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Art as an Investment

Art as an Investment

Investment in art is recognized as an asset class now more than ever, presenting an alternative to stocks, bonds, real-estate, gold and other traditional investment avenues. Art offers investment diversification, relatively low correlation with other asset classes and relatively inflation proof. One may find more investment vehicles in art and similar assets (SWAG - silver, wine, art, gold/ Investment Week 9/11) which imply art may enter the mainstream spectrum of alternative assets.
This phenomenon is demonstrated in the steady growing velocity of the Post-War and Contemporary Art markets that have exceeded $5 billion at the height of the market and has decreased by about 50% during the credit crunch years. Since then the consensus is that this market has fully recovered and beyond.

Art as an investment may be compared to stocks or to the private equity markets. Acquiring a work by an emerging artist for investment purposes can be compared to investing seed money in a start-up company which holds an idea that has not yet been realized. For buyers making an acquisition for investment purposes in a recognized artist such as Gerhard Richter (b.1932, Dresden) is not dissimilar to buying stocks of companies such as Teva, Google or Checkpoint Software, companies that are recognized for their strong brands and financial performance and have substantial market capitalization. Similarly acquiring a Picasso may be compared to purchasing stocks in corporate brand name firms such as Johnson & Johnson, Apple, Citigroup or IBM.

During the past decades, investment in the visual arts emerged as a credible investment alternative. While works by renowned artists of earlier periods (‘Impressionist and Modern Art’), such as Picasso, Matisse and Giacometti, have steadily risen in price, works by living artists have also tended to appreciate in value and have therefore become an appealing investment opportunity.

The pullback of capital markets during 2008-2009 and the availability of resources significantly diminishing for many private collectors resulted in more established art (mostly ‘Post-War’, i.e. post Second World War) fetching record prices while Contemporary Art (1950’s onwards) prices gave way to such established Post-War works. Yet the gradual market recovery shows steady improvement in auctions with new records almost each season for prominent Post-War artists followed by the Contemporary ones.
In the high end of the market for works sold above $40M you may find the Masters of Post-War artists such as Mark Rothko ($86.8M, Christie’s NY 5/12), Francis Bacon ($86.3M, Sotheby’s NY 5/08), Roy Lichtenstein ($44.8M, Sotheby’s NY 5/12), Andy Warhol ($43.7M, Christie’s NY 11/12) and Jackson Pollock ($40M, Sotheby’s NY 11/12) to name a few. For works above $30M you may find artists such as Yves Klein ($36.7M Christie’s NY 6/12), Lucien Freud ($33.6M, Christie’s NY 5/08) and the Contemporary artists Jeff Koons ($33.6M, Christie’s NY 11/12) and Gerhard Richter ($34.2M, Sotheby’s London 10/12).

Artists who enjoy growing success in the recent year or two are Peter Doig (new auction record set at $11.9M, Christie’s London 2/13), Glenn Brown ($8, Sotheby’s London 6/13), Urs Fischer ($6.8M, Christie’s NY 5/11) and Martin Kippenberger ($5M, Christie’s London, 10/12).
The top end of Contemporary photography is led by Anders Gursky ($4.3M, Christie’s NY, 11/11), Cindy Sherman ($3.89M, Christie’s NY 5/11) and Jeff Wall ($3.6M, Christie’s NY 5/12).

With the remarkable performance of the art market and the robust auction sales in the US and Europe, in particular high-end artworks, Fine Art reinforced its status as a valid, noteworthy and significant investment vehicle.

The performance of Fine Art as an asset class appears to have limited correlation with the performance of other asset classes, especially stocks, when measured over short-term periods. The Mei/Moses Fine Art Index demonstrates the performance of art investment when compared with S&P 500 and that the performance of art has exceeded S&P 500. The index shows a relatively low correlation between the downturns of each market and that art has proven to outperformed equities in all periods between 2000 – 2011. According to the Mid Year Tracking Report published by Professors Mei and Moses in July 2010, "not all collecting categories are reacting in tandem to the changing economic climate of the first half of 2010. However what is obvious is that there is growing positive momentum in the impressionist and modern and the post war and contemporary collecting categories".

Since art is a differentiating factor among wealthy individuals for it is an original, unique and rare element with high cultural and social values, its extraordinary status, if wisely select, has proven to be an exclusive and sought after investment instrument.

Art Partners has proven the fundamental ability to properly select the appropriate works of art for investment purposes which remains our unique set of skills. With that in mind we are set to establish Art Partners II during the second half of 2013.

For further details please contact us.

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