Art as an Investment is a Solid Financial Alternative.

Investing in art can be a lucrative financial alternative? 

Yes! art can serve as a leveraging asset in a diversified portfolio, by countering against financial market risk.   Art has proven to have longevity and substance as an alternative asset class, which can provide returns and diversification. Over the past ten years art has outperform most investment class. Art buyers are now much more likely to make potential profit part of their decision. When an art collection can make up a significant percentage of an individual's net worth, who can blame them? As a result, art as investment is increasingly accepted in both the artistic and financial worlds.

Financial advisers focus on art as a source of long-term profit. New hedge-fund-like vehicles, so-called art funds, buy and sell artworks and share the profits.

Here are a few ways to integrate art into one's wealth asset allocation strategy:

1. Liquidity optimization
2. Manage overexposure to risk
3. Develop appropriate reporting
4. Optimize taxation or organize appropriate transmission to heirs
5. Effective tax and inheritance planning for collections or gifting or donation to charity

We tell clients that they should target [returns] in the mid-teens, net of fees and expenses, but there is not yet a lot of evidence that this can be easily achieved. The art-fund industry is only 10 years old." - Michael Plummer, a partner in New York City-based ArtVest Partners LLC.

"Diana" ca.01 by Tatjana's cubism | surrealism, Photo: P.Kirane

Investing in art is somewhat different than investing in the stock market. One expect to earn dividends from equities, a share of the profits from a business, and rents from real estate. The transaction costs in art are, by and large, much higher than in stocks and real estate, but the opportunity to make gains in the short-term are also much higher when you sell art. With stocks, in a year or two, you might be able to make 2% to 5% but, with art, you have the opportunity to make 100%.

If you build a diversified art portfolio, with works bought solely at auction, where there are buyer premiums, 1% to 5% is probably on target. However, I don't recommend paying high auction premiums and high gallery commissions, because most of the art I purchase is directly from the seller—and 50% of the art I sell is done privately as well. Over the years, the Fine Art Fund has averaged 19% gross returns, before management fees are taken out.

How long do you hold on to a work of art. It depends on the market you are engage in. A 2014 study by Tutela Capital entitled "Analysis of holding period for young artists since the 1980s" offered an insight into the dynamic of art investing in the primary market.

The key is understanding the dynamics of investing in art as a part of a diversified wealth strategy.

Blue Chip Art or Emerging Contemporary

Robert Currie, CEO of Global Art Network a global art's consulting, marketing, career management and art investment firm. We provide solutions for companies and individuals that sell artwork in the retail art market. Our areas of expertise includes Ecommerce or 'brick and mortar' art business, remedies for promotional and marketing shortfalls, solutions for struggling careers, providing agent services worldwide, finding financial support for art projects, resolutions to help stabilize one's business or an artist's career, generating consistent patrons for one's art, secured collector's network, secured art collection services and more. We operate in 100 metro art markets in the United States and currently have affiliates in 31 countries.