investment in art

The art industry has come of age: it is now worth over $3 trillion and has an annual turnover of $30 billion. It has its own indexes for tracking performance (Mei Moses All Art Index, Art Market Research and, showing that returns are just as attractive if not better in art than the stock market. Art has become the new hip must-have investment. Indices tracking the performance of fine art have held up well in the recent economic slowdown with auction houses continuously reporting record prices.
Art as an investment has an increasing demand coupled with an absolutely limited supply and the ability to survive the economic downturn.
Today’s high net worth individual wealth is over $30 trillion and is increasing by 7% per annum. Currently, $300 billion is potentially available to be invested in art (ABN AMRO report).

By comparing four art indexes from London based Art Market Research (ArtQart, Modern Art, Contemporary Art, American Art) with UK and US real estate indices, hedge fund indices, bonds, and equity (The New York Stock Exchange, FTSE 100, S&P 500), over a two year period, February 2005 to January 2008, annual returns for art continue to exceed the return for stocks, bonds, equities and real estate, making it a good contender for those interested in diversifying their investment portfolio.
When it comes to asset planning, one of the key concerns for investors is how well an asset can hedge against inflation. Due to the high volatility of art’s value, it is necessary to invest over a longer period to adequately hedge (Schweizer, 2008). India, one of the booming markets for contemporary art; works by leading painters have shown price appreciation in value of twenty fold since 2000.

A half dozen art investment funds are betting on next-generation Indian artists in their 30s and 40s, allowing fund managers to do the work for investors who want to get in on returns that have driven the Indian art market up 485 percent in the last decade and turned it into the fourth-most-buoyant art market in the world.
According to ArtTactic, a company that monitors the progress of emerging markets, average prices for contemporary Indian art at auction rose by 140 per cent between March 2006 and September 2008. But between September 2008 and September 2009, they fell by 75 per cent.
Saatchi bought a painting of kitchen pots by India's most highly rated young artist, Subodh Gupta, for a triple estimate and record $646,000. In the months that followed, several Gupta paintings and sculptures broke the $1 million mark at auction.
Gupta's bronze sculpture UFO was bought in 2007 from the Bodhi Gallery for about $160,000, but would be priced at double that amount since the artist signed up with international heavyweight dealers Hauser & Wirth. Then there is T V Santhosh, whose paintings Saatchi again purchased direct from the artist's gallery in 2007. Costing about £32,000 each, similar works became the subject of intense speculation, rising to 10 times that amount at auction during the next 18 months. But, like so much contemporary Indian art, prices then crashed down to earth.However, Saatchi would still probably double his money if he sold those paintings at auction now, says Conor Macklin, a director of the Grosvenor Vadehra Gallery, which works with Santhosh.

With a simple buy and hold investment strategy, Indian Art has given a 2000% return over the last 5 years. This figure has been calculated by taking an average appreciation in value of paintings by 50 artists over the last five years. The best Equity Mutual Funds have given a return of 1100% over the same period as compared with the Sensex which has appreciated by only 200% and property which is considered a safe investment has given a return of 250% over the same term. Thus, compared to the other asset classes Art has out performed them considerably giving the highest returns.


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