Investing In Fine Art Can Mean Pretty Profits
His suggestion? “Talk to seasoned collectors. Go to the auction houses and ask questions. Get involved with the museum and befriend the curator. An educated consumer is going to be best equipped to maneuver in this marketplace.”
Due diligence is all the more important given the number of unscrupulous art dealers who traffic in imitation art.
Provost says newcomers should stick with reputable brokers and auction houses that can help verify authenticity.
“The art market is not immune to the same scandals that have rocked the financial services or real estate market,” he says. “Investors need to be careful about what they’re doing, do their homework and understand who they’re working with.”
From a return on investment standpoint, he says, it’s also good advice to buy the best piece you can afford.
Artwork that emanates from more mature markets, such as Old Masters paintings, can cost anywhere from $10,000 to many millions depending on the artist.
Rare and important photographs, however, which have only been collected for the last 50 years, can still be had for as little as $2,000—though Christie’s sold one in 2009 for $1 million.
“With each new photography sale there’s often a new world record set so that’s an area that has tremendous collecting interest,” says Provost. “The great photographs now are expensive, but I’d recommend those are the ones to buy. The great ones generally increase in value the most. Mediocre objects tend not to increase in value at the same pace.”
If you’re not accustomed to putting all your eggs in one basket, you can also consider an art investment fund, but be prepared to shell out.
The Fine Art Fund Group, for example, founded in 2001 as a diversified portfolio of high-end artwork, is only open to investors worth at least $2.5 million.
Those who qualify can invest a minimum of $250,000 into the broader fund, $100,000 in the specialized funds or own part of a single painting.
Other investment funds, like the new “Collection of Modern Art” fund launched in May by Castlestone Management, requires a smaller minimum investment of around $10,000.
The fund itself is based and regulated offshore in the British Virgin Islands. As such, it is open to investors only through financial advisors who can counsel clients on the risks and potential rewards involved.
With help from a 100-percent year-over-year sales volume increase for post-war art, the Collection of Modern Art Fund gained 10 percent for the first half of 2010.
How much of your portfolio should you allocate towards art?
“I advise my clients to put no more than 5 percent of their wealth into art,” says Hoffman, noting investors in this economy, where demand is lower, should employ a buy and hold strategy.
“Art is a long-term goal rather than a short-term investment,” he says.
Be sure, too, to buy what you like. That way, if your twentieth-century still-life painting fails to appreciate in value, you can still appreciate its contribution to your wall.
