monopoly
The rarity of works leading to a monopoly situation: while there are willing to buy the product, the owner may request any price. This phenomenon partly explains the bubbles on the art market.
Information: From confidentiality - to increasing transparency
Not so long ago, this market was very closed, transactions that committed collectors and dealers are not made public, auction houses, too, did not publish the prices of traded products.
But the art world has changed, it is now abundant and complete information about the state of the art market.
The variety of works of art
Because each piece of art is unique, offering in this market is very diverse, but the quality is comparable to hard objects - from antique furniture to commercial photography, a variety of subjects neyveroyatno.
The relative scarcity of transactions
Earlier work of art appeared on the market more frequently than once every 20-30 years, but now fewer buyers keep their acquisition, and on average they are resold every 10 years. But in the case of a very speculative subjects, this period may be shorter.
High cost sdelkok
The cost of transactions are very significant. For example, in the Swiss market with the first 20,000 Swiss francs. francs buyer pays a commission of 25%in part from 20000 to 600000 Swiss francs. fr. - 20%and above - 12%.
These costs must be added the cost of examination, storage, insurance, transport, etc.
Some factors influencing the market of art
«The effect of death» (Death Effect)
In 2000, Ekelund, Ressler and Watson conducted a study confirmed the existence of the relationship between the artist's death, and higher prices for his work.
Naturally, after the death of the artist's production ceases. Risk poyavlkniya on the market too much work disappears. This creates a situation of monopoly, and prices begin to rise.
«Midday effect (Afternoon Effect)
This phenomenon discovered Ashenfelterom in 1989: price bottles of the same wine sold at some auctions, can vary by 30%!
In 1997, Beggs and Graddi studied this phenomenon on the basis of bids from Christie's and Sotheby's, and concluded that, if put on the auction of similar items, items that are sold in early trading, purchased at a price much higher than the price of similar items sold later, if the evaluation of the first items is higher than the next. Can recommend auctioneers, displaying items for auction, starting with the least expensive and continue in an increasing order.
«The effect of wealth creation» (Wealth Creation Effect)
Rachel Campbell (2005) pointed out that the strong growth of the exchange contributes to the prosperity of the art market.
«The Right to Succeed» (Droit de suite)
Officially the highest European Parliament adopted on 27 September 2001, the right to succeed must take root throughout Nvropeyskom Union charging a certain amount of the benefit of authors and their successors sold the works in their public resale. Term of copyright - 70 years, and in principle to pay this amount to the buyer.
Artists receive from 4%to 0,25%of the selling price of the product, but the total can not exceed 12,500 euros.
Currently, some states - members of the EU have already implemented this law. In Austria, Ireland, the Netherlands, Britain and Luxembourg, the right to succeed will be deducted only to the authors, but not their successors. However, since 1 January 2010, all countries should apply the law.
Resale Royalty generates additional costs. It can adversely affect the art market.
Already we are seeing the movement of sales in the U.S. that will not fail to affect the highest European cultural heritage.
Indicators of prices in art
The oldest index of the prices of art, it is Times Sotheby's index, existed from 1968 to 1969. It was based on the opinion of experts on the evolution of different types of works. 1951, when the art market has been historically low, was adopted as the base with the value 100. This index stopped going out because on the one hand, art dealers zhekstko criticized him, and with another - the tax authorities based on it to strebovat purchasers of works of art with additional taxes.
In 1993, economists and Gettsman Pezando parallel to develop an index of art. Index of annual income from the works of art Gettsmana covers the period from 1715 to 1986. For which the yield of works of art superior yield stocks and bonds. Pezando created a semi-annual index for a shorter period - from 1977 to 1992., Which included the phase of the crisis on the art market late 80's. Its yield is below the yield stocks and bonds, but close to stock returns.
Index Mei and Moses (2002)
Designed Ran Makyklom Ping Mei and Moses, professors at New York University (Stern School of Business), this annual index covered the most recent period ppadeniya market in the United States.
It includes various sectors of art - the U.S., old masters, impressionism and pre-war painting.
The database consists of the main results of bidding auction houses.
Mei and Moses compared the index with the S & P 500.
