervalue foreign art) when shares have equal value internationally.
• There is often a considerable financial loss from commissions paid to dealers or auction houses when selling a painting (from 10-50%), but without a sale no money can be obtained (very seldom money can be loaned for the security of the art , but not a high percentage of the actual price).
• Art does not bring a regular income in the form of annual yield, unlike shares.
• There are many law related particularities (tax deductions, loss deduction, tax benefits etc), which differ between investment in shares and art investment.
"Art as an investment is a misconception that rests on false premises, both aesthetic and financial. Art is a matter of judgment. The word` art 'is value neutral "(Chanin, 1990, p.79). This statement is in direct correlation with Marx's concept of "nothing can have value, without being an object of utility" (Marx, 1867), which was mentioned in the chapter on the `Commodification of art ', and it appears that Marx did not contradict himself.
"Art, however, proved unsuitable as a financial instrument, not only because of its illiquidity but because there is just not enough real art around" (Feigen, 2000, p.114). In the pre-Crash 1980s when the art and share markets were booming, much `art 'with little or no aesthetic or art historical quality was being produced and sold. Not every painted canvas is an object of art; sometimes it is just a second-hand canvas that cost less than a brand new one. Standards of quality were pushed aside to the point of barely existing.
The above points clearly explain why dealers hardly ever recommend buying art as an investment, but readily supply a buyer with many `realistic 'figures published from many` reliable' sources, like Art Auction Records, Art Auction Indexes, Price Guides etc.
There is a huge gap between collecting art and investing in art. For the pure collector, price appreciation of art is one of the less important benefits and pleasures.
Watson states baldly: "Forget` investing 'in art. If money is all you are interested in, look upon the art market as a speculator's market. Wait for a boom and then act quickly. This may not be a very attractive position to take , morally or aesthetically, but it is what evidence suggests "
22 (Watson, 1992, p.432). So according to Watson there is money to be made on the art market, but one should not to have any illusions.
However, money can be made on the art market. Not to mention a steady growth (sometimes hard to predict for how long, to what extent, and often dependant on fashion) of prices for some artist's works, there are some ways to make money. Very often it is upon the misfortunes of others.
To make a profit one has to buy:
against the fashion in recession
auction sleepers, post auction sales, estate auctions
from inexperienced sellers with lack on knowledge (or the seller is in a squeeze desperate to sell)
occasional findings.
The speculator, by the angry definition of Keeton is: "... the person who buys the painting purely for the purpose of selling [so does an art dealer]. He or she is usually what I refer to as the` backyard dealer ' , the fly-by-nighter, the unprofessional `professional 'or the' quick-buck operator ', and unfortunately there are many of them in the art field." (Keeton, 1986, p.30). He also says, that `speculators' do not care whether they see the client again, and often rip them off by selling poor quality paintings for very high prices.
This may well be Keeton's opinion but it is not a true statement. Dealing on the New Zealand art market this way is virtually impossible (Keeton, as a New Zealander, should realize this). The art market is so small that everyone involved in the market immediately knows of any `funny 'deals, and such an" operator "is out of business straightaway and practically forever. The so-called `speculator` has to be in possession of a profound knowledge of the local art market, with a `good eye 'for art, and have top selling abilities. "Speculators" are often driven not just by financial gains but the thrill of the hunt, and their attempts at finding a real nugget in tons of rubbish. In doing the groundwork to discover such a nugget they are often sieving through mountains of meaningless and poor quality pieces, doing something of a service to the community with their more spectacular finds.
23 The difference Keeton highlights between an art dealer and art speculator is: "The speculator says he is a collector, whereas the dealer will tell you his profession straight off." (Keeton, 1986, p.31). This, however, does not really explain the difference. There is a fine line between dealing and speculation. No dealer would refuse a fast and highly profitable deal. Not all the art sold by dealers is of a high quality. And again, a standard of quality is primarily a matter of opinion.
The motto of `Buy cheap, sell expensive 'is accepted in any business, so is it in art.
In conclusion it is possible to admit that it is very difficult to put a distinct boundary between art investment and art speculation or between the art dealer and art speculator. All participants are in the shifting business of selling and hopefully profiting from art sales.
As the research shows, fine art does not always perform as a good investment but can sometimes bring handsome dividends to art speculators.
05.07.2008, 11:26
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