5 Tips for Investing In Art

The growing trend in high net worth investing is to seek out asset classes with scarcity, like fine wines, antique cars, and real estate. However, in today’s global market the real question is: Is art investment the next move? Here are five of our favorite tips before you decide to jump into the art market.

1. Fluctuations in the market for one artist can and often will affect the market for another, related artist. Investing in an actively managed art fund can give you access to the art market without requiring knowledge of art movements and art history. Arthena funds capture this requirement for its investors. Arthena closely monitors the relative performance and portfolio compositions of its funds. In addition to monitoring the underlying funds individually, the team also monitors the combined effect of collective ownership of the art across all of the underlying funds. Through an ‘x-ray’ analysis of the underlying funds, which looks through to the individual artworks held — Arthena monitors sector biases and various risk management statistics.
2. Diversification is key. Athena balances investing between three main art funds which include Emerging, Modern and Post-War/Contemporary. This allows investors the ability to diversify their investment across three distinct collections — and within each collection, benefit from active selection and fund performance management. The key to diversification is investing in financial products whose performance does not correlate to the stock market. To reduce risk, spread your wealth over multiple, non-traditional asset classes.
3. Value is found not only in the artist, but in the quality of a given work. Always buy the best you can afford — and to do so, of course, requires, again, understanding and a certain amount of expertise in the artist’s oeuvre. Better to buy a great Wesselmann than a bad Warhol, for instance; the first is far more likely to be liquid than the latter, and will appreciate more over time.
4. Which takes us to our next point. Liquidity in the art market is historically very limited and can make investing in the art market seem daunting. By choosing to invest with Arthena funds, we provide unparalleled liquidity by designing our funds with a 5 year investment horizon. Arthena portfolio managers also operate funds with a growth model in mind that seeks to manage volatility within each fund. Arthena can estimate the volatility of a fund from the estimates of individual works in the fund. Works are chosen for our funds based on their estimated sharpe ratios and the risk level of the fund.
5. According to the 2016 Deloitte Art & Finance Report, 72% of art collectors said they bought art for passion with an investment view. Further, there was an increase from 3% in 2014 to 6% in 2016 of clients and advisors looking to buy art specifically for investment purposes. However, one of the primary reasons investors choose art as an investment is because it’s beautiful. An artwork remains a tangible, beautiful object in which value will remain if the price dips. There is a prestige associated with art that will never change, even if the value changes.