Table 1 shows that yield superior return on shares of American investment in works of art. The difference is much increased since 19000, the
Table 2 , showing the statistical results in more detail explains the results of investments in the arts compared with other types of assets and shows the correlation between them.
According to these statistics yield of art is much higher than government bonds or bonds of companies, but lower than equities. You can also notice that the shorter period of time, the lower the volatility of art, but for the 1875-1999 period, investment in art more risky than in financial assets. With regard to the correlation, the index shows a negative correlation with bonds, but almost zero or very weak line with stock indices.
For this reason, investment in the arts can be a way to diversify your portfolio and optimize its profitability.
The index Artprays
Artprays (Artprice.com) is the global leader of information about the art market. Since 1990, the firm has developed a quarterly index of Global Art (Art Global index) and indices dlopolnitelnye - impressionism, etc.
Lacunas indexes art
- only available for the use of data are sales prices in the auction;
- calculation of the indices is faulty;
- They are very different in the evaluation of profitability, because they use very different time intervals.
The correlation between art, gold and oil
Between these three asset correlation is very strong at all time intervals, from 1875 to the present day, with the longer period of time, so it is stronger. Therefore, we can recommend in terms of optimizing the profitability of the portfolio does not invest in all these three types of assets simultaneously.
Analysis of profitability and risk of investment in art
Let us analyze the evolution of the value of art for the period 1875-1999.
Based on the data and Mei and Moses in 1875 - is a database with the value 1. Then, the index rose to a value of 78 in 1960 and in 1961 it exceeded the value of 100 in 1980. soared to 8000.
Table 3 shows the index for the years 1875-1960.
Table 4 - for the years 1961-1999.
Index and Mei and Moses begins in a time of major world depression 1873-1896 gg. But since 1900, works of art begin to fluctuate in price.
Interesting observation:
Prices for works of art during the wars of grow - they have risen strongly in the First World War. At the end of it, in 1918, prices for art reached its first peak - 32,8 points. The same situation during the Second World aoyny from 19398 to 1945.: Prices are rising and reaching the top of 29,75 points in 1944, this phenomenon can be explained by simple inflation of military vremenm, but can it be that art has become the value of refuge especially when you consider that gold at that time could not rise in price (gold standard)?
Periods of economic development is also positively affect the price of art. In 50-ies. French labor productivity increased between 1949 and 1963. 5%per year. In Britain, too, there is economic prosperity: from 1951 to 1964. GDP grows at 2.8%per year, while national income increased from 12 to 40 billion pounds. In Italy, in Japan the same situation. Gold is also rising in price.
After 1961, despite the Israeli-Arab war, the withdrawal of U.S. troops from Vietnam, etc. the price of art continues to grow and in 1979 exceeded 1000 points. In the 1980's. Art Market experienced a period of very rapid development, the index rose to 8640 points in 1990, this development took an active part Japanese: according to the Tokyo Customs in 1989, the Japanese have imported works of art of almost $ 2 billion, that is twice than in the previous year. Christie's estimates the contribution to the growth of the Japanese Trade iskussta works in 45%of all buyers.
Table 5.
Izuchchaya historical charts of indexes of art, it becomes obvious that the market reacts to the fine art of economic crises and other negative geopolitical events in the world: after the market crash in Vienna in 1929, when the Asian crisis in 1997 the Art Market to hit. Of course, the price of art depends on the political and economic events, but its growth trend is not broken.
Example: After the September 11, 2001, in October, prices for art have fallen only 6%, and in April 2002 rose by 8,4%. After the war began in Iraq in May 2003 the index of art is equal to 61.4 points in April, in July rose to 64.7, ie by 5,5%.
One can assume that the market for art is like the stock exchange: in times of uncertainty, he falls, and its volume decreases. At public auctions between 2000 and 2003. volume of transactions declined by 36:. But if the exchange's stock is falling at the slightest agitation of investors, the art does not necessarily lose in price. Before you lower the price, actors of the art market is becoming more selective, and the reduction in sales reveals this trend. Reduction of the same volume helps to support prices.
But in 1990 the crisis erupted, the turnover krupneyshizh auction houses declined by half. The table shows that for one year the index fell from 8640 to 5508 points, ie 35%. But the next year the market rose by 17%.
Since 1999, the index Mei and Moses out of print, we use the index Artprays.
Table 6 shows that the stock assets were more profitable than the market of art, with the volatility of works of art were lower than stock prices.
Yield and drawing investment in art in comparison with other types of assets
We compared the index with the art of stock indices (FTSE 100, SMI, HKSE et S & P 500), with the dollar /euro, gold and oil for the period from 1996 to 2006.
During this period, the yield of art is higher than gold, but two times lower than oil. Accordingly, the oil twice as risky. We also noticed that the investment in contemporary art is more profitable than gold, and less risky.
Modern Art more profitable than the FTSE 100 (the yield is close to gold), and with less risk. Its yield slightly lower than the HKSE, SMI and the S & P 500, but the risk is much weaker than each of these three types of assets.
Compared with the period 1950-1999 yield of art fallen, but the risks of too.
Investments in the dollar /euro proved to be very profitable - more profitable than art, with the lowest risks for all types of investments.
After this analysis, we can conclude that the art deserves to have it in their investment portfolio. Its yield is higher than gold and bonds, and lower than stock.
Art and investment funds
In 1904, the French financier André Léveillé persuaded 12 investors out of their friends to provide for 212 francs for each piece of contemporary art, which they bought together in the framework of an investment fund created by them, called them "the bear's hide." After 10 years, the Fund had more than 100 works, including paintings by Matisse and Picasso. They resell their pictures with phenomenal profits - some work left at the price at 10 times the purchase price. It was the first in the world of art investment Ford.
We have a great many of these funds, especially in the United States.
Menezhdery hedge funds have become leading actors of the art market.
For example, Steven Cohen, founder of SAC Capital Management in Stamford, but in 2003, earned more than $ 350 million that he invested in the works of Claude Monet, Edouard Manet, Jackson Pollock and Andy Warhol. Forbes named him the "King of hedge funds."
Another manager million hedge fund, Daniel, Deb, Managing Level Global Investors, collecting art for over 20 years and became one of the most active buyers in the art world.
Many managers of hedge funds say they are not interested in money that they collected proizvedeneiya art before he came hedge funds. But Philip Hoffman, a former chief financial officer at the London branch of Christie's, which manages the fund now famous Fine Art Fund, said: "I have no passion for art. I - a professional finance.
To enter the fund needs at least 250,000 dollars, which is blocked for 3 years. 2%deduction on account of expenses of administering the fund, 20%of the revenue collected as a reward. This fund, which operates in London, but officially registered in Delaware, is surrounded by a haze of mystery - his site is protected by a password and enter it can only be stakeholders.
Managers try to protect their funds. Thus, the new fund Art Trading Fund, established in 2007 on the island Gernessi, signs exclusive kontrekty with dozens of artists: every six months, shareholders of the Fund may buy any number of works by these artists. The artists themselves have no right to sell their work to others. Co-founder of the fund Justin Williams explains that for him every artist - a mini-business. Artists are selected based on the successes of recent years. They provide between 50 and 100 pieces per year. Foundation hopes to yield a 30%per annum, one third of which must come from the works of these artists.
Features of the fund - that it may also invest in shares and options business suites, which, according to Chris Charlsona, the second co-founder and former tredera in Deutsche Banque and UBS, are closely correlated with the market of art, and besides, he developed his own code market, which may allow in the future to buy or sell options or futures on indexes of art.
Fine Art Fund does not hold its gains: every week, bought new works by 1-2 million, and is sold in about a year. In the Art Trading Fund average shelf life even shorter works - 5,2 months.
Banks also realized that the art - a worthy asset for investment. Barclays, Citigroup and ING - here are a few examples of banks actively engaged in this sector. In Switzerland, UBS has since 1998, opened a department of art, and at the end of last year, BSI (Romandskoy Bank of Switzerland) signed a partnership agreement with the Fund Philip Hoffman.
Investment funds represent something entirely new in the relationship between art and commerce - with love nezhnachitelnym budget may participate in that market exclusively to the economic position, without any interest in the aesthetic component.